Process a Construction Loan

To Create a Construction-Only Loan

1. On your Pipeline, click the New icon.

2. On the New Loan window, click New Blank Loan.

   Or, select a construction loan template, and then click Select Template.

3. Follow your company business practices and policies to complete basic borrower, property, and loan information on the Borrower Summary - Origination, 1003, and other loan forms, and then complete the 2015 Itemization and verifications.

4. In the panel on the lower-left of the loan file, click the Forms tab and then click Construction Management.

5. On the Loan Info tab, select Construction for the Purpose of Loan (field ID 19) if not already selected.

6. Complete the Construction Only section at the bottom of the Loan Info tab.

7. In the Loan Terms section, enter the Term and Due in months for the construction phase, for example, 12 and 12 for a one-year construction loan.

8. Enter the Construction Terms in the Period Months field (field ID 1176).

9. For a construction-only fixed loan, select Fixed Rate for the Amortization Type.

   Encompass automatically calculates the balloon payment for a construction.

10. For a construction-only ARM loan, select ARM for the Amortization type, click the Find icon to select an ARM Type, and then complete the information in the Rate Adjustment section.

    Encompass automatically calculates the balloon payment for a construction.

11. Complete any additional fields on the Loan Info tab as needed.

12. Use the Project Data tab to track important construction dates and pre-closing requirements, to enter disbursement terms and vendor information, and to identify and enter the name and contact information for the borrower's designee to whom construction funds will be disbursed.

13. Complete the remaining Encompass forms and tools based on your company business practices and policies.

14. Do not enter interest-only months in the Interest-only field (field ID 1177) for construction-only loans because it is automatically registered as interest-only.

14. When ordering disclosures and closing documents, select the appropriate plan code for your construction loans. Encompass has two default plan codes for construction-only loans:

    • Construction Only - Adjustable Rate - Select this plan code when working with a construction-only ARM loan.

    • Construction Only - Fixed Rate - Select this plan code when working with a construction-only fixed-rate loan.

To Originate a Construction-to-Permanent Loan with Blended Disclosures:

1. On your Encompass Pipeline, click the New icon.

2. On the New Loan window, click New Blank Loan.

• Or, select a construction loan template, and then click Select Template.

3. Complete basic borrower and loan information on the Borrower Summary - Origination, 1003, and other loan forms (you will use the Construction Management form to enter detailed loan information starting in Step 6 below), and then complete the 2015 Itemization and verifications.

4. In the panel on the lower-left of the loan file, click the Forms tab and then click Construction Management.

5. On the Loan Info tab, select Construction-Perm for the Purpose of Loan (field ID 19) if not already selected.

6. In the Additional Details section, use the dropdown list to indicate whether you will reduce the payment amount or the number of monthly payments as a result of principal prepayments or excess funds not advanced.

7. Enter information for the construction and permanent phases of the loan in the Construction-Perm (1x Close) section at the bottom of the Loan Info tab.

   • In the Construction-Perm (1x Close) section, enter or review the Construction Loan Terms. Select Fixed for the Amortization Type if not already selected.

     ARM rates for the construction phase are not supported with blended disclosures. Use the separate disclosure workflow to originate a construction-to-permanent loan with an ARM construction phase.

   • In the Construction-Perm (1x Close) section, enter or review the Permanent Loan Terms. Select an Amortization Type if one is not already selected and enter Rate Adjustment information for ARM loans as needed.

     The Due In months are typically the same as the Term, for example 360 for a 30-year loan, and are modified only when using different loan and amortization terms.

8. Complete any additional fields on the Loan Info tab as needed.

   • Select the Construction Period Included in the Loan Terms checkbox (field ID CONST.X1) to use the number of months in the permanent phase to populate the Loan Terms disclosed on the Loan Estimate (the construction months will be treated as part of the permanent phase). Clear the checkbox to use the total combined months for the construction and permanent phases.

9. Use the Project Data tab to track important construction dates and pre-closing requirements, to enter disbursement terms and vendor information, and to identify and enter the name and contact information for the borrower's designee to whom construction funds will be disbursed.

10. When ordering disclosures and closing documents, select the plan code that applies to the permanent phase of your construction-to-permanent loan transaction. Encompass recognizes the loan as a construction-to-permanent transaction and generates the additional documents that apply to the construction phase of the loan.

To Originate a Construction-to-Permanent Loan with Separate Disclosures:

1. On your Encompass Pipeline, click the New icon.

2. On the New Loan window, click New Blank Loan.

   • Or, select a construction loan template, and then click Select Template.

3. Create a loan file that will be used to process the construction phase of the loan, based on your company practices and policies.

4. Complete basic borrower and loan information on the Borrower Summary – Origination, 1003, and other loan forms (you will use the Construction Management form to enter detailed loan information starting in Step 7 below), and then complete the 2015 Itemization and verifications.

   When providing separate disclosures all finance charges and fees that apply towards points and fees must be allocated to the construction phase.

5. In the panel on the lower-left of the loan file, click the Forms tab and then click Construction Management.

6. On the Loan Info tab, select Construction for the Purpose of Loan (field ID 19) if not already selected, and then select the Construction Perm Disclosed Separately checkbox.

   When you select these checkboxes, the following two features are accessible:

   • A Construction Only section displays below the Additional Details section. Use the Construction Only section to enter and view information about the construction phase of the loan, as described below.

   • A Linked Loans tab displays on the construction Management form.

7. In the Additional Details section, use the dropdown list to indicate whether you will reduce the payment amount or the number of monthly payments as a result of principal prepayments or excess funds not advanced.

8. In the Construction Only section enter the Term and Due in months for the construction phase, for example, 12 and 12 for a one-year construction loan.

9. For a construction-only fixed-rate loan, select Fixed Rate for the Amortization Type.

   Encompass automatically calculates the balloon payment for a construction loan.

10. The Linked Loans tab enables you to link the construction loan file to a separate loan file used to process the permanent phase of the loan and to synchronize data between the linked loan files.

Link the construction-only loan file to a permanent loan file

Synchronize data between linked loans

10. After linking the loan files, use the two columns on the Linked Loans tab to compare and edit data in the two loans.

11. Click the Go to Perm button to switch to the permanent loan file and enter data in the Construction Management form that is specific to the permanent phase of the loan transaction.

12. In the construction loan file, use the Project Data tab on the Construction Management form to track important construction dates and pre-closing requirements, to enter disbursement terms and vendor information, and to identify and enter the name and contact information for the borrower’s designee.

13. Complete the remaining Encompass forms and tools in the construction and permanent loan files.

14. In the construction loan file, use the Project Data tab on the Construction Management form to track important construction dates and pre-closing requirements, to enter disbursement terms and vendor information, and to identify and enter the name and contact information for the borrower’s designee.

15. Complete the remaining Encompass forms and tools in the construction and permanent loan files

16. Before generating disclosures or ordering closing docs, open the construction loan file and select the appropriate plan code:

    • For a construction fixed rate loan, select the Construction Only - Fixed Rate plan code.

    • For a construction ARM loan, select the Construction Only - Adjustable Rate plan code.

17. In the construction loan file, run an audit for the disclosures or closing docs, and then resolve all Required audit issues.

18. On the Construction Management form, on the Linked Loans tab, click the Sync Data button to synchronize data between the linked loan files.

19. In the permanent loan file, select the appropriate plan code for your permanent loan.

20. In the permanent loan file, run an audit for the disclosures or closing docs, and then resolve all Required audit issues.

21. In the construction loan file, order disclosures or closing docs, selecting the appropriate construction plan code.

    • Encompass identifies the loan as a construction-to-permanent transaction and generates the disclosure forms or closing docs needed for the permanent and construction phases of the transaction.