TRID TILA RESPA Integrated Disclosures

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1 Experience Extraordinary TRID TILA RESPA Integrated Disclosures April 21 st, Overview Kara Lamphere

2 Overview of TRID Effective for applications received on or after August 1, 2015 CFPB finalized amendments to RESPA and TILA which integrate existing disclosures and take effect with applications received on or after The CFPB gave the industry 21 months to comply with the final changes and has clearly stated there will not be any delays or extensions in the implementation date. The GFE and Initial TIL will be combined into one form called the Loan Estimate ( LE ) The HUD 1 and Final TIL will be combined into one form call the Closing Disclosure ( CD ) The changes are not simply about 2 new disclosures. TRID narrows what impacts an application, amends acceptable tolerances and significantly impacts the timing, delivery and workflow of key policies and procedures. 2

3 Overview of TRID Effective for applications received on or after August 1, 2015 New disclosures are not permitted to be used prior to August 1, 2015 We must be able to track the application date and provide correct disclosures: Application s received on or before July 31 st Old Disclosures This means new construction may close in 2016; however, the old HUD-1 and TIL would be used at closing. Application s received on or after August 1 st New Disclosures Certain loan types* are not applicable and, thus, would still use the current GFE, HUD-1, and/or TIL. *The new disclosures do not apply to HELOCs, reverse mortgages, mortgages secured by a mobile home or by a dwelling not attached to real property (i.e. land). 3

4 Application Definition Application definition has been changed to consist of the 6 core items from the current regulation. Those are: 1. Borrower s name 2. Borrower s income (stated not verified) 3. Borrower s social security number in order to obtain an credit report a) Could be a Tax EIN; it is not just a SS# 4. Property address 5. An estimate of the value of the property 6. Loan amount sought An application is considered complete when all 6 items are provided. Timeline for disclosures begins on that date. 4

5 The Loan Estimate ( LE ) - Overview Generally the same information as a GFE and TIL, presented in new format. Fee s are now disclosed alphabetically GFE important dates section has been removed The APR is deemphasized (on page 3) and other fed box disclosures have been removed Increased itemization of settlement charges No disclosure of lender paid broker compensation (it is on the Closing Disclosure) Broker comp is still included in the QM Points and Fees calculation New information, including enhanced projected payments table (replaces payment schedule). A new Total Interest Percentage (TIP) is also disclosed on page 3 TIP is the total amount of interest the borrower will pay over the life of the loan as a percentage of the loan amount. 5

6 The Loan Estimate ( LE ) - Overview The LE must be delivered to the borrower in person, placed in the mail or sent via electronic delivery: Within 3 business days after the creditor or broker receives an application; and Within 7 business days before consummation If the LE is not provided to the borrower in person, it is considered to be received 3 business days after it is placed in the mail or sent via electronic delivery. This receipt date is important as it drives the ability to impose a fee, providing written estimates of terms or costs (i.e. Fee Worksheet), and requiring documents for verification. Fee Worksheets, if given, prior to the LE must state that the terms and cost may change. Definition of Business days : Days in which the creditor s offices are open to the public for carrying out substantially all of its business functions except Sunday s and legal public holidays. 6

7 Providing the Loan Estimate Broker s receipt of an application triggers the obligation to provide the LE within 3 business days If the broker provides the LE: Broker must comply with all relevant requirements If creditor is unknown, broker leaves Loan ID# and lender info blank If creditor accepts a loan after the LE has been provided, creditor is bound by the tolerance limitations If the broker provides an incorrect LE, the creditor is still responsible and may not issue a revised LE correcting the error. NOTE: At this time, CMG, along with most other creditors, has not determined the process for submission of an LE by a broker. A couple of financial institutions have stated they will not allow a broker to deliver an LE. CMG has not yet made a determination. This will be provided in a later release. 7

8 Providing the Loan Estimate - Restrictions No fee s may be imposed on the borrower before the borrower has received the Loan Estimate and indicated an intent to proceed with the transaction. Exception for a bona fide and reasonable fee for obtaining the borrower s credit report Signing the LE does not indicate an intent to proceed Payment info may NOT be requested or held until the intent to proceed is provided. The creditor can t require a borrower to submit documents verifying information related to the application before providing the Loan Estimate Creditor or broker cannot refuse to accept any of the six items that constitute an application to avoid the issuance of the Loan Estimate If a borrower is provided with a written estimate of terms or costs before receiving the LE: It must have the statement: Your actual rate, payment and costs could be higher. Get an official Loan Estimate before choosing a loan. The estimate or worksheet may not be made with headings, content, and format substantially similar to the Loan Estimate Form 8

9 Providing the Loan Estimate Tolerance Limits ZERO TOLERANCE Certain charges are subject to zero tolerance, meaning that the creditor may never charge more than the estimated amount unless there is a "changed circumstance" 10% CUMULATIVE TOLERANCE Certain charges are subject to a 10% cumulative tolerance: NO TOLERANCE Certain charges are not subject to a tolerance limitation, meaning the amount charged to the borrower may exceed the amount disclosed on the Loan Estimate by any amount. Fees paid to the creditor, mortgage broker, Recording Fees Prepaid interest, property insurance or an affiliate of either Charges for third party services where: premiums, amounts placed into an escrow, Fees paid to an unaffiliated third party if The charge is not paid to the creditor impound, reserve or similar accont; the creditor did NOT permit the borrowwer or the creditor's affiliate, and/or Services required by the creditor if the to shop for that service Borrower is permitted by the creditor to creditor permits the borrower to shop and Transfer Taxes shop but selects a third party service the borrower selects a third party service provider on the creditor's written list provider not on the creditor's written list of service providers of service providers; and Charges paid to third party serivce providers for services not required by the creditor (may be paid to the affiliates of the creditor) NOTE: Affiliates mean ALL affiliates who provide settlement services. This can be title companies, escrow agents, third-party processers, etc. 9

10 Changes to the Loan Estimate Important Rule: Creditors are bound by the Loan Estimate and may not issue a revised LE because they later discover technical errors, miscalculations or underestimations of charges Creditors may only charge more than the amount disclosed when the original estimate, or lack thereof, was based on the best information reasonably available at the time of the disclosure. Revisions to the LE are permitted only in certain specific circumstances; Changed circumstance which occurs after the LE is provided to the borrower causing settlement charges to increase more than the permitted tolerance Changed circumstance which occurs after the LE is provided to the borrower that affect the consumers eligibility for the terms for which the borrower applied or the value of collateral Revisions requested by the borrower Interest rate not locked when the LE was provided, and locking the rate would cause the points or lender credits disclosed on the LE to change. Borrower indicates an intent to proceed with the transaction more than 10 business days after the LE was originally provided. The loan is a new construction loan, and settlement is delayed. 10

11 Changed Circumstances Note: These are the same as today! A changed circumstance for purposes of a revised Loan Estimate is: An event beyond the control of any interested party or other unexpected event specific to the borrower or transaction; Information specific to the borrower or transaction that the creditor relied upon when providing the LE and that was inaccurate or changed after the disclosures were provided; or New Information specific to the borrower or transaction that the creditor did not rely on when providing the LE For example, a changed circumstance may be an act of war, natural disaster, or an unexpected event specific to the borrower or transaction (loss of employment). 11

12 Other LE Considerations The creditor is required to deliver or place in the mail the revised LE within 3 business days of a changed circumstance including the interest rate being locked. The originator cannot receive money, hold a check or hold a credit card until the borrower receives an LE and has given their intent to proceed. A confirm receipt of the LE is NOT an intent to proceed If a mortgage broker receives the borrower s application, either the creditor or the mortgage broker may provide a consumer with the LE. If a mortgage broker provides the LE, the creditor is responsible for compliance. More information is forthcoming on CMG s policy relative to this topic. An Alternative Loan Estimate may be used if the transaction does not have a seller (refinances). 12

13 The Closing Disclosure (CD) - Overview Provides generally the same information as a HUD 1 settlement statement and Final TIL. The CD must: Generally contain the actual terms and costs of the transaction Be in writing and contain the information prescribed in such as: Page 1: General Page 2: Costs Page 3: Cash to Close & Summaries Page 4: Additional Loan Information Page 5: Other Information Information, Loan Terms, Projected Payments, Costs at Closing Loan Costs, Other Costs Calculating Cash to Close, Summaries of Transactions Loan Disclosures, Escrow Account, AP and AIR Tables (when applicable) Loan Calculations, Other Disclosures, Contact Information, Confirm Receipt Note: An Alternative Closing Disclosure may be used if the transaction does not have a seller (Refinance). 13

14 The Closing Disclosure (CD) - Overview Generally the same information, presented in a different format Page 1 mirrors the Loan Estimate Page 1 Costs are itemized with columns indicating party and timing of the payment (Page 2) Added information to show changes to costs and how cash to close was calculated (Page3) Fed Box disclosures and more contact information for the borrower on Page 5 Signature of borrower to confirm receipt is permitted (optional) Note: We will still be required to use the current GFE, HUD-1, and TIL forms for applications received prior to August 1, We will be required to use both forms until those applications received prior to August 1, 2015 either closed, cancelled or withdrawn. 14

15 Providing the Closing Disclosure The creditor is responsible for ensuring that the borrower receives the CD no later than 3 business days before consummation (Purchase and Refinance transactions) This timing requirement is new and will impact the scheduling of all closings. Business day here means all days except Sundays and federal public holidays. Consummation is defined under Reg Z as the time the consumer becomes contractually obligated on the transaction The date the NOTE is signed. NOTE: If the initial CD is: Delivered in person, it must be received at least 3 business days before consummation Delivered by mail (USPS, UPS, FedEx, etc.), borrower is considered to have received it 3 days after it was placed in the mail (unless creditor can prove earlier receipt). Delivered by (as long as compliant per ESIGN-ACT), borrower is considered to have received it 3 days after the was sent (unless creditor can prove earlier receipt). The creditor can contract with the settlement agent to provide the CD on the creditor s behalf. However, the creditor is still legally responsible for the accuracy as well as any errors or defects. CMG will determine who creates and provides the CD in a later announcement. The settlement agent must provide the seller with the Closing Disclosure 15

16 Changes to the Closing Disclosure Creditors must re-disclose terms or costs on the CD if certain changes occur to the transaction that cause the disclosure to become inaccurate. Three categories of changes require a corrected CD containing all changed terms: 1. Changes before consummation that require a new 3 business day waiting period: Disclosed APR increases by more than.125% (fixed) or.250 (ARM) Change in loan product (Fixed to ARM) Addition of a prepayment penalty 2. Changes before consummation which do not require a new 3 day waiting period. Costs change which do not affect the APR threshold above (i.e. HOA due, escrow, attorney fee) 3. Certain changes which occur after consummation require issuance of a revised CD Discovery a recording fee paid by the consumer is different from the amount disclosed on the CD The borrower has the right to inspect a revised CD during the business day before consummation. 16

17 The Closing Disclosure Tolerance Cures General Rule If the amounts paid by the borrower at closing exceed the amounts disclosed on the last delivered Loan Estimate beyond the applicable tolerance threshold: 1. The creditor must refund the excess to the borrower no later than 60 days after consummation, and 2. The creditor must deliver or place in the mail a corrected Closing Disclosure that reflects the refund no later than 60 days after consummation Zero tolerance charges: Any amount charged beyond the amount disclosed on the Loan Estimate must be refunded to the borrower. 10% cumulative tolerance charges: To the extent the total sum of the charges added together exceeds the sum of all such charges disclosed on the Loan Estimate by more than 10%, the difference must be refunded to the borrower 17

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19 Stay Tuned for Part II. Understanding the Loan Estimate (LE) Wednesday, 5/13/2015 at 11:00 AM PST

20 Experience Extraordinary This is not meant to be legal advice. Please seek legal counsel as you implement TRID CMG Financial, All Rights Reserved. CMG Financial is a registered trade name of CMG Mortgage, Inc., NMLS #1820 in most, but not all states. CMG Mortgage, Inc. is an equal opportunity lender, licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act No , Loans made or arranged pursuant to a California Finance Lenders Law license No Offer of credit is subject to credit approval. For information about our company, please visit us at To verify our complete list of state licenses, please visit For more information on State licenses, please visit Not intended to serve as a business solicitation for residents in Massachusetts. For Wholesale Brokers and Select Partner Clients only. 20