4602.5: Mortgage purpose for Construction Conversion and Renovation Mortgages (10/27/18)

(a) Purchase or refinance

Construction Conversion Mortgages and Renovation Mortgages may be for purchase transactions, "no cash-out" or cash-out refinance transactions as shown in the chart below. A Construction Conversion Mortgage or a Renovation Mortgage may not be used for the purpose of making a single disbursement of funds to a builder or contractor or for the assumption of an existing Mortgage.

If, prior to the closing of the Interim Construction Financing, the Borrower is...	Then the transaction is a...	And proceeds from the Interim Construction Financing may be used to...
Not the owner of record of the land, or If the site-built home is on a leasehold estate, not the lessee of the leasehold estate	Purchase transaction	Purchase the land, or for a site-built home, acquire a leasehold interest in the land For Renovation Mortgages, purchase the site-built home Pay construction or renovation costs of the site-built home For a Manufactured Home, acquire the Manufactured Home and pay construction costs, including costs to install and anchor the Manufactured Home on a permanent foundation system
The owner of record of the land, or If the site-built home is on a leasehold estate, the lessee of the leasehold estate	Refinance transaction	Pay off any existing liens on the land and on the improvements, if the Mortgage is a Renovation Mortgage Pay off any existing liens on the land, if the Mortgage is a Construction Conversion Mortgage Pay all Closing Costs Pay construction or renovation costs of the site-built home For a Manufactured Home, acquire the Manufactured Home and pay construction costs, including costs to install and anchor the Manufactured Home on a permanent foundation system on land owned by the Borrower

(b) Special considerations for Refinance Mortgages

The following special considerations apply to Construction Conversion Mortgages and Renovation Mortgages that are refinance Mortgages:

Type of refinance	Eligible property types	Land ownership requirements
"No cash-out" refinance as described in Section 4301.4	Site-built homes	No additional requirements
"No cash-out" refinance as described in Section 4301.4	Manufactured Homes	At least one Borrower must have been on title to the land for 12 months or more prior to the Effective Date of Permanent Financing
Cash-out refinance as described in Section 4301.5	Site-built home	At least one Borrower must have been on title to the land for six months or more prior to the Effective Date of Permanent Financing

Special purpose cash-out refinance Mortgages are ineligible as Construction Conversion Mortgages and Renovation Mortgages.Construction Conversion and Renovation Mortgages are "no cash-out" refinance transactions if the requirements in Section 4301.4 are met. For purposes of Section 4301.4, the amount of the Interim Construction Financing secured by the Mortgaged Premises is considered an amount used to pay off the first Mortgage as described in Section 4301.4. The proceeds of the Permanent Financing may be used to pay off a junior lien(s) secured by the Mortgaged Premises provided the lien(s) were used in their entirety for the construction and/or renovation of the subject property, as applicable, as documented in the Mortgage file. However, paying off unsecured liens or construction costs paid by the Borrower outside of the secured Interim Construction Financing is considered cash out to the Borrower, if above $2,000 or 1% of the loan amount, whichever is greater.