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When must the bank provide the Loan Estimate for the permanent phase for a construction-only loan? What is the timing if the customer applies for both phases at the same time?

A customer completed an application for a construction-only loan. After the bank provided the Loan Estimate, the customer told the lender that she has also decided to apply for permanent financing of the construction loan with the bank. When must the bank provide the Loan Estimate for the permanent phase? What is the timing if the customer applies for both phases at the same time?

The timing for providing the Loan Estimates depends on when the customer applies for each phase. If the customer applies separately, as your customer did, the bank would provide the Loan Estimate for the construction phase within 3 business days of receipt of the construction phase application and the Loan Estimate for the permanent phase within 3 business days of receipt of the application for the permanent phase. If the creditor receives a single application for both phases and chooses to conduct separate closings and provide separate disclosures for each phase, it would provide Loan Estimates for both phases within 3 business days of receipt of the application, a separate closing and Closing Disclosure for the construction phase, and a separate closing and Closing Disclosure for the permanent phase upon completion or near-completion of the construction phase.

See: Regulation Z, Comment 5 to §1026.19(e)(1)(iii) and the Bureau’s 2017 TILA-RESPA Rule: Detailed Summary of Changes and Clarifications. (July 2018)

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