COVID Residential Loan?

[Gilmore]

Unlike a CRD which is an entirely new type of distributable event, it is my understanding that the CARES Act loan provisions must work in concert with existing loan procedures.

If accurate, and if the plan allows for residential loans to be paid back over a 15 year term, can a qualified individual who is in the middle of building a new home request a $100,000 loan with a 15 year term, assuming all $100,000 is being used to pay construction costs and assuming the plan is amended to allow the increased CARES Act loan limits?

The only mention that I think I see in the Act regarding 5 years is with respect to delaying payments, not with the actual term of the loan.

It seems this would be possible, but once again, I'm looking at a recordkeeper's new CRL form that specifically says the loan can only be for 5 years, so maybe I'm wrong.

Thanks for any clarification.

[msmith]

It is my understanding that a term of more than 5 years would not apply to a construction loan.

[Gilmore]

Thanks.  So let's change the example and say the $100,000 is being used to purchase the primary residence.

A qualified individual can request a loan up to $100,000.  I don't believe the ACT mentions any restrictions on the use of the funds.  So if the participant is purchasing a primary residence, and the plan allows for a residential loan to be repaid over 15 years, is it acceptable for the $100,000 loan to be repaid over 15 years if the funds are being used to purchase the primary residence.

Thanks again.

[Luke Bailey]

The CARES Act loan provisions do not exclude principal residence loans, which of course can have a longer payment period than 5 years.

[Gilmore]

Thanks Luke.  The recordkeeper in my original question has revised their forms since then.

[Luke Bailey]

UR welcome, Gilmore.