12.21 LOAN CLOSING (05/17/17)
- Kacey Olson
© RHS HB-1-3555 SFH Guaranteed Loan Program Technical Handbook
Standard industry closing documents are utilized when closing a combination construction-permanent loan. The lender is responsible for any state specific construction related requirements that may influence the validity of the first lien or the construction disbursement process. The date of closing will be the date the interim construction loan is closed. A construction rider or allonge to the note and a construction loan agreement is required in addition to standard documentation. These construction documents may be in any form acceptable to the lender.
The term of the loan is thirty years. When construction is complete as evidenced by a Certificate of Occupancy or final inspection, the loan should be amortized to achieve full repayment within its remaining term. The lender may opt for dual loan disclosures to the borrower disclosing the terms of the interim construction period and a separate disclosure for the terms of the permanent loan, or they may choose a single disclosure method that blends the terms of the construction portion and the permanent loan. After applying excess funds as a principle curtailment, the loan may be reamortized to achieve full repayment within the remainder of the loan term.
When a loan is reamortized via a modification, the lender can also reduce the permanent interest rate. In such cases, the lender must provide an executed loan reamortization agreement (modification agreement) to confirm the existence of the permanent loan and the corresponding amortizing interest rate on the mortgage loan. Amortization must begin no later than the first of the month 60 days from the final inspection.
The approved lender monitoring the construction of the subject dwelling should retain a certification stating the dwelling has been completed properly and can be occupied by the borrower, construction phase inspections have been made and the required warranty coverage has been obtained. The lender should obtain the appraisers final inspection, a certificate of occupancy, and a final endorsement to the title policy clear of all liens. Attachment 12-D of this Chapter is an example of a lender certification.
Select Lender Origination to view the document regarding Identification of Electronic Delivery.
The Agency will receive the documents from Lenders and will image them permanently into the Agency’s imaging repository as a miscellaneous document. Refer to Chapter 2 of this Handbook for further guidance regarding imaging documents.