Everyone is hoping that 2010 sees a return of building activity and the question this week is how does the new RESPA changes and your new construction project get affected! The million dollar question is if a goodfaith estimate (GFE), which is primarily designed for disclosure of cost on a purchase or refinance transaction work with a construction project that can takes months to complete? How can anyone know what changes could take place between application and closing that may affect your original GFE?
The New RESPA changes address this issue by stating that "if settlement is anticipated to occur more than 60 calendar days" from when a GFE is provided, the lender may provide a disclosure to the borrower that is conspicuous and obvious stating that the lender can provide a revised GFE at any time up to 60 calendar days prior to closing.
For lenders, builders and agents this is a safe guard that allows some flexibility with your new construction project. We all know that construction projects, even the best planned, can suffer delays due to the weather, material supplies or labor; so this provision takes this into consideration.
But there is an exception that should be noted! The new RESPA changes also state if the lender fails to provide a separate disclosure explaining that a revised GFE can be provided up to 60 days prior to closing, then a revised GFE may not be issued and the original GFE stands! WOW- talk about minding your P&Q's- this is going to be mission critical to lenders involved with construction projects.
We are all learning the new RESPA changes together! If you need specific help with a loan scenario or have additional questions not addressed on this blog, send me an email at kbarger@downhomebank.com.
Keith Barger
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