Glossary of One-Time-Close Mortgage Terminology Term Definition Appraisal that is based on the value of the project assuming all construction has been completed. Includes land value. The appraiser utilizes the "As-Built" Appraisal builder’s line item budget and plans and specifications to arrive at the appraised value. Attachment to Deed Of Trust/Mortgage that governs the loan transaction Addendum To during the construction phase. This document is removed from the Deed Of Deed/Mortgage Trust/Mortgage at permanent loan commencement. This addendum governs the loan during the construction phase of the loan, Addendum To Note stating the start date and completion date of the construction phase as well as the interest rate and payment parameters of the construction phase. Also identified as architectural plans, these are provided by a licensed architect, a custom builder or can be provided by a factory-built home Blueprints supplier. They provide a complete overview of how the project will be constructed, including all necessary architectural and structural issues. A specific insurance policy carried by the builder/contractor that provides specific coverage to the physical structure of the building in case of fire or Builder Risk Insurance accident. Countrywide must be on the policy as Lenders Loss Payee. This coverage is mandatory for all transactions and must be carried by the builder/contractor or as Course of Construction Insurance by the borrower(s). Also know as Conditions, Covenants and Restrictions, this document may apply to homes constructed in a particular area or subdivision. Homeowners Associations include this document as a part of title liens. The OTC-PC or C C and Rs CMD Construction Lending reviews these to make sure the proposed project is within the applicable parameters of the respective requirements. If the Appraisal specifies these, they are mandatory for Project Approval. Signed by a contractor, subcontractor or material supplier, this form waives Conditional Lien their right to file a Mechanic’s Lien (see above). This is signed on the Release condition that they receive payment for work performed. This release may be submitted throughout the construction period or at completion of the project. Closing document that spells out the parameters and conditions of the Construction construction loan, as well as the responsibilities of all parties associated with Loan Agreement the loan. Countrywide, the borrower(s) and the builder/contractor will all sign this document at the closing table. This fee covers the cost of all inspections and disbursements during the construction phase of the loan. Unlike some lenders that bill the borrower at Construction each disbursement, CHL includes this fee in the overall Closing Costs of the Administrative Fee loan. The dollar amount is governed by the length of the construction phase and is found in the OTC guidelines. Construction Start Date is the day the loan security instrument is recorded Construction Start Date reflecting CHL as lender of record. The actual term of the construction phase of the loan. It is stated in months: Construction Term 4, 6, 9, 12 or 18 months are the current options or conventional loans. Term Definition A reserve account usually equal to 5% of the Direct Costs of the construction project. These funds are held in reserve and will be available to cover any Contingency Reserve unexpected construction mishaps or severe problems. Any funds remaining in this account at the completion of construction will be applied to the permanent loan as a principal reduction with new P & I. This form is to be used for submitting a builder/contractor for prior approval Contractor Review for the OTC program. It required specific information about the builder / Request contractor and provides for attachment of licensing & insurance information. Details of the type grade and color of all building materials to be used in the Description Of construction of the home. Can be presented on a standard HUD Form or in Materials any format chosen by the builder/contractor. Construction costs that include labor and all building materials associated Direct Costs with the actual construction project. These costs are found on the (Hard Costs) builder/contractor line item budget. A loan specific schedule that is created as part of the Construction Loan Agreement signed at closing. The schedule defines the percentage of Disbursement construction funds that will be disbursed to the borrower(s) and/or Schedule builder/contractor at each draw request. CHL offers a choice of 4 different stage draw options as well as a line item disbursement draw option. This form is to be submitted by the borrower(s) and/or builder/contractor to CHL to request a disbursement of construction funds. This form is provided to the borrower(s) and builder/contractor at loan closing. Receipt of this form, Draw Request via FAX, notifies OTC-PC or CMD Construction Lending to order inspection Form to review the work completed to date and to arrange wiring of funds from OTC-PC or CMD Construction Lending to the borrower(s) and/or builder/contractor. As easement is a right for a third party to use a portion of another individual’s property. Typical easements are for actual access, utilities, water flow, etc. Easement Easements can increase or decrease a property’s value. Any easement noted under a title review must be reviewed prior to closing the loan. A foundation endorsement certifies that the project is located within the proper boundaries of the property and that there are no easements or Foundation encroachments present. This endorsement is issued by a title company at Endorsement completion of the foundation work and is required on properties in states that do not normally require a survey. This covers damage to other party’s property or another person due to General Liability construction related project accidents. COUNTRYWIDE MUST BE NAMED Insurance AS AN ADDITIONAL INSURED. Builders must carry their own General Liability Policy as governed by their applicable state law. Construction costs other than labor and materials. These include, but are not limited to, architect fees, building permits, builder profit and overhead, Indirect Costs temporary utilities for the job site, soils reports. These costs are broken out (Soft Costs) in the builder/contractor line item budget. Items in this category can be reimbursed to the builder and /or borrower at full amount as opposed to items contained in the Direct or Hard Costs category. Term Definition Ordered by OTC-PC or CMD Construction Lending upon receipt of a Draw Request form from the borrower(s) and/or builder/contractor. Inspector visits the construction site, verifies the work completed to date and notifies OTC- Inspection Report PC or CMD Construction Lending accordingly. This inspection is always ordered by OTC-PC or CMD Construction Lending, and no construction funds will be dispersed until the inspection report has been received by OTC- PC or CMD Construction Lending. A reserve account that holds an estimated interest amount that will be due on the loan during the construction phase of the loan. CHL will advance the interest due as necessary from this account to pay the monthly-accrued Interest Reserve interest. Any funds remaining in this account at the completion of construction will be applied to the permanent loan as a principal reduction with new P & I. Calculation: Loan Amount x Interest Rate x 60%/ 12 x Construction Term. A detailed listing of the actual costs of the construction project. This includes Line Item Budget/Cost the cost of labor, all building materials, and any other costs associated with Breakdown construction. A right by a contractor, sub-contractor or material supplier to place a lien on a borrower’s property for payment of work performed or material delivered on Mechanic’s Lien the property. Depending on state law, these liens may have priority over our construction loan. In such a case, a valid mechanic’s lien can be a foreclosure and the person filing can obtain ownership of the property. Improvements that are to be made to the adjacent to the subject property. Offsites (I.e.) roads, water and sewer, sidewalks, etc. These improvements must be complete prior to the start of actual construction on the financed project. The start date of the permanent phase of the loan. This date is defined in the Permanent Loan construction loan documents executed at the initial closing. It is the date of Commencement Date the Note and the Deed Of Trust/Mortgage. Ordered by the borrower(s) and/or the builder/contractor, these represent permission and agreement from local authorities and municipalities that the Permits proposed project can be constructed on the assigned lot and will meet all required specifications and rules that apply to the area. Any fees or preliminary project costs that have been paid out of pocket by the builder or borrower(s) prior to the closing of a construction loan. These costs Pre-Paid Costs include local permits and fee, payment to architects and other design services, pre-payment of taxes, etc. It does not include borrower paid expenses for which they want to be reimbursed. A portion of construction loan funds that are held back from disbursement until the project is complete. This retention is an insurance policy for the Retention borrower(s) and Countrywide that the builder will complete the work as agreed. Construction project that is free standing on a purchased lot and not Spot Development associated with a specific development, tract or sub-division. A project built as a condominium project with a HOA. The unit is not Stand Alone Condo connected to other units at any point. (Refer to the Conventional (Site Condo) Underwriting Manual for specifics concerning these types of housing). Term Definition Some states require a property survey at three intervals. 1) Prior to start of construction to properly locate easements and building set backs, 2) after Three Part Survey completion of foundation to verify the correctness of the location and 3) a final survey at completion of construction to warrant that there are no encroachments present that impact marketability. These constitute an enhancement to a standard title policy. Title endorsements are intended to eliminate risk associated with un-plotted Title Endorsements easements (see above) foundation placement on the lot, and address and other items listed on the property title that Countrywide would not want to have priority over the construction/permanent loan. This fee covers the cost of what the construction industry considered a "title date down" At completion of each inspection and prior to disbursement of Title Inspection construction funds, CHL may contact a local Title Company and ask for an Endorsement Fees endorsement that states our first lien position on the property. In some states, the original Title Policy covers these issues and these fees are not charged. CHL includes this fee in the overall Closing Costs of the loan. One of two components identified in determining the actual LTV of an OTC loan. Total Cost to Construct includes all Direct and Indirect Costs, all Total Cost to Construct exterior finish work and landscaping, etc., all Closing Costs, Discount and Origination Fees, and all Reserve Costs. Signed by a contractor, subcontractor or material supplier, this form waives the right to file a Mechanic’s Lien (see above). This type or release in not Unconditional Lien dependent on their receiving payment for work released. This release may Release be submitted throughout the construction period or at completion of the project. This policy covers injury that might occur on the project site as a result of working on the project. It covers any of the Contractor’s employees assigned to and working on the site. It is generally carried by the builder/contractor. Worker’s Comp This coverage is not available to Tradesman Owner –Builders or Owner- Insurance Builders. In some states, builder/contractors are not required to have this coverage if their sub-contractors cover themselves. Countrywide must be on the policy as Lenders Loss Payee.