Integrated Disclosure

Transcription

1 Thursday, December 4, p.m. Central time Integrated Disclosure Sheldon Hendrix, CRCM Senior Managing Consultant BKD, LLP shendrix@bkd.com Michael Prince Senior Consultant II BKD, LLP mprince@bkd.com TO RECEIVE CPE CREDIT Participate in entire webinar Answer polls when they are provided If you are viewing this webinar in a group Complete group attendance form with Title & date of live webinar Your company name Your printed name, signature & address All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar Answer polls when they are provided If all eligibility requirements are met, each participant will be ed their CPE certificates within 15 business days of live webinar 2 2 // // experience access access 1

2 OVERVIEW Dodd-Frank Act (DFA) mandated Bureau to integrate current disclosures under TILA & RESPA (GFE & HUD Settlement Statement) These new forms are called o The Loan Estimate (replaces GFE & ETIL) o The Closing Disclosure (replaces HUD Settlement Statement & FTIL) Both forms will consolidate other required disclosures related for mortgage lending o Example: Regulation B Appraisal Notification & RESPA Servicing Disclosure will be included on Loan Estimate (LE) Regulation & Staff Interpretations will be housed in Regulation Z & removed from Regulation X; however, Reg X will still contain GFE/HUD used for covered reverse mortgage transactions Effective Date: Application taken on or after August 1, // experience access 3 // experience access SIGH OF RELIEF ITEMS DROPPED FROM RULE Bureau determined NOT to finalize the following provisions it initially proposed 1. All-Inclusive APR Bureau did NOT incorporate a change in calculation methodology regarding annual percentage rate. This would have involved including all fees/charges associated with loan when computing APR. Bureau believed it would have made loan comparison shopping easier for consumers, but determined not to finalize at this time 2. Machine-readable documents Bureau did NOT mandate specific machine-readable document retention provisions proposed to ease compliance oversight by banking regulatory agencies 3. Wholesale rate of funds Bureau did NOT incorporate required disclosure approximate amount of the wholesale rate of funds in connection with the loan. This was deemed too confusing to consumers during testing & removed by Bureau 4 // experience access 4 // experience access 2

3 SIGH OF RELIEF ITEMS DROPPED FROM THE RULE 4. Transaction Coverage Rate (TCR) Bureau will reevaluate TCR in future rule makings, but declined to finalize implementation of this two-fold finance charge definition. Bureau may look to data provided under HMDA to assist in making this assessment over next five years. Since HMDA data collection items may be expanded, CFPB may incorporate certain data fields which would allow it to evaluate fees, interest rates & certain terms/ features of loans 5 // experience access 5 // experience access OTHER PROVISIONS INCLUDED IN FINAL RULE Bureau included other requirements in Final Rule that do not necessarily pertain to Integrated Disclosures, but are worth mentioning o o o Since reverse mortgages are exempt from Integrated Disclosure requirements, they would not receive Servicing Disclosure Statement required by RESPA. Bureau added a provision in (a) of Reg. X to require provision of Model Form MS-1 within three business days from application of a reverse mortgage to satisfy requirement of providing this disclosure HUD Settlement Statements & GFEs will still be used for reverse mortgage transactions & Bureau has incorporated sections of HUD RESPA FAQs related to reverse mortgages in Appendix A & C to Regulation X to address these specific situations Regulation Z now defines application for other types of credit extensions beyond closed-end mortgage loans to mean the submission of a consumer's financial information for purposes of obtaining an extension of credit 6 6 // // experience access access 3

4 OTHER PROVISIONS o o Definition of business day has been changed in certain circumstances (see handout accompanying this presentation) Consumer purpose loans made to trusts for tax or estate planning purposes are specifically included in Reg. Z coverage determination to alleviate confusion as to whether these loans are applicable under TILA 7 7 // // experience access access COVERAGE OF INTEGRATED DISCLOSURE The integrated disclosures will affect most closed-end, consumer purpose mortgage loans secured to real property, BUT will not affect: o HELOCs o Reverse mortgages (although these are still subject to GFE & HUD-1 in RESPA & ETIL & FTIL in TILA) o Creditors extending credit 5 or fewer times when secured to a dwelling (although these transactions will be subject to applicable RESPA sections including the HUD RESPA FAQs for completing GFEs &HUD-1) o Chattel-dwelling loans (a.k.a. mobile home or dwellings not secured to land- although these transactions are still covered by Reg Z provisions) o Special exemption in (h) - loan must meet all criteria including: secured by a subordinate lien AND the transaction is for down payment purposes, closing costs, or other home buyer assistance, property rehabilitation assistance, energy efficiency assistance, or foreclosure avoidance / prevention AND the credit does not require payment of interest AND etc. The disclosure WILL apply to closed-end, consumer purpose loans secured to real property that include: o Loans without regard to acreage (25 acres or more are now included in the coverage) o Vacant-land loans o Construction-only loans o Extensions of credit secured to a consumer s interest in a timeshare plan (although timing requirements do not mirror those for typical closed-end credit transactions secured to real property) The Bureau has provided model forms & detailed instructions for completing the forms in the final rule Effective date: August 1, // experience access 4

5 WHAT IS AN APPLICATION ON AUGUST 1, 2015 Application Definition Six Pieces of Information 1. Consumer's name 2. Income 3. Social Security # (or TIN) to obtain a credit report 4. Property address 5. Estimate of value of property 6. Mortgage loan amount sought CFPB stated, The Final Rule permits creditors to collect the information they need to give a reliable estimate before they complete collection of the six items of information that constitute an application (emphasis added) **The catch-all element has been removed & eliminates any other information deemed necessary by the loan originator from definition & prohibits creditor from requiring verifying documentation in order to issue Loan Estimate 9 // experience access LOAN ESTIMATE DISCLOSURE Loan Estimate (LE) consolidates Current GFE Early TIL Appraisal Notice (Reg B- ECOA) REMINDER TO WATCH DENIALS Servicing Disclosure Statement (Reg X RESPA) Timing o LE must be provided three business days (open to public for carrying on substantially all its business functions) after receiving an application & seven business days (all days except Sundays & holidays) prior to closing o Since definition of application has changed, LE will likely be delivered earlier in loan application process than typically observed with current GFE o If a creditor denies an application within three business days (open to pubic for carrying on substantially all of its business functions) from receipt, it does not have to provide LE. However, if creditor later consummates a transaction on terms applied for originally but did not provide LE, it will be deemed to have violated timing requirement of disclosure (Comment (e)(1)(iii)-3). Creditor should constitute a new application in these events // // experience access access 5

6 PREDISCLOSURE ACTIVITIES LIMITATIONS Limitations on predisclosure activities o Creditors cannot charge a fee (other than credit report fees) until the consumer has received the LE & indicated their intent to proceed with the application (if the creditor uses a specific method to document the consumer s intent to proceed (e.g., signing a particular document notifying their intent to proceed with the loan or oral communication of intent to proceed) the creditor must retain such document to comply with recordkeeping requirements in section silence is NOT intent nor compliance) Example #1: a creditor CANNOT retain a $500 check for underwriting fees even if it was promised creditor would not cash check until after LE was provided & consumer s intent to proceed with application was obtained Example #2: a creditor CANNOT charge a credit report fee to a consumer s credit card account & subsequently charge card for additional fees based on original authorization to charge card for credit report fee even if consumer notified creditor of intent to proceed with application A creditor MUST obtain separate authorizations when processing credit card payments for credit report fees & subsequent loan fees // // experience access access PREDISCLOSURE ACTIVITIES LIMITATIONS Limitations on predisclosure activities o Creditors issuing any written estimate of terms or costs specific to that consumer, must include the disclaimer, Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan in at least 12-point font on the front of the first page of such estimate or document (Model Form H-26) o Creditors CANNOT require consumer to submit verifying information regarding application prior to providing the LE. This would include such items as paystubs, bank account statements or sale/purchase contracts // // experience access access 6

7 THE LOAN ESTIMATE DISCLOSURE Waiver of Timing Requirements o The consumer can waive both the 7 business day waiting period required before closing a transaction after provision of the LE & the 3 business day waiting period before closing a transaction required by the Closing Disclosure, but the consumer(s) primarily liable on the legal obligation must: Receive the LE or the Closing Disclosure Provide a written statement that is dated Describes the bona fide financial emergency in that statement o Final Rule posits sudden, unforeseen mandatory military service deadline, unforeseen medical emergency, & imminent foreclosure threat as bona fide - these should be limited in nature All parties primarily liable on the obligation must sign the statement USE OF PRE-PRINTED FORMS ARE PROHIBITED Note: The creditor should obtain two separate signed statements from the consumer(s) waiving the timing requirements for the Loan Estimate & the Closing Disclosure (to be discussed later in this presentation), respectively. The consumer MUST receive each disclosure before they can waive the timing requirements. Therefore, the consumer CANNOT waive the timing requirements for the Closing Disclosure after only receiving the Loan Estimate. 13 // experience access TOLERANCE FOR LOAN ESTIMATE FEES (0% CATEGORY) Expanded fields subject to 0% tolerance Bureau has expanded fields applicable to zero percent increase tolerance. They include 0% Tolerance Fields Fees paid to creditor Fees paid to affiliates (creditor/broker) some exceptions apply Transfer taxes Fees paid to mortgage brokers Fees paid to unaffiliated third parties where consumer was not allowed to shop for a provider (required items chosen by creditor) Notes: a. When comparing estimates to actual charges for any tolerance calculation, use unrounded numbers b. Fees paid to an affiliate would not be subjected to 0% tolerance threshold if creditor was not requiring service but consumer opted for service & for hazard insurance premiums where agency is affiliate of creditor // // experience access access 7

8 TOLERANCE FOR LOAN ESTIMATE FEES (10% CATEGORY) Fields subject to aggregate 10% increase tolerance Bureau has defined fields subject to 10% increase tolerance as follows 10% Tolerance Fields (aggregated total) Fees paid to unaffiliated third parties where consumer was allowed to shop for provider & chose a provider identified on Providers List or did not select provider ultimately chosen Fees paid to unaffiliated third parties where consumer was allowed to shop for provider, but a Providers List was not provided Recording fees Notes: a. When calculating aggregate totals for tolerance, do NOT include estimates for servicers NOT performed (i.e., an appraisal was ordered, but during underwriting was determined it was not needed; in this case the estimated appraisal fee on LE will not be included in calculation for determining tolerance violations) b. Use unrounded numbers (see previous slide) // // experience access access TOLERANCE FOR LOAN ESTIMATE FEES (UNLIMITED CATEGORY) Fields not subject to a specific tolerance Bureau has defined fields that are not subject to a specific tolerance as follows No tolerance specified ( Unlimited Category) Fees paid to unaffiliated third parties where consumer was allowed to shop for provider & chose a provider NOT identified on Providers List Fees paid to third parties NOT required by creditor (even if party is affiliate) Prepaid interest (daily interest) Property insurance premiums (hazard insurance premiums) (even if provider is an affiliate of creditor) Amount placed in escrow (impound) account Notes: a. Amounts in this category must be based on information reasonably available to creditor at time disclosure provided b. Items not required by creditor but chosen by consumer are required to be estimated if consumer notifies creditor of intent to pursue such item c. Good faith would be violated if creditor has reasonable information at time disclosure is provided, but did not disclose item d. Use unrounded numbers (see previous slide) // // experience access access 8

9 LOAN ESTIMATE PAGE #1 General Top Section // // experience access access LOAN ESTIMATE PAGE #1 Save this Loan Estimate to compare with your Closing Disclosure standard on model forms Date Issued date LE is mailed or delivered Applicants if all applicants cannot fit in provided space, an additional page can be added to accommodate Property address w/zip code of security property; multiple zip codes are allowed if multiple properties in multiple locations for a purchase transaction are being considered; if a property description is used in lieu of an address, an additional page CANNOT be used to append the document, but if there are multiple addresses that do not fit in the provided space, an additional page may be used to append the document Sale Price/Est. Prop. Value sales price from contract (if known) or estimated value of property when sales price is not known or in transactions not involving a purchase; only use estimates or values related to real value & exclude personal property (i.e., furnishings being purchased along with transaction) Loan Terms Maturity 24 mo. whole number of years as, for example, 25 years ; if maturity is not a whole number of years, for example, 185 months, then disclose as 15 yr. 5 mo. Maturity <24 mo. display as, for example, 16 mo. ; but if exactly 12 mo., display as 1 year // // experience access access 9

10 LOAN ESTIMATE PAGE #1 Purpose using one of the following terms, describe intent of transaction Purchase proceeds from transaction will be used to purchase property in which a security interest is taken Refinance cash out or no cash out transactions; debt consolidation or simple refinance Construction initial construction loan & construction-permanent loan; NOT used for renovations Home equity used for all other purposes except Purchase, Refinance & Construction Product a description of loan product using one of the following Adjustable rate where interest rate may increase after consummation & unknown at time of consummation Step rate where interest rate may increase after consummation & known at time of consummation Fixed rate where loan is not a step rate or an adjustable rate loan // // experience access access LOAN ESTIMATE PAGE #1 Product if one of following features may change periodic payment, feature along with any applicable duration would be disclosed before product description (i.e., 7 Year Balloon Payment, Fixed Rate) using order given below if more than one feature applies Negative amortization if principal may increase due to addition of accrued interest to principal Interest only if one or more payments may be applied to loan s accrued interest & not to principal Step payment if variations to scheduled payment occur & are not caused by changes in an interest rate Balloon payment if legal obligation includes a balloon payment Seasonal payment if legal obligation provides regular periodic payments are not scheduled between specified unit-periods Loan type using one of following terms Conventional not guaranteed by Federal or State agency FHA loan is insured by Federal Housing Administration VA loan is insured by U.S. Dept. of Veterans Affairs Other other loans not FHA or VA that are federally or state insured with a brief description of that type (i.e., Other RHS for Rural Housing Service loans) 20 // experience access 20 // experience access 10

11 LOAN ESTIMATE PAGE #1 Loan ID # letters or numbers used by consumer, creditor or other parties to identify transaction Rate lock check appropriate box indicating if interest rate is locked If rate is locked, expiration of such lock period (even if accepted on any date after lock) must be specified with a specific date & time; time shall include time zone (i.e., 5:00 p.m. CST) Before closing, your interest rate, points, and lender credits can change unless you lock in the interest rate. All other estimated closing costs expire on [mm/dd/yyyy at hh:mm time zone]. included statement on all model forms If creditor has a policy to honor interest rates without a written agreement, it must disclose no in this section pursuant to Final Rule Since creditor is bound to LE for 10 days, duration between Issued Date & Expiration Date of closing cost estimates should be at least 10 days // // experience access access LOAN ESTIMATE PAGE #1 Loan Terms // // experience access access 11

12 LOAN ESTIMATE Loan amount note amount/principal amount of loan To right of Loan Amount, a disclosure of whether or not this amount can increase after consummation; if it can, maximum balance for transaction & due date of last payment that may cause principal balance to increase & if such increase is scheduled or potential Interest rate rate applied at consummation If rate is not known at consummation, fully indexed rate (margin + index at consummation) shall be disclosed To right of Interest Rate, a disclosure of whether or not interest rate can increase; if it can, frequency of rate adjustments, date of first adjustment, maximum rate & first date rate can reach that maximum Principal & interest payment periodic payment amount due under terms of the loan & add associated unit; period disclosed before label such as Monthly Principal & Interest. In same gird, a statement to See Projected Payments below for your Estimated Total Monthly Payment To right of Principal & Interest, a disclosure of whether or not payment can increase; if it can, scheduled frequency of adjustments, due date of first adjusted payment, maximum payment could reach & first date maximum payment could be reached // // experience access access LOAN ESTIMATE PAGE #1 Prepayment penalty whether transaction has a prepayment penalty To right of Prepayment Penalty, a disclosure to whether loan has a prepayment penalty; if it does, maximum amount of prepayment penalty that may be imposed & date when prepayment is terminated Balloon payment whether transaction has a balloon payment feature To right of Balloon Payment, a disclosure to whether loan has a prepayment penalty; if it does, maximum amount of balloon payment & due date of such payment Calculating timing of following events Interest rate adjustments when disclosing dates interest rate may first change & first date rate can reach its maximum, date should be calculated by counting from date interest for first scheduled payment begins to accrue Payment increases, balloon payment & loan amount when disclosing date payment increases, balloon payment becomes due or loan amount could increase, date should be calculated by counting from due date of initial periodic payment Prepayment penalty when disclosing date prepayment penalty period is terminated, date should be calculated by counting from date of consummation // // experience access access 12

13 LOAN ESTIMATE PAGE #1 Adjustments after consummation if loan amount, interest rate or P/I payment can increase after consummation, under heading Can this amount increase after closing?, following additional information must be disclosed: For loan amount adjustments, maximum principal balance for transaction & due date of last payment that may cause principal balance to increase. Disclosure must also state if maximum principal balance disclosed is potential or is scheduled to occur (based on legal obligation in the contract or note) For interest rate adjustments, frequency of interest rate adjustments, date of first interest rate adjustment & first date when interest rate can reach maximum interest rate. This statement must be followed by a reference to AIR Table For increases in periodic payment, scheduled frequency of adjustments to periodic P/I payment, due date of first adjusted P/I payment, maximum possible periodic P/I payment, date when maximum P/I payment will be reached. If P/I payment adjustments are not caused by changes in rate, a reference to loan amount adjustments section referenced above. If there is a period where principal payment are not required, that fact shall be stated along with due date of last periodic payment of such period where principal payments are not required // // experience access access LOAN ESTIMATE PAGE #1 Details about prepayment penalties & balloon features if loan has a balloon payment or prepayment penalty, under heading Does the loan have these features?, disclosure shall state following o Maximum amount of prepayment penalty & date when prepayment penalty terminates o Maximum amount of balloon payment & due date of balloon payment // // experience access access 13

14 LOAN ESTIMATE PAGE #1 Projected Payments // // experience access access LOAN ESTIMATE PAGE #1 Periodic payment or range of payments when one of the following events occurs, LE must disclose up to four payments or ranges of payments P/I payment or range of payments can change (ARM, step rate, etc.) Balloon payment event (when a loan has such feature) Mortgage insurance premiums will terminate under applicable law Multiple adjustments occur in a single year (in which case projected payments are made on anniversary of due date of initial periodic payment or range of payments immediately following occurrence of multiple events) Limitation to four schedules Balloon payment since LE is limited to only allow four periodic payment schedules, all events occurring after second event MUST be disclosed as one event. This is because balloon payment must be disclosed as the fourth (& final) event Mortgage insurance termination mortgage insurance termination should be disclosed as a separate event, UNLESS other triggering events exceed three // // experience access access 14

15 LOAN ESTIMATE PAGE #1 Ranges of payments are required when Multiple events are combined in a single section Multiple events occur in a single year Interest rate & payment adjust in same section When ranges are required, LE must disclose minimum & maximum P/I payments based on legal obligation of loan including applicable introductory rates, interest rate caps, lifetime caps, floors & other applicable usury laws (as applicable) Projected payment disclosures are broken into four parts under subheading Payment Calculation as follows Principal & Interest P/I payment, & if loan is interest only, must disclose only interest Mortgage Insurance maximum MI premium corresponding to P/I payment (this would include items not technically considered M, i.e., annual USDA or VA guarantee fees) Escrow property taxes, credit insurance products, hazard/loss insurance, & debt cancellation/ suspension coverage payable into an escrow account with a statement Amount can increase over time Estimated Total [UNIT PERIOD] Payment adding all items to total to include P/I, MI, & Escrow (above) // // experience access access LOAN ESTIMATE PAGE #1 Estimated Mortgage Obligations This section required even if escrow account is NOT established // // experience access access 15

16 LOAN ESTIMATE PAGE #1 Taxes, insurance & assessments (T,I&A) under label Taxes, Insurance, & Assessments, following items are to be disclosed Sum of property taxes, fees or assessments imposed by condo/cooperative/hoa, ground rents, leasehold payments & premiums or other charges for credit insurance (life/health/accident/loss-ofincome, etc.), debt cancellation or suspension & other such insurance covering against loss of or damage to property or against liability arising out of ownership or use of property required by the creditor Under subheading Estimated Taxes, Insurance, & Assessments : Amount can increase over time Under boxes used to indicate what is included in estimate: See Section G on page 2 for escrowed property costs. You must pay for other property costs separately Calculating T,I&A To calculate T,I,&A for disclosure, use replacement cost of property during the initial year after transaction // // experience access access LOAN ESTIMATE PAGE #1 Costs at Closing This section summarizes estimated closing costs generated on second page of disclosure Includes statements related to specific costs (i.e., Loan Costs & Lender Credits) Two fields include Estimated Closing Costs & Estimated Cash to Close // // experience access access 16

17 LOAN ESTIMATE PAGE #1 (VARIATION) Costs at Closing (w/o a seller) For transactions without a seller, creditor can use following format on LE // // experience access access LOAN ESTIMATE PAGE # // // experience access access 17

18 LOAN ESTIMATE PAGE #2 Loan costs A. Origination charges must be disclosed as $ & % of loan amount; must be blank if NA. This must be first item listed Origination charges will be itemized & CANNOT exceed 13 items; if more than 13 items are needed, they must be aggregated & labeled Additional Charges on one line B. Services You Cannot Shop For items required by creditor that consumer cannot shop for & payment is NOT made to creditor or mortgage broker Services You Cannot Shop For will be itemized & CANNOT exceed 13 items; if more than 13 items are needed, they must be aggregated & labeled Additional Charges on one line If any item is related to title insurance or for conducting closing, introductory description Title shall be used before each item (i.e., Title Settlement Agent Fee, Title Title Search) // // experience access access LOAN ESTIMATE PAGE #2 Loan Costs A. Services You Can Shop For items required by creditor that consumer can shop for & payment is NOT made to creditor or mortgage broker Services You Cannot Shop For will be itemized & CANNOT exceed 14 items If any item is related to title insurance or for conducting closing, introductory description Title shall be used before each item (i.e., Title Settlement Agent Fee, Title Title Search) **Points are listed first in Section A. All other fees in all other categories are listed alphabetically by labels // // experience access access 18

19 LOAN ESTIMATE PAGE #2 D. Total Loan Costs Section A (Origination Charges) + Section B (Services You Cannot Shop For) + Section C (Services You Can Shop For) = TOTAL LOAN COSTS Other Costs (second column on the form to the right of first column) E. Taxes & Other Government Fees amounts paid to state & local governments for taxes & other government fees First all recording fees & taxes are recorded first Last transfer taxes paid by consumer (if paid by another party, must be blank) No other fees can be added or deleted from this section F. Prepaids items paid in advance of the first periodic payment First Homeowner s Insurance Premium (# of months) & dollar amount due Second Mortgage Insurance Premium (# of months) & dollar amount due Third Prepaid interest using daily amount, number of days & rate as a percent to calculate total dollar amount due Fourth Property taxes (# of months) & dollar amount due If not applicable, four above items must be BLANK & cannot be deleted Three additional items may be added & must also disclose applicable time consistent with above // // experience access access LOAN ESTIMATE PAGE #2 Other Costs E. Initial Escrow Payment at Closing an itemization of amounts consumer will place in escrow account at the time of consummation (these CANNOT be rounded) First Homeowner s Insurance Premium (dollar amount) per month for (# of months), then totaled Second Mortgage Insurance Premium (dollar amount) per month for (# of months), then totaled Third Property Taxes (dollar amount) per month for (# of months), then totaled If any field is not applicable, fields must be BLANK & cannot be deleted If other charges beyond three above are applicable, itemize & describe using format consistent with other fields (dollar amount) per month for (# of months), then totaled ; this is limited to five additional items // // experience access access 19

20 LOAN ESTIMATE PAGE #2 Other Costs F. Other an itemization of any other amounts in connection with transaction consumer is likely to pay or has contracted with a person other than creditor or loan originator to pay at closing with creditor is AWARE of at time of issuing LE For items in this section, any item that is option shall be described & labeled as such (i.e., Home Warranty (optional)) If any item is related to title insurance, introductory description Title shall be used before each item (i.e., Title Owner s Title Policy (optional)) This section is limited to five items **All items specifically described are to stay in that order. Items itemized outside those specifically described are to be alphabetically ordered // // experience access access LOAN ESTIMATE PAGE #2 Total Other Costs are totaled in Section I Total Loan Costs (Column 1) are added to Total Other Costs (Column 2) & totaled in Section J // // experience access access 20

21 LOAN ESTIMATE PAGE #2 Seller Transaction Refinance Transaction Section J is Total Loan Cost + Total Other Costs Closing Costs Financed (Paid from your Loan Amount): must be disclosed as a negative number (if any) Down Payment/Funds from Borrower - Purchase: subtract principal amount of loan from purchase price - Not a purchase: if borrower owes money at closing, $0 disclosed in Funds for Borrower & amount owed is disclosed in Down Payment/Funds from Borrower. If borrower is due money at closing, $0 is disclosed in Down Payment/Funds from Borrower & amount due to borrower is disclosed in Funds for Borrower. If there are no amounts due or owned, $0 is disclosed in both fields For transactions without a seller, alternative disclosure can be made (right) // // experience access access LOAN ESTIMATE PAGE #2 If loan has an adjustable rate feature that does NOT adjust with an index (step-rate loan) or has a seasonal payment feature, Adjustable Payment (AP) Table is required (left). Each applicable section is required to be completed. If loan has an adjustable rate feature set to an index, Adjustable Interest Rate (AIR) Table is required (right). Each applicable section is required to be completed // // experience access access 21

22 LOAN ESTIMATE PAGE #3 Additional Information About this Loan complete each section as applicable Lender ID & Loan Officer information in first column Mortgage Broker information in second column If an NMLS ID number has not been issued to creditor or individual loan officer, license number or other unique identifier issued by applicable jurisdiction or regulating body to which creditor or loan officer is licensed & state of applicable jurisdiction or regulatory body stated before the word License Contact information for each as appropriate // // experience access access LOAN ESTIMATE PAGE #3 In 5 Years total of principal, interest, mortgage insurance premiums/fees & loan costs through end of 60 th month from first payment due date & principal paid during this same time in applicable labeled row (shown above) Annual Percentage Rate (APR) APR Total Interest Percentage (TIP) total amount of interest consumer will pay over life of loan, expressed as a percentage (all finance charges for life of loan + prepaid interest collected before closing) // // experience access access 22

23 LOAN ESTIMATE PAGE #3 Complete fields as appropriate based on terms & features of product // // experience access access LOAN ESTIMATE PAGE #3 This section is optional; however, if signature lines and statement are not present, the creditor must add a statement under the heading Loan Acceptance stating You do not have to accept this loan because you have received this form or signed a loan application. Complete fields as appropriate based on terms & features of product // // experience access access 23

24 WHEN REVISED LOAN ESTIMATES ARE ALLOWED Creditor can issue a revised LE in following instances o Settlement charges (changed circumstances) a revised LE can be provided if changed circumstance threshold is exceeded as follows Occurrence of an extraordinary event beyond control of any interested party or other unexpected event specific to consumer or transaction Information specific to consumer or transaction creditor relied on to provide LE becomes inaccurate or changes after disclosure was provided New information specific to consumer or transaction creditor did NOT rely on to provide LE is discovered // // experience access access EXAMPLES OF CHANGED CIRCUMSTANCES War or natural disaster (extraordinary event) Title insurer relied on to provide title insurance cost estimates on LE goes out of business prior to loan closing (information relied on to provide LE has changed) Consumer states annual income is $XX,XXX, but during underwriting it is discovered to be much lower than stated (information relied on to provide LE has changed) One applicant in a transaction involving two co-applicants loses his/her job after LE was provided & that information was relied on to make disclosure (new information specific to consumer becomes available) While underwriting loan, creditor discovers a previously undisclosed lien recorded on property (new information specific to transaction becomes available) **Note: if a creditor issues a LE before actually obtaining six pieces of information necessary to complete an application, creditor is presumed to have obtained them & CANNOT use acquisition of one of six pieces of information to reach change circumstance threshold & then revise an LE 48 // experience access 24

25 SPECIAL RULES FOR TOLERANCES & CHANGED CIRCUMSTANCES The comparison rules under the new LE & Closing Disclosure are as follows: o If the creditor encounters a changed circumstance instance & fails to redisclose the revised LE to the consumer(s), the originally provided LE will be used for calculating any applicable tolerance violation o If the creditor encounters a changed circumstance instance & provides a revised LE, but was not required to because such change did not exceed the thresholds established, the originally provided LE will be used in calculating any applicable tolerance violation. Keep in mind that a rate lock event where interest rate dependent charges change & borrower requested change require the issuance of a revised LE consistent with current Regulation X (78 FR 79832)- so the creditor MUST provide a revised LE regardless of whether any tolerances were exceeded in these two instances Examples 1. Creditor discloses $400 for an appraisal fee to be paid to an affiliate appraisal company. Property description from consumer was relied on to provide fee estimate as a one to four family dwelling. However, when appraiser arrives, dwelling is situated on a farm & this aspect requires a higher fee of $600 due to extra work involved. If creditor provides a revised LE due to changed circumstance, fee at closing can be compared to actual fee of $600. However, if creditor fails to provide a revised LE, fee at closing is compared to originally disclosed $400 & will be a violation of 0% tolerance category of good faith provision // // experience access access SPECIAL RULES FOR TOLERANCES & CHANGED CIRCUMSTANCES Examples 2. Creditor discloses a $400 fee to be paid for title insurance provided by an unaffiliated third party, but creditor does not provide list for which consumer can use to shop for such service as allowed by creditor. Therefore, fee estimate provided is subject to 10% tolerance category as creditor did not supply Providers List. During loan processing, it is discovered an existing lien is recorded on security property & title company will need to perform additional work to release such lien. Based on discussions with title company, fee increases to $420 & aggregate of all fees disclosed in 10% category increases by 8%. In this case, even though a change circumstance was reached & creditor provided a revised LE to consumer(s), creditor must compare fee of $420 for title insurance to originally provided estimate of $400, NOT $420 revised fee because a tolerance violation was not reached // // experience access access 25

26 WHEN REVISED LOAN ESTIMATES ARE ALLOWED Creditor can issue a revised LE in following instances o Eligibility (changed circumstances) a revised LE can be provided if consumer is ineligible for an estimated charge previously disclosed because of consumer s creditworthiness or value of security for loan o Example: Creditor offers a no appraisal loan program subject to certain restrictions. Consumer applies for a mortgage loan under such program & creditor provides a LE without an appraisal fee. During loan underwriting, consumer violates one of restrictions subject to loan program (i.e., consumer has mortgage delinquency payments on consumer report & this factor violates program requirements). Creditor issues a revised LE & fees for appraisal fees at closing are compared to revised fees disclosed by creditor. Any other fees not subject to eligibility provisions that reached changed circumstances, would be compared to those originally disclosed on original LE // // experience access access WHEN REVISED LOAN ESTIMATES ARE ALLOWED Creditor can issue a revised LE in following instances o Consumer requested changes a revised LE MUST be provided it consumer requests revisions to credit terms or settlement that causes an estimated charge to increase Example: Consumer grants a power of attorney to a family member to consummate transaction after LE has already been provided. Creditor can provide a revised LE & then actual charges will be compared to revised changes to determine if fees have been increased for tolerance purposes o Interest rate dependent charges if a consumer does not lock in rate prior to LE being provided & subsequently locks in interest rate where interest rate dependent charges change, creditor MUST provide a revised LE with updated interest rate & other terms of transaction. Fees/charges related to interest rate dependent charges (i.e., points, lender credits, etc.) are compared to revised disclosure at closing when determining if fees have violated applicable thresholds // // experience access access 26

27 WHEN REVISED LOAN ESTIMATES ARE ALLOWED Creditor can issue a revised LE in following instances o Expiration a revised LE can be provided if consumer indicates intent to proceed with transaction more than 10 business days after LE was provided ( business day meaning creditor is open for carrying on substantially all of its business functions ) Note: if original LE was mailed to consumer(s), creditor can assume disclosure was delivered three business days (excluding Sundays & holidays) after placing it in the mail. Therefore, if creditor mailed original LE on Monday the 1 st, consumer(s) would be deemed to have received it on Thursday the 4 th. If creditor is not open to pubic to carry on substantially all of its business functions on Saturdays & consumer does not indicate intent to proceed before Friday the 14 th, creditor can consider LE expired. If Saturday is a business day for creditor, consumer would need to indicate intent to proceed before Wednesday the 12 th. This example assumes no legal holidays fall between provided dates o Delayed settlement on construction loan if creditor anticipates settlement on a NEW construction loan occurring more than 60 days after providing LE, creditor can provide a revised LE as long as original LE clearly stated at any time prior to 60 days before consummation, the creditor may issue revised disclosures. For purposes of providing revised LEs, if an occupancy permit has been issued, this reason CANNOT apply to revise a LE // // experience access access LENDER CREDITS & GOOD FAITH ESTIMATE ANALYSIS When determining good faith of lender credit disclosures, following principals apply Non-specific lender credits & specific lender credits are aggregated when determining good faith between LE & actual fees charged or imposed on consumer at consummation Regardless of type, actual amount of lender credits provided by creditor less than estimated lender credits is an increased charge to consumer Example #1: Creditor discloses $750 of lender credits, but only provides $500 of actual credits at consummation. Creditor has violated good faith Example #2: Creditor discloses $750 estimate of lender credits to cover appraisal costs & appraisal fee increases to $900, but lender credits are adjusted up to cover $150 increase of cost for appraisal, lender will NOT be revised to have violated good faith because amount charged to consumer did not increase Example #3: Creditor discloses $750 estimate of lender credits to cover appraisal costs & appraisal fee decreases to $700. Creditor subsequently decreases lender credits to $700 due to $50 decrease in actual fee of appraisal. Creditor has violated good faith because amount of lender credit decreased // // experience access access 27

28 LENDER CREDITS & INTEREST DEPENDENT FEES When determining good faith of lender credit disclosures regarding rate locks & interest dependent fees, following principals apply If interest rate is not locked at time LE is provided, creditor may revise lender credits when interest rate is locked & adjust other interest rate dependent fees (as appropriate) Example #1: Creditor sets interest rate with customer using a rate lock agreement. Creditor provides LE to consumer after such agreement. Lender credits are compared to originally issued LEunless a changed circumstance or other event occurs pursuant to section (e)(3)(iv) Example #2: Creditor issues LE before consumer locks in interest rate applicable to transaction. Consumer locks in their interest rate several days later & creditor issues a revised LE which changes lender credits. Lender credits are compared to revised LE disclosure assuming no other changed circumstances or other events occur pursuant to section (e)(3)(iv) // // experience access access PROVIDING REVISED LOAN ESTIMATE Following provisions apply when providing a revised LE If reason for providing a revised LE was due to a rate lock event, creditor MUST provide revised LE on date of rate lock (it CANNOT use three business days allowed for other reasons) If reason for providing a revised LE was due to any event meeting changed circumstance threshold other than a rate lock event, creditor must provide revised LE within three business days of receiving information to establish that one of changed circumstance thresholds applies Receipt by customer if revised LE is provided via mail ( included), consumer is deemed to have received such disclosure three business days (except Sundays & holidays) after placing it in mail. For , creditor could prove consumer received it earlier such as a time stamped response from consumer informing creditor they received disclosure (ESIGN applies) // // experience access access 28

29 PROVIDING REVISED LOAN ESTIMATE Revised LE must be provided four business days prior to consummation (business day here means all days except Sundays & holidays); however, when mailing the revised LE add three business days (all days except Sundays & holidays) to prohibited closing window Example: creditor discovers a changed circumstance that is not a rate lock event on Monday the 1 st. Bank prepares a revised LE on Tuesday the 2 nd & mails it the same day. Customer is deemed to have received revised LE on Friday the 5 th. Transaction CANNOT close before Wednesday the 10 th to allow for four business day provision. If creditor delivered revised LE in person, transaction could have closed no earlier than Saturday the 6 th (if they are open) or Monday the 8 th (if they were not open) // // experience access access SERVICE PROVIDERS LIST If consumer is permitted to shop for a settlement service, creditor shall provide a written list identifying available providers of that settlement service & o Provide at least one such provider on written list o Must state consumer may choose a different provider than one(s) identified o Must provide sufficient information for consumer to use to contact provider (such as name, address & telephone number). The preamble of Final Rule stated one particular piece of information is not necessarily required (i.e., address), but if it is not, creditor must demonstrate that information was sufficient to allow consumers to contact service provider o Providers identified on list must perform service where consumer or property is located Timing requirements o Timing requirements for Providers List mirror those of the LE (three business days after receiving application) Regarding affiliates o Preamble to Final Rule states, The Bureau does not believe that an affiliated provider is a required provider (emphasis added) // // experience access access 29

30 SERVICE PROVIDERS LIST Providing list is only required ONCE; when issuing a revised LE as result of a changed circumstance, it is not necessary to issue another Providers List // // experience access access SPECIAL INFORMATION BOOKLET Creditor must provide RESPA Settlement Cost Booklet (1024.6) unless Loan is a HELOC (then When Your Home is on the Line booklet is required) Loan is 1. A refinance 2. A subordinate-lien loan 3. A reverse mortgage subject to // // experience access access 30

31 CLOSING DISCLOSURE Closing Disclosure (CD) consolidates Final Truth in Lending Disclosure (FTIL) HUD-1/1A Settlement Statement Timing o CD must be provided three business days (all calendar days except Sundays & holidays) before consummation of transaction to any consumer with primary liability on loan & to each consumer with rescission rights (for rescindable transactions, this time cannot be concurrent with rescission period) o CD CANNOT be provided on or before day LE is provided o If creditor mails (including ) CD, consumer is considered to have received disclosure three business days (all calendar days except Sundays & holidays) from placing it into mail unless creditor evidences earlier receipt (i.e., overnight mail receipt or acknowledgement via that consumer received disclosures (ESIGN applies)) Note: if you are not a creditor (five or fewer transactions a year), Early TIL, GFE, Final TIL & HUD Settlement Statements are required under previous regime // // experience access access CLOSING DISCLOSURE In Final Rule, Bureau leaves open possibility for creditors & settlement agents to prepare specific sections separately & then combine disclosure when providing CD to consumer Creditor is ultimately responsible for accuracy, so coordination & communication will be key to providing an accurate disclosure within timeframes & deadlines provided under the rule Creditor can use average charges in lieu of actual charges, but cannot do so to inflate cost of settlement services overall. The following must be met to use average charges Average charge is no more than average amount paid for that services by or on behalf of all consumers/sellers of that particular class of transaction Charge is defined by class based on an appropriate period to time, geographic area or type of loan Same average charge is used on every transaction in that class Average charge does NOT include insurance, any charge based on loan amount or property value & charge is not otherwise prohibited by law // // experience access access 31

32 CLOSING DISCLOSURE Settlement agent (if different from creditor) is required to provide CD applicable to seller s transaction Settlement agent is also required to provide a copy of seller s sections to creditor // // experience access access CLOSING DISCLOSURE PAGE # // // experience access access 32

33 CLOSING DISCLOSURE PAGE #1 Information completed consistent with LE // // experience access access CLOSING DISCLOSURE PAGE #1 Information completed consistent with LE, except items highlighted in red CANNOT be rounded on CD as they can be on the LE Section disclosing Taxes, Insurance & Assessment must be completed even if an escrow account is NOT established // // experience access access 33

34 CLOSING DISCLOSURE PAGE #1 Information completed consistent with LE, except items highlighted in red CANNOT be rounded on CD as they can be on the LE For transactions without a seller, creditor can use alternative table indicating cash to or from borrower (shown above) // // experience access access CLOSING DISCLOSURE PAGE # // // experience access access 34