Peter Cook Mortgage

Service Standards

Policy:

Peter Cook Mortgage Construction Lending must authorize the General Contractors/Builders for the One Time Close program to ensure that the General Contractor/Builder has the background to complete the construction phase of these loans on time and within budget. To accomplish this, the General Contractor/Builder's experience should reflect a history of completing projects as planned as well as proper payment to sub-contractors and material suppliers.  

Authorized General Contractors/Builders should be able to use their credit lines at suppliers to carry the project to the appropriate percentages of completion for disbursement. No advances are allowed as funds will only be disbursed for completed work.

Procedures:

  1. The originating Branch/Correspondent must assemble the following items and forward to the Regional Construction Lending office along with the General Contractor/Builder's Information and Reference Form to complete the qualification process.
    1. The General Contractor/Builder must fully complete General Contractor/Builders Information and Reference Form.
      • This form must be completed entirely, listing all information requested including names, addresses, phone numbers, and social security numbers.  This form is used to complete the approval process.
      • IF A GENERAL CONTRACTOR/BUILDER REFUSES TO GIVE ALL APPROPRIATE INFORMATION (INCLUDING SOCIAL SECURITY NUMBERS), THE GENERAL CONTRACTOR/BUILDER CANNOT BE AUTHORIZED FOR THIS PROGRAM.
    2. Obtain Year-End and Year-to-Date Financial Statements.
    3. Builder's Risk's and General Liability Insurance
    4. Contractor's License, if applicable.
  2. A decision will be made by Construction Lending within 24-hours of receiving the above information.
  3. Contact the Builder Liaison in Construction Lending with any questions concerning the General Contractor/Builder information requested or the authorization status.
  4. Construction Lending  maintains an "authorized" General Contractor/Builder file for all General Contractor/Builders submitted.  Once authorization is completed, the General Contractor/Builder will need to update their information annually.

There are two separate processes for underwriting One Time Close loans.

  1. Permanent (credit) underwriting - completed through normal underwriting process.
  2. Construction review process - completed by the Construction Lending Department.

Peter Cook Mortgage's One Time Close loan program is not available to General Contractor/Builders on a "spec"  basis and is not available to be used as interim financing.  ONLY "PRE-SOLD" PROPERTIES ARE ELIGIBLE FOR THIS PROGRAM.

NOTE:  OTC transactions are not the same as a Construction to Perm transaction.  A Construction to Perm transaction is defined as when a borrower is converting an interim construction loan with an outside lender into a permanent mortgage.

Follow applicable loan product guidelines. The maximum LTV allowed on the One Time Close program is 95%.  OTC loans must also meet the following guidelines regarding reserves and minimum credit score.

One Time Close

One Time Close service standards are as follows.

Builder Approvals Decision within 24-hours of receiving the required information.

Construction Review Process:

  1. The items needed to complete the construction review need to be compiled by the branch/broker and forwarded to the Construction Lending Department.
    1. All required items need to be submitted at the same time.
    2. Missing items will delay the final approval and affect the turnaround time of Construction Lending's decision.
    3. If all items are present, the construction review processing will take two business days.
  2. The Borrower and General Contractor need to provide all items listed on the Construction Lending Requirements Checklist.
    • All items must be submitted.
    • The Construction Lending Department Manager or designee may waive any items that do not apply.
    • If any questions contact the Construction Lending Department, including questions from the Borrower, General Contractor/Builder or Broker.
    • The required items and a brief explanation for each item are as follows.
Item Explanation
1. Soils Report
(if applicable)		 The Construction Lending Department reviews the soils report for special "footing or foundation requirements".  The Construction Lending Department Manager may waive soils reports; however, a soils report will be required if the property is located in an area that has unstable soil, hillsides, rocks, etc.
2. One complete sets of "Plans & Specifications"

Plans and Specifications must be signed by both the Borrower and General Contractor/Builder.
3. Current Lot Survey
or Plot Plan		 Three surveys will be required, if applicable in the state of the subject property.  See Survey policy in Section 8 - Closing/Funding/Delivery for list of states where surveys are NOT required.
  1. Current Lot Survey - sets outs the boundaries of the property, which assists the General Contractor/Builder in building the house within the property lines, avoiding construction on any easements or property lines.   In states that do not use Surveys, a plot plan needs to be submitted.  This survey is required at submission .
  2. Foundation Endorsement/Slab Survey - Required after closing before the first draw request.  This survey occurs when the foundation forms are set and before the foundation is laid.
  3. Final Endorsement/Survey - required before the final disbursement and modification.

Borrowers have the option of depositing funds for the costs for the remaining (two after closing) surveys/endorsements or paying for the survey/ endorsements on an as-needed basis.
4. Copy of CC&R's
(if applicable)

An active set of CC&R's will need to be submitted if the proposed home is being built in a Master Planned Community or Planned Unit Development.  The originating branch may obtain this from the title company.
5. Proof of Land Ownership / Evidence of land acquisition
  • Submit the settlement statement showing the purchase price, Warranty Deed, or current Title Commitment. 
  • If the proposed loan will payoff the land, the "lot sales contract" will be required.
6. Complete Legal Description / Title Work

Submit a copy of the Title Commitment for this loan transaction.
7. Contract between Borrower and General Contractor/Builder
  • A proposed contract will suffice if a contract has not been signed because a loan is not in place.  If the General Contractor/Builder and loan are approved, an actual contract will need to be submitted before loan closing.  The actual contract must match the cost breakdown.
  • No cost plus contracts are allowed.
8. Construction Cost Breakdown

Submit all cost breakdowns on the Construction Cost Breakdown form or equivalent form. This form (or equivalent) must be signed by the General Contractor/Builder only.  Complete this form as follows:

  • Heading: The Borrower and General Contractor/Builder's names, addresses, telephone numbers, job site address, square footage of the proposed structure, and PCM's loan number.
  • Category A-Land Costs: Only include cost of the land if it is part of the contract or a separate contract to purchase.
  • Category B-Indirect Costs: All costs considered "soft", including but not limited to building permits, architectural plans, insurance, fees, etc. These costs are paid on the same percentage of completion as the loan funds are disbursed.
  • Category C-Offsite Costs: All costs for work completed on the "lot", underground work, etc., plus any work required by municipalities or utility companies.
  • Category D-Onsite/ Building Costs: All costs associated with the actual construction of the house (sticks and bricks).
  • Signature Block: Only the General Contractor/Builder need sign and date.
9. Building Permits Submit actual copies of permits before the first draw, if applicable.
10. Appraisal Work

A copy of the full appraisal or 2055 Interior/Exterior appraisal reflecting the "as-is" value of the lot and the "completed" value of the proposed single family residence.  The value of the lot MUST be noted on the appraisal.
11. Indemnification Agreement If work commenced prior to closing, an Indemnification Agreement is required at closing to assure that no liens have been filed on the property.  The title company should provide this agreement.
12. Permanent Loan Approval, 1008/1003 Loan Application.
  • Credit scores must be shown on the Underwriting Determination Sheet.

Closing Requirements

In addition to regular closing items, the closer is responsible to ensure that the following items are obtained at closing for all OTC transactions.

  1. Indemnification Agreement -
    The title company should provide this document at closing if work has commenced prior to closing.  This agreement is required to assure that no liens have been filed on the property.

  2. Insurance (Proof of) -
    Proof of the following coverage is required at loan closing and must be carried throughout the life of the construction phase of the One Time Close loan.

a. General Liability: $500,000.00 Minimum
b. Builder's Risk/ Course of Construction: Full Replacement value
c. Worker's Compensation: Full Coverage, if applicable

  1. Title Insurance - 
    Proof that the appropriate title insurance has been issued.

Construction Phase 

The pre-construction meeting is the last pre-recording responsibility of Peter Cook Mortgage's Construction Lending Department. 

 

Construction Loan Fees and Costs The following is a general list of fees and costs that need to be collected at loan closing as well as an explanation of each fee/cost.  These costs and fees are in addition to normal branch costs and fees. Fees may vary slightly with each region.  Exact fees should be obtained from the regional construction lending department.
Fee/Cost Typical Amount Explanation
Construction Fee   This fee varies by region and state.  Consult the OTC manager for your area.  This fee will be charged for all loans and is considered earned at loan closing.

For factory built housing (modular, pre-fabricated, or panelized), 1.5% or $750, whichever is greater.

a. Prime Plus 1.5 %

 $ -0-

b. Prime Plus 1%

 $ 750.00

c. Prime Plus 0%

1% of loan amount
(minimum $1,000, maximum $2,000)

c. Fixed Rate

d. Adjustable Rate
Inspection Fees $ 500.00 (Varies)
$150.00 for final (Varies)		 A deposit will be collected at loan closing for the inspections required prior to any disbursement.  Inspection costs vary by area and may exceed the amount collected.  A final 442 with photos is required prior to a final draw.   Inspection fees will be reconciled at the completion of construction; any shortage will be billed to the borrower.
Date Down Endorsement $ 350.00   (varies)
($100.00 in Texas)
($100.00 for factory built housing (modular, pre-fabricated, or panelized))

 

 A final date down endorsement is required before the final disbursement can occur.  This endorsement comes from the Title Company that issued the original Title Policy.  The cost will be collected at loan closing and disbursed when needed.
Appraisal Recertification $ 100.00 (varies)
($150.00 for factory built housing (modular, pre-fabricated, or panelized))		 If the appraisal is greater than 4 months old at the time of closing, a recertification of value is required.  If the appraisal is over 12 months old at the time of closing, a new appraisal is required.
PCM Doc Prep/Attorney Fee $ 170.00 (varies) This fee is a document preparation fee for this program only.  This fee will be collected at loan closing.
Modification Fee $100.000 (TMO Users) Any principal reduction anticipated on the modification date will be handled with a Modification Agreement. The permanent interest rate, loan term and first payment dates are also established.

All costs that are paid or deposited by the Borrower are considered earned and are non-refundable.
Recording Draws The only items to be paid at loan closing will be for the following:
  1. Land Payoff: If the property on which the structure is being built is not free and clear, the land loan (seller) must be paid off to ensure Peter Cook Mortgage's priority lien. This may be accomplished with the first draw.
  2. Commissions: Real Estate Fees may be paid at closing. Broker Fees that are charged at closing will be paid at closing (i.e., Origination Fee, Discount, Processing Fee).  When using the Prime Plus options, premiums will be paid at the modification.
Disbursement Procedures

Once loan closing has occurred, PCM's Construction Lending Department will disburse soft cost (permits, fees); thereafter, all disbursement of funds will be based on a percentage of completion.

  • If the Borrower signs a Borrower's Consent to Advances to Contractor at loan closing, the funds will be disbursed directly to the General Contractor/Builder via wire upon their request. The OTC Manager may still require the Borrower's signature on each draw request.
  • If the Borrower's Consent to Advances form is not signed at loan closing, the draw request will need to be signed by both the Borrower and the General Contractor/Builder.  The disbursement check will be made out to both the Borrower and General Contractor/Builder.

Peter Cook Mortgage offers a Direct Disbursement Schedule, or for Factory Built Housing (modular, pre-fabricated, or panelized), a Factory Built Housing Disbursement Schedule.   Disbursements will be made from PCM's Construction Lending Department by wire, U.S. Postal Service, or overnight delivery.

Under the Direct Disbursement Schedule system, funds are disbursed in direct proportion to the percentage of work completed on the project.  Example: If 10 percent of the work is completed, 10 percent of the loan funds can be disbursed after approval from PCM's approved inspector.

Under the Factory Built Housing Disbursement Schedule system, funds are disbursed as follows:

  • Draw #1: 10% of invoiced amount may be disbursed at loan closing.
  • The remaining 90% is disbursed in four draws at the following stages of completion:
    • Draw #2:  The foundation is completed and certified, underground utilities, the sewer and water system are completed, and the foundation survey or endorsement has been received.
    • Draw #3:  The Factory Built home (modular, pre-fabricated, or panelized) is delivered and permanently affixed to the foundation.
    • Draw #4:  All finish work is completed, finish electrical and plumbing, appliances are installed, landscaping is complete, etc.
    • Final Draw:  All final documents are executed and received, title company has issued the final date down endorsement, final survey received and proof of homeowners insurance is received.

All draw requests must be submitted on Draw Request Form - Direct Disbursement  (or Factory Built Housing Draw Request Form).  The proper backup must accompany all draw requests.  Backup that may be required, but is not limited to, is as follows:

Draw Request Backup
1. Proof of adequate insurance:

All One Time Close loans must be adequately insured, naming First Horizon Home Loan Corporation as "additional insured".  The following is the required insurance:

a. General Liability: $500,000.00 Minimum
b. Builder's Risk/Course of Construction: Full Replacement value
c. Worker's Compensation: Full Coverage, if applicable
  • Proof of the above coverage is required at loan closing and must be carried throughout the life of the construction phase of the One Time Close loan.
  • If any of the above coverage lapses during the construction phase, proof of renewal will be required before the next draw request can be funded.
  • Loan Officers/Broker need to inform the Borrower/General Contractor/Builder of these insurance requirements upon loan application.
2. All Bills Paid Affidavit  This form needs to be completed properly and submitted with each draw request.
  • If disbursements have been authorized to go directly to the General Contractor/Builder, then only the General Contractors/Builder's signature is needed on the form. 
  • If disbursements are to be to the Borrower and General Contractor/Builder, both parties need to sign the form.
3. Invoices and Lien Releases:
  • If any lien problems arise during the construction phase of the loan, lien releases from the appropriate parties will be required before the next disbursement will be made. 
  • In all cases, before the final disbursement will be made, the General Contractor/Builder will be required to submit a General Contractor's Lien Waiver Affidavit Upon Final Payment.
Disbursement Flow

All disbursements for this program will be made by PCM's Construction Lending Department. The time frame and disbursement flow are as follows.

  1. An inspection will be ordered on the day that the draw request is received in PCM's Construction Lending Department. 
    • The request can be submitted by FAX.
    • The draw request will be checked to ensure that the draw request is correct and that all appropriate information has been submitted.
    • If a draw request is for the delivery of factory built housing (modular, pre-fabricated, or panelized), a date down endorsement will be ordered and arrangements made for inspectors to be on-site for the delivery.  When delivery is verified, funds will be disbursed.
  2. The draw request will be paid within three business days if all required items are received and PCM's approved inspector agrees with the percentage of completion.  (These three business days do not include the day the request is received if received after 3:00 PM CT.)
  3. The final disbursement will be made when all appropriate parties have given their approvals, signed the appropriate documents, ensured Peter Cook Mortgage has proper lien position protection, and the inspector has certified that the dwelling is built as per original submitted plans and specifications.
Change Orders
  • Change orders that increase the cost of the project are not allowed if the Borrower does not have the funds to pay for these change orders.    Both the Borrower and General Contractor/Builder must be cautioned that once the loan has closed, THE AMOUNT OF THE LOAN CANNOT BE INCREASED.
  • All change orders over 5% of the construction phase of the loan must have prior approval of PCM's Construction Lending Department.
  • Change orders and cost overruns are not paid by PCM.  The borrowers must pay the General Contractor/Builder from their own funds.
  • Factory Built Housing (modular, pre-fabricated, or panelized):  If a change order lowers the cost of the home, funds remaining at the end of the construction period will be used to reduce the loan principal.  The Borrower's payments will NOT change, only the principal will be reduced.
Retention There is a 10% retainage requirement for all of PCM's One Time Close loans.
  • This retainage will not be held out of each draw request but will be retained at the 90% disbursed level of the construction phase.
  • When 90% of the construction loan funds have been disbursed, disbursements will cease until the proper documents have been submitted by the Borrower and General Contractor/Builder.
  • The documentation includes: an executed Affidavit of Completion, Final All Bills Paid Affidavit, General Contractor's Lien Waiver Affidavit, a final survey, a final property inspection with photos, evidence of Homeowner's Hazard Insurance coverage, satisfactory well/septic certifications (if applicable), a Certificate of Occupancy, and an acceptable updated title policy.
Construction Phase and Interest Rate
  • The construction phase term will be at a minimum of six (6) months and a maximum of twelve (12) months.  This term shall be determined by the Borrower, the General Contractor/Builder, and PCM's Construction Lending Manager. The minimum term for Factory Built Housing (modular, pre-fabricated, or panelized) is four (4) months.
  • Interest for the construction phase of PCM's One Time Close loan will be based on the available programs/rates at the time of loan submission.
  • Interest statements will be sent out on the first business day of each month based on the principal outstanding balance at that time.  All payments will be collected and administered by PCM's Construction Lending Department.

  • If the LTV allows, an interest reserve account may be established by the Borrower from the loan funds.  Monthly interest payments will be deducted automatically out of this account at the first of each month.

  • Factory Built Housing (modular, pre-fabricated, or panelized):
    • Interest rate must be locked at closing for the entire construction period.
    • Construction must be 100% complete, including final inspection and photos, within the construction period.  If not completed, the borrower's interest rate must be re-locked.
      • If interest rates have risen, the borrower is responsible to pay additional costs to keep that initial interest rate.
      • If interest rates have fallen and the initial lock has expired, the borrower will need to be re-locked at the new rate.

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