Source: https://www.law.cornell.edu/cfr/text/7/3555.105
Timestamp: 2019-07-16 21:18:32
Document Index: 592916467

Matched Legal Cases: ['§ 3555', '§ 3555', '§ 3555', '§ 3555', '§ 3555', '§ 3555', '§ 3555', '§ 3555']

7 CFR § 3555.105 - Combination construction and permanent loans. | CFR | US Law | LII / Legal Information Institute
Section 3555.105. Combination construction and permanent loans.
7 CFR § 3555.105 - Combination construction and permanent loans.
§ 3555.105 Combination construction and permanent loans.
(a)Lender requirements. In addition to other lender requirements of this part, lenders seeking guarantees of combination construction and permanent loans must:
(b)Contractor or builder requirements. Contractors or builders of homes financed with guaranteed combination construction and permanent loans must at least have:
(2)State-issued construction or contractor licenses, as required by State or local law;
(c)Use of loan funds.
(iii) Reasonable and customary closing costs as defined at § 3555.101; and
(3)Funds remaining after full disbursement of construction costs will be applied by the lender as a principal payment. Borrowers are not to receive funds after closing except that the borrower may receive funds remaining from certain unused prepaid expenses if the borrower used personal, non-loan funds to pay those expenses.
(d)Terms. The following terms apply to guarantees of combination construction and permanent loans:
(1) The interest rate for the construction and permanent loan will be established in accordance with § 3555.104 at the time the rate is locked, which must occur prior to closing.
(2) The fair market value of the proposed property to be constructed will be used to establish the maximum loan amount.
(3)Annual fees will begin in the month immediately following loan closing and will not be affected by loan reamortization following the completion of construction. Lenders may fund a lender imposed escrow account for borrower payments of the annual fee in accordance with § 3555.101(b)(6)(xi), as an eligible loan purpose, provided the market value of the property is not exceeded.
(4)Interest on the construction loan is payable monthly either directly from the borrower or indirectly drawn from an established interest reserve. Real estate taxes and property insurance due during the construction period may also be paid using the same draw process. The annual fee will be due and payable from the lender on the 1st of the month following the anniversary date the construction to permanent loan closed.
(e)Mortgage file documentation. Standard industry credit and verification documents may be utilized when processing and closing the loan and must be dated within a reasonable time, specified by the Agency, of the closing in order to be considered valid. In addition to documentation noted at § 3555.202(a), lenders must obtain and retain evidence:
(1) The actual cost to construct the subject dwelling;
(6) Required inspections and warranties; and
(7)Loan modification agreement when construction is complete confirming the existence of the permanent loan and the amortizing interest rate on the loan.
(f)Loan Note Guarantee. The Loan Note Guarantee will be issued after closing of the construction loan without waiting for complete construction of the subject property upon:
(4) The lender's compliance with other requirements under § 3555.107.
(g)Unplanned changes during construction. Should an unplanned change occur with the borrower or contractor preventing completion of construction, the lender remains responsible for completion of improvements satisfactory to Rural Development. The loan will be serviced in accordance with subparts F and G of this part.
(h)Reservation of funding.Rural Development reserves the right to limit the number or amount of loans guaranteed under this section based on market conditions and other factors it considers appropriate, such as loan and portfolio performance.