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TRIDTILA‐RESPA Integrated DisclosureA Webinar by J.T. Turner
All Rights Reserved
J.T. TurnerInvolved in the banking industry for 30 years
Involved in corporate training for 24 years
President of Turner, Nobody and Nobody a consulting and training company.
Presentation topics include: Underwriting, Tax Return Review, Sales Training, Presentation Skills, HELOC’s , Management, Memory Skills and Lie Detection.
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J.T. TurnerOn a personal note, J.T. is a professional actor with credits on stage, in TV, radio and in film
Mystic River
Meet Joe Black
Dan in Real Life
Fever Pitch
Showtime’s “The Brotherhood”
ABC’s “Body Of Proof”
Interpretation of Information
This class interprets the new TRID guidelines as best as possible. But as with many Disclosures, this document is subject to further interpretation and change by regulators. Also state laws may cause small variances among lenders. To that end, when in doubt, please check with CFPB or your lending counsel.
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Agenda
A Bit of History
TRID
The Loan Estimate
The Closing Disclosure
Introduction
TRID stands for TILA‐RESPA Integrated Disclosure. It simplifies the mortgage disclosure forms that have long been required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).
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History
Dodd‐Frank Wall Street Reform and Consumer Protection Act (Dodd‐Frank Act).
Consumer Financial Protection Bureau
Amend Regulations X (Real Estate Settlemend Procedures Act) and Z (Truth In Lending Act), specifically for disclosures consumers receive in connection with applying for and closing a mortgage loan
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History
As a result, as of October 3rd 2015, gone are the Good Faith Estimate, HUD‐1 settlement statement, and 2 Truth in Lending Act disclosures. Those 4 documents are replaced by 2: the Loan Estimate and the Closing Disclosure
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HistoryGood Faith Estimate (GFE)+ initial Truth‐in‐Lending disclosure (initial TIL) =The Loan Estimate.
Similar to those forms, the new Loan Estimate form is designed to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage loan for which they are applying.
HUD‐1 and final Truth‐in‐Lending disclosure = The Closing Disclosure
This is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction.
Why?“Mortgages are complex transactions that may include risky features, so we’ve issued a rule that will simplify and improve disclosure forms for mortgage transactions. Consumers currently receive different, but overlapping federal disclosure forms with the terms and costs of mortgage loans. Because these forms are confusing for many people, Congress directed the Bureau to create new forms. The rule replaces the current forms with two new forms: the Loan Estimate, given three business days after application, and the Closing Disclosure, given three business days before closing.”‐CFPB
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TRID
The new rules, known as TRID, were implemented by the Consumer Financial Protection Bureau on Oct. 3. The CFPB says the new mortgage disclosure forms established by the rules should help consumers save money when shopping for home loans by making it easier to more precisely know the loans costs.
TRID
TRID stands for:TILA (Truth In Lending Act)RESPA (Real Estate Settlement Procedures Act)IntegratedDisclosure
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TRID
TRID applies to most closed‐end consumer mortgages. It does not apply to home equity lines of credit (HELOCs), reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land). The final rule also does not apply to loans made by persons who are not considered “creditors”.
Loan Estimate
For both disclosures, please follow along with your printed samples, although parts of the forms are embedded in our webinar.
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The Loan Estimate
General InformationDate Issued
The date the Loan Estimate is mailed or delivered to the consumer.
Applicants
Applicants includes the name and mailing address of the consumer(s) applying for the loan. Use each Applicant’s name and mailing address if there are multiple
.
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General InformationProperty
Address of the subject property.
Sale Price or Appraised Value or Estimated Value
If the loan is for a purchase money mortgage, use the selling price, the loan is for a transaction without a seller, use Appraised Value or Estimated Value
Loan Term
Loan Term is the term of the debt obligation. Describe the Loan Term in whole years, if there are partial years use the abbreviation “mo”.
General InformationPurpose
List intended use:
Purchase,
Refinance,
Construction,
Home Equity Loan.
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General InfromationProductFor the product description, you need to provide 2 key pieces of information:1) Any change that may occur to the periodic payment via a feature, including Negative Amortization, Interest Only, Step Payment, Balloon Payment, or Seasonal Payment.
2)The duration of the relevant payment feature.
General Information
For example, a payment feature where there is a five‐year period during which the payments cover only interest, and are not applied to the principal balance, would be disclosed as a 5 Year Interest Only for the payment feature.
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General InformationIf the loan can be described with more than one of these descriptions, only thefirst applicable feature is disclosed. For example, a loan thatwould result in both Negative Amortization and a Balloon Payment would only disclose Negative Amortization as part of Product.
General Information
Loan Type
Conventional
>FHA if the loan is insured by the Federal Housing Administration
>VA if the loan is guaranteed by the U.S. Department of Veterans Affairs, and
>Other ( insured or guaranteed by another Federal or a State agency).
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General Information
Loan ID#
Loan ID # is the creditor’s loan identification number.
Rate Lock
When the interest rate is locked at the time of the Loan Estimate’s delivery, the date and time (including the applicable time zone) then the lock period ends must be disclosed.
General Infromation
The date and time (including the applicable time zone) at which the estimated closing costs expire must be disclosed on every Loan Estimate.
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Loan TermsDisclose in the Loan Terms table:
Loan Amount (if the amount is in whole dollars, do not disclose cents)
Initial Interest Rate,
Initial Monthly Principal & Interest amount,
Any adjustments to these amounts after consummation,
Whether the loan includes a Prepayment Penalty, and
Whether the loan includes a Balloon Payment.
Loan termsInterest Rate & Monthly Principal & Interest
If the initial Interest Rate is not known at consummation, the fully‐indexed rate is
disclosed; a fully‐indexed rate is the interest rate calculated using the index value
and margin at the time of consummation.
The initial principal and interest payment amount also would be calculated using
the same fully‐indexed rate.
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Loan Terms
Can this amount increase after closing?
When it is possible for the Loan Amount, Interest Rate, or Monthly Principal & Interest
amounts to increase after consummation, disclose Yes where applicable with the
information pertinent to the adjustment after consummation.
Loan TermsIf the Loan Amount, could adjust, lender must give the maximum principal balance, and the date of the last payment that may cause a principal balnce increase, (negative amortization).
If the Interest Rate, could adjust, lender must disclose the frequency of interest rate adjustments, the date when the interest rate may first adjust, the maximum interest rate, and the first date when the interest rate can reach the maximum interest rate. (Also, disclose and reference the Adjustable Interest Rate (AIR) Table on page 2 of the Loan Estimate).
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Loan TermsIf the Monthly Principal & Interest could adjust, the lender must disclose the scheduled frequency of adjustments, due date of the first adjustment, and the maximum possible amount (and the earliest date it can occur) of the Monthly Principal & Interest. In addition, if there is a period during which only interest is required to be paid, also disclose that fact and thedue date of the last periodic payment of such period. ( Also, disclose and reference the Adjustable Payment (AP) Table on page 2).
When the Loan Amount, Interest Rate, or Monthly Principal & Interest payment cannot increase after consummation, disclose “No” where applicable.
Loan TermsPrepayment Penalty and Balloon Payment‐Does the loan have these features?If it does:
The maximum amount of the Prepayment Penalty and the date when the period
during which the penalty may be imposed terminates.
As high as $3,240 if you pay off the loan in the first two years.
The maximum amount of the Balloon Payment and the due date of such
payment.
You will have to pay $149,263 at the end of year 7.
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Projected PaymentsProjected Payments
This table shows estimates of the periodic payments that the consumer will make over the life of the loan. Creditors must disclose estimates of the following periodic payment amounts in the Projected Payments table:
Principal & Interest;
Mortgage Insurance;
Estimated Escrow;
Estimated Total Monthly Payment; and
Estimated Taxes, Insurance, & Assessments, even if not paid with escrow funds.
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What might appear in columns?
PMI dropping off
ARM Adjustments to maximum over periods
Interest Only Payments
Balloon Payment
Projected Payments
From the CFPB:
The maximum number of columns the Periodic Payments table may contain is four.
If a loan has more than four triggering events, show a range of payments in the
fourth column that reflects all remaining periodic payments not shown in the first
three columns.
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Projected Payments
Estimated Total Monthly Payment
For each column, disclose the sum of the Principal & Interest, Mortgage
Insurance, and Estimated Escrow as Estimated Total Monthly Payment.
Projected Payments
Estimated Taxes, Insurance & Assessments
Monthly amount due for taxes, homeowners insurance,Condo or HOA dues, ground rent, leasehold payments, and certain insurance premiums or charges if required by the lender.
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Costs at ClosingEstimated Closing Costs
This figure is calculated just as the Total Closing Costs disclosed on page 2 .
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Closing Cost Details (Page 2 of Loan Estimate)
Loan Costs
A‐ Origination Charges
This section includes points, Application Fees, and Underwriting Fees
Closing Cost DetailsB‐Services You Cannot Shop For
Appraisal fee,
Appraisal management company fee,
Credit report fee,
Flood determination fee,
Government funding fee (such as a VA or USDA guarantee fee, or any other fee
paid to a government entity as part of a governmental loan program),
Homeowner’s association certification fee,
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Closing Cost DetailsB‐Services You Cannot Shop For (Continued)
Lender’s attorney fee,
Tax status search fee,
Third‐party subordination fee,
Title – closing protection letter fee,
Title – lender’s title insurance policy, and
An upfront mortgage insurance fee (unless the fee is a prepayment of future premiums or a payment
Closing Cost DetailsC‐ Services You Can Shop For
Pest inspection fee,
Survey fee,
Title – closing agent fee, and
Title – closing protection letter fee.
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Closing Cost Details
D‐Total Loan Costs (A+B+C)
Simply the sum of the above sections.
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Closing Cost DetailsOther CostsE‐ Taxes and Other Government Fees
F‐Prepaids
G‐ Initial Escrow Payment At Closing
H‐Other
Such as Owners Title Policy (optional)
I‐Total Other Costs (E+F+G+H)
J‐Total Closing Costs (D+I)
Any Lender Credits are applied here
Calculating Cash to Close
Calculating Cash To Close
This section calculates the Estimated Cash to Close
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Closing Cost Details Alternative Cash to Close for a Refi
Closing Cost DetailsFor transactions with adjustable monthly payments, an Adjustable Payments
(AP) Table with relevant information about how the monthly payments will
change.
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Closing Cost DetailsFor transactions with adjustable interest rates, an Adjustable Interest Rate
(AIR) Table with relevant information about how the interest rate will change.
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Significant Changes
Zero Tolerance – The fees paid to the lender, mortgage broker, or an affiliate of either may not increase from what is disclosed on the Loan Estimate. The fees paid to an unaffiliated third party may not increase if the lender does not permit the consumer to shop for that service. Transfer taxes are also subject to a zero tolerance.
10% Cumulative Tolerance – Recording fees and fees paid to third‐party service providers, when the lender allows the consumer to shop and the consumer selects a provider on the creditor’s written list, are subject to a 10% cumulative tolerance.
Charges Not Subject to a Tolerance – Prepaid interest, property insurance premiums, escrows, and services required by the lender when the consumer is allowed to shop. When the consumer selects a third‐party provider not on the creditor’s written list of service providers, the fee for that service is not subject to a tolerance.
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Additional Information (Page 3)Contact Information
Disclose the Name and NMLS/___License ID number for the creditor and mortgage broker, if any, and the individual loan officer of both. Also, disclose the Email and/or Phone number of the individual loan officer.
Additional InformationComparisons
In this section, a consumer is encouraged to take the loan information about costs of the loan In Five Years, The Annual Percentage Rate, as well as Total Interest Percentage.
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Additional InformationOther Considerations
Here a borrower is informed about the following:AppraisalAssumptionHomeowners InsuranceLate PaymentRefinanceServicing
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Additional InformationConfirm Receipt
The consumer is not required to sign the Loan Estimate. The creditor may add a signature statement and have the consumer sign page 3 of the Loan Estimate in order to Confirm Receipt of the Loan Estimate by the consumer. If used by the creditor, the signature statement must contain the exact language from the model form.
If the Confirm Receipt table is not used by a creditor, a statement about Loan Acceptance must be included at the end of the Other Consideration table that states, “You do not have to accept this loan because you have received this form or signed a loan application.”
Receiving the Loan Estimate Lender must deliver within three business days of the lender’s receipt of an “application”
Application –automatically occurs when lender receives six pieces of information:
Borrower(s) Name(s)
Income
Social Security Number(s)
Property Address
Estimated Value of Property
Mortgage Loan Amount
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Receiving the Loan Estimate
Except for credit report, no fees chargeable until after Loan Estimate is provided
Lender must attach separate Provider List similar to that formerly used with the GFE.Must include all services which the borrower may need for the transaction (not just items for loan)
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Intent to proceed
There are two actions involved in satisfying this particular CFPB requirement:
Delivering the Loan Estimate to the consumer after a loan application
Collecting the consumer’s intent to proceed after receipt of the Loan Estimate
It is up to the lender to create what it will accept as Intent To Proceed.
Closing DisclosureThe second document set is the Closing Disclosure. Again please refer to a sample form as we review the disclosure.
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ConsummationConsummation is not the same thing as closing or settlement. Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan, not, for example, when the consumer becomes contractually obligated to a seller on a real estate transaction.
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Closing DisclosureThe top section of the first page is divided into three sections, and gives general information.
Closing Information‐ Date Issued, Closing Date, Disbursement Date, Agent, File #, Property and Sales Price.
Transaction Information‐ Borrower, Seller, Lender
Loan Information‐ Loan term, Purpose, Product, Loan Type, Loan ID#,MIC#
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Closing DisclosureLoan Terms/Projected Payments
These two tables discloses the same information we reviewed in the Loan Estimate form, updated to reflect the terms of the legal obligation at consummation.
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Closing Disclosure, No Seller
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Closing DisclosureLoan Costs
The sections, Origination Charges, Services Borrower Did Not Shop For, and Services Borrower Did Shop For, are the same in structure as on the loan estimate. One difference however, is if your borrower could have shopped for a service but did not, it should appear under Service Borrower Did Not Shop For. Also if they selected a service from the Written List of Providers, it is still considered a Service Not Shopped For.
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Closing DisclosureOther Costs
Items on this table should be disclosed as they would be disclosed on the Loan Estimate, updated to reflect the terms of the legal obligation and real estate transaction at consummation. An exception to that is section H, also called Other Costs.
Closing DisclosureSection H of Other Costs
These are items reflect costs incurred by the consumer or seller that were not required to be disclosed on the Loan Estimate, such as:
Real estate brokerage fees,
Homeowner or condominium association fees paid at consummation,
Home warranties,
Inspection fees, and
Other fees paid at closing that are not required by the creditor or otherwise required to be disclosed elsewhere on the Closing Disclosure.
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Closing DisclosureTotal Other Costs and Total Closing Costs
The total of all closing costs paid by the consumer, reduced by the Lender Credit, is disclosed as Total Closing Costs (Borrower‐Paid). The total of items designated as Borrower‐Paid At or Before Closing, Seller‐Paid At or Before Closing, and Paid by Others are disclosed as Closing Cost Subtotals. Lastly, the total amount of Lender Credits, if any, are disclosed and designated as Borrower‐Paid At Closing.
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Closing Disclosure, Page 3Calculating Cash to Close table and Summaries of Transaction table are disclosed. For transactions without a seller, a Payoffs and Payments table may be substituted for the Summaries of Transactions table and placed before the Alternative Calculating Cash to Close table. (See Example, next slide)
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Closing DisclosureCalculating Cash to CloseThis table has nine items listed:
Total Closing Costs,
Closing Costs Paid Before Closing,
Closing Costs Financed (Paid from your Loan Amount),
Down Payment/Funds from Borrower,
Deposit,
Funds for Borrower,
Seller Credits,
Adjustments and Other Credits, and
Cash to Close.
ClosingSummaries of Transactions
Here we disclose the amounts associated with the real estate purchase transaction between the consumer and seller, together with closing costs, in order to disclose the amounts due from or payable to the consumer and seller at closing, as applicablle. A separate Closing Disclosure can be provided to the consumer and the seller that do not reflect the other party’s costs and credits by omitting certain disclosures on each separate Closing Disclosure.
In transactions without a seller, the creditor does not provide the Seller’s Transaction column as part of the Closing Disclosure
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Closing Disclosure, Pg. 4
Loan Disclosures Assumption
Demand Feature
Late Payment
Negative Amortization,
Partial Payments
Security Interest
Closing Disclosure Pg.4Escrow Account
When an Escrow Account is established, disclose:
The amount of Escrowed Property Costs over Year 1 with a list of the costs that will be paid by the Escrow Account,
The amount of Non‐Escrowed Property Costs over Year 1 with a list of the costs that will not be paid by the Escrow Account (to the extent there is room to list the costs in the space provided)
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Closing Disclosure pg. 4When an Escrow Account is not established, disclose:
The amount of Estimated Property Costs over Year 1, and
The amount of any Escrow Waiver Fee imposed for waiving the creation of an Escrow Account with the loan.
If it applies, you will disclose an Adjustable Payments Table, or an Adjustable Interest Rate table
Closing Disclosure
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Closing Disclosure, Page 5Loan Calculations
Disclose the Total of Payments, the Finance Charge, the Amount Financed, the APR, and the Total Interest Percentage (TIP) in the Loan Calculations table. The APR and TIP amounts should be updated from the amounts disclosed on the Loan Estimate to reflect the terms of the legal obligation at consummation
ClosingOther DisclosuresA statement related to the consumer’s rights in relation to any Appraisal conducted for the property,
A statement informing the consumer of consequences of nonpayment, what constitutes default, when a creditor can accelerate maturity, and prepayment rebates and penalties pursuant to Contract Details,
A statement of whether State law provides for continued consumer responsibility for any Liability after Foreclosure,
A statement concerning the consumer’s ability to Refinance the loan, and
A statement concerning the extent that interest on the loan can be included as a Tax Deduction by the consumer.
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Closing Disclosure Pg. 5In the Contact Information table, disclose the following information for the Lender, the Mortgage Broker, the consumer’s Real Estate Brokerage, the seller’s Real Estate Brokerage, and the Settlement Agent in a columnar format:
Name,
Address,
The NMLS or State license ID, as applicable,
Closing Disclosure, SignaturesThe creditor, at its option, may include a line for the signatures of the consumers to Confirm Receipt. If the creditor includes a signature line to Confirm Receipt, the creditor must also include a statement that the signature only signifies receipt of the Closing Disclosure.
If the creditor does not include statement line or the consumer’s signature, add a statement to the Other Disclosures concerning Loan Acceptance that states: “You do not have to accept this loan because you have received this form or signed a loan application.”
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Three different three‐day periods in closing The 3‐day right of rescission (“3‐day rescission”) under TILA Presently applicable to most refinance transactions
The 3‐day waiting period (“3‐day waiting”) after delivery of the Closing Disclosure, the Borrower has 3 days to review before a closing may occur
The 3‐day delivery period for delivery of the Closing Disclosure (“3‐day delivery”) –Unless the Closing Disclosure is delivered personally, the Rule “deems” it delivered three business days laterPeriod may be shortened by actual confirmation of receipt
Changes to initial Closing Disclosure after delivery Only a few changes will require another 3‐day waiting period –
Change in the loan program
Example –moving from fixed rate to an adjustable rate loan
Changes to Annual Percentage Rate (APR) greater than 1/8 %
Applies only to increases in APR items , other increases do not trigger a new disclosure with waiting period.Caution–other increases may still cause tolerance violations, like the addition of a prepayment penalty fee after the initial disclosure But , all changes require a new Closing Disclosure to be prepared and delivered at or before “consummation”.
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Disallowed Practices
Imposing fees on a consumer before the consumer has received the Loan Estimate and indicated an intent to proceed with the transaction
Providing written estimates of terms or costs specific to consumers before they receive the Loan Estimate without a written statement informing the consumer that the terms and costs may change
Requiring the submission of documents verifying information related to the consumer’s application before providing the Loan Estimate
TimingWhen there is a changed circumstance after the Loan Estimate has been provided,
the creditor can revise the Loan Estimate within three business days. A revised
Loan Estimate generally can be provided no later than seven business days before
Consummation.
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TimingThe waiting period can be waived, but only in dire financial circumstances, such as an imminent foreclosure. The borrowers must provide the lender with a dated written statement describing the emergency and specifically amending or waiving the waiting period. The statement must be signed by all parties to the contract on the buyer’s side. The waiver may not be a pre‐printed statement from the lender.
Timing‐New DisclosureChanges that require a new disclosure and an additional three‐business‐day waiting period after receipt have been limited to the following:
changes to the APR above 1/8 of a percent for most loans and 1/4 of a percent for loans with irregular payments or periods;
changes to the loan product; and
the addition of a prepayment penalty to the loan.
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Timing‐ New Disclosure
For example, the following circumstances do not require a new 3‐day review:
Unexpected discoveries on a walk‐through such as a broken refrigerator or a missing stove, even if they require seller credits to the buyer.
Most changes to payments made at closing, including the amount of the real estate commission, taxes and utilities proration, and the amount paid into escrow.
Typos found at the closing table.
Timing
The creditor may not provide a revised Loan Estimate on or after the date it provides the Closing Disclosure.
• The creditor must ensure that the consumer receives the revised Loan Estimate no later than four business days prior to consummation. If the creditor is mailing the revised Loan Estimate and relying upon the 3 business day mailbox rule, the creditor would need to place in the mail the Loan Estimate no later than seven business days before consummation of the transaction to allow 3 business days for receipt.
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TimingGenerally, the creditor is responsible for ensuring that the consumer receives the Closing Disclosure form no later than three business days before consummation. If the Closing Disclosure is provided in person, it is considered received by the consumer on the day it is provided. If it is mailed or delivered electronically, the consumer is considered to have received the Closing Disclosure three business days after it is delivered or placed in the mail.
However, if the creditor has evidence that the consumer received the Closing Disclosure earlier than three business days after it is mailed or delivered, it may rely on that evidence and consider it to be received on that date.
Business DayFor purposes of providing the Loan Estimate, a business day is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions.
Note that the term business day is defined differently for other purposes; including counting days to ensure the consumer receives the Closing Disclosure on time. For these other purposes, business day means all calendar days except Sundays and the legal public holidays specified by the CFPB
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Waiving the Three Business Day Waiting Period
Consumers may waive or modify the waiting period when:
the extension of credit is needed to meet a bona fide personal financial emergency;
the consumer has received the Closing Disclosure; and
the consumer gives the creditor a dated written statement that describes the emergency, specifically modifies or waives the waiting period, and bears the signature of all consumers who are primarily liable on the legal obligation.
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Contact the CFPB
www.consumerfinance.gov/regulations/integrated‐mortgage‐disclosures‐under‐the‐real‐estate‐settlement‐procedures‐act‐regulation‐x‐and‐the‐truth‐in‐lending‐act‐regulation‐z/
Questions?
Anyone?
Anyone??
Bueller???
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Thank You!Upcoming CUWebinars
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April 12th - Key Monitoring and Underwriting Criteria for Business Loans
April 18th - Credit Reports and Credit Scores
April 26th - Beyond Time Management: The Clock is Not the Enemy
May 6th - Motivating & Managing the Front Line
May 9th - Opening Formal and Informal Trust Accounts
Don’t forget about our listing of OnDemandprograms at CUWebinars.com!
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