Appendix D to Part 226 - Multiple Advance Construction Loans
12:3.0.1.1.7.9.8.1.19 : Appendix D
Appendix D to Part 226 - Multiple Advance Construction Loans
Section 226.17(c)(6) permits creditors to treat multiple advance
loans to finance construction of a dwelling that may be permanently
financed by the same creditor either as a single transaction or as
more than one transaction. If the actual schedule of advances is
not known, the following methods may be used to estimate the
interest portion of the finance charge and the annual percentage
rate and to make disclosures. If the creditor chooses to disclose
the construction phase separately, whether interest is payable
periodically or at the end of construction, part I may be used. If
the creditor chooses to disclose the construction and the permanent
financing as one transaction, part II may be used.
Part I - Construction Period Disclosed Separately
A. If interest is payable only on the amount actually advanced
for the time it is outstanding:
1. Estimated interest - Assume that one-half of the commitment
amount is outstanding at the contract interest rate for the entire
construction period.
2. Estimated annual percentage rate - Assume a single payment
loan that matures at the end of the construction period. The
finance charge is the sum of the estimated interest and any prepaid
finance charge. The amount financed for computation purposes is
determined by subtracting any prepaid finance charge from one-half
of the commitment amount.
3. Repayment schedule - The number and amounts of any interest
payments may be omitted in disclosing the payment schedule under §
226.18(g). The fact that interest payments are required and the
timing of such payments shall be disclosed.
4. Amount financed - The amount financed for disclosure purposes
is the entire commitment amount less any prepaid finance
charge.
B. If interest is payable on the entire commitment amount
without regard to the dates or amounts of actual disbursement:
1. Estimated interest - Assume that the entire commitment amount
is outstanding at the contract interest rate for the entire
construction period.
2. Estimated annual percentage rate - Assume a single payment
loan that matures at the end of the construction period. The
finance charge is the sum of the estimated interest and any prepaid
finance charge. The amount financed for computation purposes is
determined by subtracting any prepaid finance charge from one-half
of the commitment amount.
3. Repayment schedule - Interest payments shall be disclosed in
making the repayment schedule disclosure under § 226.18(g).
