Upon completion, you will be able to:

Transcription

1 1 Indecomm Gobal Services

2 Agenda This training manual consists of two parts that will provide you with step-by-step instructions about how to complete the Loan Estimate form required by the Integrated Disclosures Rule: Chapter 1 Completing Page One of the Loan Estimate Chapter 2 Completing Page Two and Three of the Loan Estimate Upon completion, you will be able to: Utilize the proper format of the required information on each page of the form Explain the different categories and proper locations for disclosing estimated settlement charges List the various other disclosures that are included on the Loan Estimate 2

3 Completing Page One It s still an estimate made in good faith. The TILA-RESPA Integrated Disclosures Rule requires that creditors provide a Loan Estimate in good faith, based on the best information reasonably available to the creditor. It must be delivered or placed in the mail to the applicant within three business days after receiving an application and seven business days prior to loan consummation. 3

4 Closed End Consumer Credit The Loan Estimate must be provided to applicants of closed-end consumer credit transactions secured by real property. o The Good Faith Estimate is still used for HELOCs and Reverse mortgages A consumer credit transaction is one that is primarily for personal, family or household purposes. Construction loans and loans securing vacant land as well as loans securing 25 acres or more also require use of the Loan Estimate 4

5 The Loan Estimate Lenders must use the exact form and cannot add pages to the Loan Estimate except to accommodate more signature lines for multiple coapplicants. (Signatures are on page three) 5

6 Loan Estimate Rounding numbers to the nearest dollar amount on the Loan Estimate is required with the exception of the loan amount, P&I payment, per diem interest charge and prepaid escrows. o Confirm that your LOS is programmed to ensure compliance If certain portions of the Loan Estimate do not apply they should be left blank rather than use the term "N/A". 6

7 General Information Page one provides general information such as name, subject property and the transaction. The company name must indicate the creditor. This may be left blank until the creditor is known. 7

8 Applicant and Property Information Date Issued The date the Loan Estimate is delivered or mailed to the applicant, whether a creditor or a broker issues the disclosure. Applicants Each applicant's name and mailing address should be included. Property Show the full property address. At a minimum, a property location and zip code should be shown Sale Price Enter the sale price of the property for a purchase transaction. If the loan is a transaction without a seller or the purchase contract is not yet finalized, show the appraised value or an estimated value. 8

9 Term and Purpose Information Loan Term Show the term in whole years such as 30 years. A loan term that is not in whole years, such as 242 months, would be described as "20 yr., 2 mo. If the term is less than 24 months and not a whole year, it should be shown in months only; such as "15 mo." Purpose The purpose of the loan should be only "purchase", "refinance", "construction" or "home equity loan". The term "construction" refers to initial construction loans or construction-permanent loans, but not renovation loans. If the loan is a construction-permanent loan, the lender has the option to disclose the loan as one transaction or separate transactions. 9

10 Product Information First show any product feature (with duration) that may change the payment, and then the product description. If there are no applicable features, show only the product description. Optional Product Features: Negative Amortization, Interest Only, Step Payment, Balloon Payment, Seasonal Payment. Note: MiMutual does not offer any of these product features. Optional Product Descriptions: "Fixed Rate or "Adjustable Rate. The term "Adjustable Rate" is used if the amounts of future adjustments are not known at the time of closing. 10

11 Product Description Examples Examples: If a fixed rate loan has a five-year interest-only period, it would be described as 5 Year Interest Only Fixed Rate. If a 3/1 ARM has an initial three-year period with negative amortization it would be described as 3 Year Negative Amortization 3/1 Adjustable Rate. If there is more than one feature (such as negative amortization and interest only), show only the first applicable feature. 11

12 Type and ID Information Loan Type "Conventional", "FHA", "VA" or "Other". "Conventional" includes loans sold to the secondary market as well as loans to be held in portfolio. "Other" should be followed by a description, such as "Other RHS" for a Rural Housing Service loan. Loan ID # The loan's application or ID number is shown. This can only be the creditor's ID#, not a broker ID. 12

13 Rate Lock Information Rate Lock If Yes : show the expiration date with time (and time zone). If No : Include "Before closing, your interest rate, points and lender credits can change unless you lock the interest rate. All other estimated closing costs expire on 00/00/0000 at 00:00 p.m. (time zone)". 13

14 Loan Terms Section Rule includes specific requirements related to rounding and how to show an increasing principal balance. The origination system is programmed to identify these product features. 14

15 Loan Terms Fixed rate example: 15

16 5 Yr. IO, 5/3 ARM Example The LE will expand to accommodate the detailed information needed for adjustable rate loans and loans with features that cause the payment to change or principal balance to increase. 16

17 Projected Payment Show a breakdown of P&I and MI Include estimated monthly amounts and a total for escrowed items, such as: Taxes, Assessments HOA fees, ground rent or leasehold payments Any insurance required by the lender 17

18 Range of Payments Up to four columns are available to illustrate payment changes Minimum and maximum payment amounts should be shown 18

19 Loan Estimate or Closing Disclosure Page One, Loan Terms Example of Balloon Payment 19

20 PMI Termination The PMI automatic drop point must be shown. The origination system will show PMI termination after all required payment change information is shown. Remember: Automatic drop is always based on scheduled amortization and does not apply when the borrower has paid down the UPB. 20

21 Escrow Account The total of these amounts is disclosed whether or not an escrow account will be established. Indicate "YES" or "NO" or "SOME" to indicate if the items will be escrowed. 21

22 Clear Totals The totals on page one are calculated based on amounts shown on page two. Verify the cash to close estimate is as accurate as possible based on information known at the time. 22

23 Loan Estimate - Page Two The primary sections of page two of the Loan Estimate include: Loan Costs Section Other Costs Section Calculating Cash to Close Section 23

24 Optional Sections The optional sections of page two of the Loan Estimate include: Optional Adjustable Payments (AP) Table-included for loans with payment changes not related to interest rate (such as an interest only loan) Optional Adjustable Interest Rate (AIR) Table-included for loans where the interest rate is scheduled to change during the loan term (such as an ARM) 24

25 Loan Costs Sections Each subsection allows a maximum number of charges that may be shown. If there are more charges than allowed for a section, the total amount of charges over the limit should be disclosed on the last available line, labeled "Additional Charges". An addendum cannot be used. 25

26 Origination Charges Amounts paid by the borrower to each creditor or broker for originating the loan. A maximum of 13 charges may be shown. The types of fees included here include origination, underwriting, processing, administration, application and other lender charges. This section includes discount points Discount points paid to the creditor to reduce the interest rate must be itemized separately on the first line as both a percentage and a dollar amount. If no points are paid, show zero 26

27 LLPAs and Indirect Comp Loan-level pricing adjustments (LLPAs) should also be shown unless they are embedded in the interest rate. Note: Indirect compensation paid by a creditor to a loan originator through the interest rate is not itemized on the Loan Estimate (However, it will be itemized on the Closing Disclosure). 27

28 Cannot Shop Zero Tolerance Charges in this section are for services not provided by the creditor or broker but the provider will be chosen by the creditor or broker, or the borrower is required to choose a provider from the creditor's written list. 28

29 Can Shop 10% Category Charges in this section of the Loan Estimate are for services that were not provided by the creditor or broker for which the borrower is allowed to shop. Remember: The change in circumstance must equal or exceed 10% before re-disclosure resets the comparison between the Loan Estimate and the Closing Disclosure 29

30 Title Policy Simultaneous Lender Credit A lender's title insurance premium may not be shown with any credit for simultaneous purchase of an owner's policy; the full premium must be shown. The calculation of the owner's policy premium will factor the credit. 30

31 Other Costs No Restrictions The Other Costs section's fees are allowed to change without limit with the exception of transfer taxes which are not allowed to change and recording fees which are in the 10% tolerance bracket. 31

32 Transfer Tax The CFPB gave these examples to illustrate when the transfer tax should be shown on the Loan Estimate: If a State law indicates a lien can attach to the consumer's acquired property if the charge is not paid, the amount should be included on the Loan Estimate. If State of local law is unclear or does not specifically attribute the amount to the borrower or the seller, common practice in the area will apply. The transfer tax should not be shown if typically paid by the seller. 32

33 Pre- Paids Calculate the charges accordingly The lines and labels in this section may not be deleted, even if they are not used. If they are not needed they should be left blank. 33

34 Initial Escrow Payment The aggregate escrow adjustment is not included on the Loan Estimate. The lines and labels in this section may not be deleted, even if they are not used. If they are not needed they should be left blank. 34

35 Other Costs Items not required by the creditor or broker but that the borrower is likely to pay and of which the creditor or broker is aware at the time of preparing the Loan Estimate. Including but not limited to: an owner's title insurance policy (disclosed as "Title Owner's Title Insurance (optional) credit life insurance (include "optional") warranties (include "optional") real estate commissions homeowners association-related ownership transfer charges the purchase of personal property from the seller a maximum of five other items 35

36 Cash To Close Closing Costs Financed (Paid from your Loan Account) If closing costs are to be paid from the proceeds of the loan amount they are shown on the next line as a negative number. The total of any credits given by someone other than the creditor/broker or seller is shown here as a negative number: Gifts, Builder credits Pro-rations for property taxes or HOA dues Personal property to be purchased by the borrower Proceeds from subordinate financing 36

37 AP and AIR Tables The Adjustable Payment and Adjustable Interest Rate tables must be shown, as applicable. 37

38 Loan Estimate Page Three Page Three of the Loan Estimate includes certain measures intended to allow applicants to compare lenders' costs and loan terms. It also clarifies other important information related to the loan 38

39 Comparisons The Comparisons section discloses information designed to help the borrower shop and make comparisons between lenders. 39

40 APR and TIP Annual Percentage Rate (APR) Disclose the APR for the loan and include the statement, "Your costs over the loan term expressed as a rate. This is not your interest rate." Total Interest Percentage (TIP) Disclose the total amount of interest (TIP) that the borrower will pay over the loan term, as a percentage of the loan amount. TIP calculation example: Loan amount = $100,000 Interest paid over loan term = $50,000 TIP = 50% 40

41 Other Considerations The appraisal and servicing transfer disclosure are included on the Loan Estimate. Review all disclosure notices with the borrower 41

42 Confirming Receipt The signature line is optional. If a signature line is used, it must include the signatures of all applicants and co-applicants 42

43 Summary Congratulations! You should now be able to: Utilize the proper format of the required information on each page of the form Explain the different categories and proper locations for disclosing estimated settlement charges List the various other disclosures that are included on the Loan Estimate Communicate the contents of the Loan Estimate to borrowers Complete the Loan Estimate based on the TILA RESPA Integrated Disclosure Rule. 43