Improve Your Process for Proposed and Under Construction Mortgages
[December 11, 2004]
LoanProspector.com recently added a "New Construction" data field
to the Loan Purpose section to help you easily identify and more easily process
these three types of mortgages:
One Close Construction to Permanent — Credit valid in LP for 120
days
Two Close Construction to Permanent — Credit valid in LP for 180 days
Construction of Mortgaged Premises Completed After Application — Credit
valid in LP for 180 days
With this new data field, LoanProspector.com calculates the appropriate credit
expiration date and provides you improved feedback on these loans.
For One Close Construction to Permanent and all other loans, the credit infiles
remain valid for 120 days.
For complete details on proposed and under construction homes and credit report
requirements for, see Chapters 23 and 37 of the Single-Family Seller/Servicer
Guide.
LoanProspector.com 'Proposed' and 'Under
Construction' Features at a Glance
Explanation
Example
One Close Construction to Permanent
One loan for the construction that automatically
converts to a permanent mortgage.
The borrower owns the land, and with a single
transaction finances the building of a home. That financing automatically
converts to a permanent mortgage.
When Carl and Sara were ready to build their retirement home on a piece
of land they own in rural Colorado, they turned to Pioneer Mortgage
with the architect's plan in hand. So the couple does not need
to sign a second set of documents, Pioneer suggested a single transaction
to cover the terms of both their short-term construction financing (interest-only
based on the outstanding balance) and their long-term permanent construction
takeout mortgage (30-year fixed-rate fully amortizing).
Pioneer submitted the loan for a Loan Prospector assessment, and selected
"1 Close Const To Perm" from the New Construction dropdown menu.
Carl and Sara's credit infiles will be valid in LP for 120 days.
Two Close Construction to Permanent
One loan for the construction plus a separate
loan or modification agreement for the permanent mortgage.
The borrower owns the land, and with the first
transaction finances the building of a home. A second transaction pays
off the construction loan with a permanent mortgage.
Kim hired a contractor to build a home on the piece of land she inherited
a few years ago and financed the construction of her new home with interim
financing from First Bank.
When the home was getting closer to move-in condition, Kim went to
Second City Home Loans. The loan officer met Kim at the property and
used LoanProspector.com to assess the new permanent mortgage on the
spot, selecting "2 Close Const To Perm" from the New Construction
dropdown menu.
Kim's credit infiles will remain valid in LP for 180 days.
Construction of Mortgaged Premises Completed After
Application
Generally, a loan to purchase a home from a builder.
The builder owns the land and finances the construction
of the home that's usually part of a subdivision. The borrower
applies for a mortgage when the construction is planned or in progress.
The mortgage transaction is completed once the construction is complete.
Andrea and Duane found a new subdivision with an ideal lot for their
growing family. Even though construction has not begun, the couple went
to their bank to apply for a mortgage.
The lender used LoanProspector.com, selecting, "Const Compl After
Appl" from the New Construction dropdown menu.
Their credit will remain valid in LP for 180 days, and Andrea and Duane's
mortgage transaction will be completed once the construction is complete.
Tips
If you access LoanProspector.com via a Loan Origination System (LOS)
Check with your LOS vendor to find out when you will have access to the
New Construction data field available through their system.
If your LOS is not ready to support the new data field, simply import your
loan data to LoanProspector.com and select the appropriate option from the
New Construction dropdown menu.
If you use LP Classic
This new data field is not available through LP Classic®. On March
31, 2006, we'll retire LP Classic and transition all customers
to LoanProspector.com.
