TILA-RESPA Frequently Asked Questions (FAQs) | TILA-RESPA Resource Center | Wolters Kluwer Financial Services
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Frequently Asked Questions (FAQs)

  • You’ve Got Questions? We’ve Got Answers! Wolters Kluwer Financial Services offers an array of Frequently Asked Questions (and Answers) in response to help you understand and implement the TILA-RESPA integrated disclosures (TRID) rule.


    Definitions

    Coverage

    Loan Estimate Disclosures

    Closing Disclosures

    Tolerances/Variations

    Rate Lock

    Disclosure Delivery

    Implementation

    Regulatory Updates

    Other Documents





    Definitions

    What are the 6 pieces of info needed to be considered a complete application?

    Under the TRID rule, an application consists of the submission of the following six pieces of information:

    • The consumer’s name
    • The consumer’s income
    • The consumer’s social security number to obtain a credit report
    • The property address
    • An estimate of the value of the property and
    • The mortgage loan amount sought

    A creditor must provide the Loan Estimate within 3 business days of submission of these six pieces of information.

    Keep in mind, you may have application policies and procedures whereby you collect additional pieces of information needed to prepare the Loan Estimate before that sixth piece is submitted. For example, some creditors may request the applicant’s mailing address before collecting a social security number. The bottom line, however, is that once those 6 pieces of information are submitted, a Loan Estimate is triggered. The See 12 CFR 026.2(a)(3) and Commentary.

    Also note that the phrase ”completed” application is used for purposes of Regulation B. Under Reg B, once you have a completed application, you are required to communicate your credit decision within certain time-frames (typically 30 days of receipt of completed application) Here, a completed application, mean all the information you regularly require to evaluate the application and make a credit decision. See 12 CFR 1002.2(f) Even though a Loan Estimate may have been provided, you still have the right to determine when an application is complete and make a credit decision pursuant to your underwriting policies and procedures. Posted 04-27-16.

    Q: In determining whether or not Saturday is a business day for us, what does it mean “to be open for substantially all business functions”?

    A: The TRID rule has not changed the definition of business day under Regulation Z. The definition for the term “business day” is found in 12 CFR 1026.2(a)(6). Outside of exceptions contain under this provision, a business day means:

    a day on which the creditor's offices are open to the public for carrying on substantially all of its business functions

    The Commentary to this section provides for a “business function test” and it states:

    Activities that indicate that the creditor is open for substantially all of its business functions include the availability of personnel to make loan disbursements, to open new accounts, and to handle credit transaction inquiries. Activities that indicate that the creditor is not open for substantially all of its business functions include a retailer's merely accepting credit cards for purchases or a bank's having its customer-service windows open only for limited purposes such as deposits and withdrawals, bill paying, and related services. (emphasis added)

    Ultimately each organization will need to determine independently whether or not a particular day is a “business day”. Again, note that the TRID rule does not alter the current definition of “business day”. That being said, if you currently treat Saturday as a business day, you would most likely continue to do so under the TRID rule unless the availability of services has changed. Also, if you haven’t done so, be sure to document in your policies and procedures the days that you consider to be business days for purposes of disclosure delivery.

    Q: CFPB's guidance seems clear that if a consumer has entered the six data items constituting an "application" in an online system, but has not yet hit a "Submit My Application" button, the lender does not yet have an "application" triggering the RESPA-TILA disclosures. But if MLOs had ability to view the data in such unsubmitted applications (and/or to contact consumers to encourage them to submit the application), would there be any significant risk of triggering disclosures?

    A: You are correct in that the consumer must affirmatively submit their application for purposes of triggering the Loan Estimate. While the Regulation and related guidance do not specifically address the situation you describe of a MLO being able to view unsubmitted application information, it seems clear that until an application is submitted, disclosure obligations are not triggered. For example, the preamble to Regulation Z states:

    Additionally, because the definition of application refers to the “submission” of the six items of information that make up the definition, if a consumer starts filling out a mortgage application form online, enters the six pieces of information that constitute the definition of “application,” but then saves the mortgage application form to complete at a later time, the consumer has not submitted the items of information.

    Q: If the consumer quotes their income over the phone, does this count as submission of a piece of “application” information?

    A: Yes, if the submission was for purposes of obtaining an extension of credit and a written record of the income figure is created. According to 12 CFR 1026.2(a)(3),Comment 2(a)(3)-1:

    An application means the submission of a consumer's financial information for purposes of obtaining an extension of credit. For transactions subject to § 1026.19(e), (f), or (g) of this part, the term consists of the consumer's name, the consumer's income, the consumer's social security number to obtain a credit report, the property address, an estimate of the value of the property, and the mortgage loan amount sought… A submission may be in written or electronic format and includes a written record of an oral application.

    Q: The final rule requires that disclosures be provided before consummation of the transaction. How is the term “consummation” defined?

    A: Regulation Z defines consummation as: “the time that a consumer becomes contractually obligated on a credit transaction. See 12 CFR 1026.2(a)(13). The Commentary to Regulation Z states further that the point at which a “contractual obligation … is created” is a matter of state law. 12 CFR 1026.2(a)(13)-2.

    Since the definition of “consummation” is not changing, mortgage lenders presumably understand the events that trigger this point in time and have incorporated that into their policies and procedures.

    Q: Why did the definition of an application change?

    A: Essentially, the final rule adopted RESPA’s existing definition of “application” but revised it slightly. The RESPA “catch all” (“and other information deemed necessary by the loan originator”) is not included in Regulation Z’s new definition of application in order to create consistency from creditor to creditor to help enable consumer credit shopping.

    From an implementation perspective, take the time now to evaluate all your lead generators (including social media). Consider the policies, procedures and training needed to avoid collecting the application information pieces that trigger the disclosure time clock before you intend to.

    Q: With regards to the information that triggers an “application”, can we request additional information before, say the SSN, or do all six pieces of application information need to be solicited at one time?

    A: The CFPB Integrated Compliance Guide states: This definition of application does not prevent a creditor from collecting whatever additional information it deems necessary in connection with the request for the extension of credit.

    The CFPB has stated that “sequencing” application information is permissible. In other words, the regulation does not prescribe any order to the application information received. Therefore, you may request additional information such as the products the potential applicant is interested in, etc. before soliciting all information that would trigger the definition of an application. See 12CFR 1026.2(a)(3) and Comment 2(a)(3).

    Q: Does the final TRID rule definition of application trigger HMDA reporting?

    A: No. The bottom line is that receipt of some or all of the six pieces of TRID application information does not necessarily trigger an “application” for purposes of HMDA/Reg C.

    Under HMDA/Reg C, an application is defined as an oral or written request for a home purchase loan, a home improvement loan, or a refinancing that is made in accordance with procedures used by a financial institution for the type of credit requested. See 12 CFR §1003.2. Unlike the TRID rule, HMDA/Reg C does not contain a “bright-line” definition of the term application. The definition turns on a creditor’s procedures which may or not mirror receipt of the six pieces of application under the TRID rule.

    Keep in mind that definitions of the term “application” vary across most regulations and one has to consider the purpose of the regulation and what an application triggers. Under the TRID rule, the goal is to provide consumers disclosures that enable them to shop for and compare different loan and settlement cost options as quickly as possible. Hence receipt of an application triggers the loan estimate. The purpose of HMDA is to prevent discrimination and insure that the housing needs of communities are being met. Thus receipt of an application triggers reporting about the disposition of that application, the applicant’s characteristics, etc.

    Note that the Bureau did mention that many commented on the variations of the term “application” across federal mortgage regulations. It did affirmatively state that the TRID definition of an application does not change the current Reg C definition of application. However, the Bureau recognizes the potential benefits of a single definition of application and it will continue to consider the comments received on this topic. This might be one of those items we see further addressed after October 3rd, 2015.




    Coverage

    Q: Are land loans subject to TRID?

    A: Yes, as long as the loan is for a consumer purpose. Regulation Z states that the Loan Estimate and the Closing Disclosure apply to transactions secured by real property. 12 CFR 1026.19 (e) (1) and (f)(1).

    Q: For a transaction to purchase vacant land with intent to construct a personal residence in the future, what disclosures apply?

    A: The TRID disclosures do apply to consumer loans to purchase vacant land. Recently, the CFPB provided a fact sheet called Know Before You Owe Mortgage Disclosures and Construction Loans. This document may help you better understand the disclosure process if you doing a construction loan transaction. Posted 04-27-16.

    Q: I made a loan to purchase a residential lot in March 2015 for one year payable interest only. The Borrower has not completed his building plans for a new construction loan and I need to renew/extend the existing loan. No new money. Are extensions of maturity using the same loan terms allowed or must I now follow all the TRID rules and redisclose to renew this loan for a 6 month period until the Borrower is ready for his construction loan? My concerns are the additional costs that will need to be charged to the customer if I must make a new loan using the new regs, plus filing a new mortgage, etc.

    A: The TRID rules apply to applications from a consumer for a closed - end credit transaction secured by real property on or after October 3, 2015. In your situation, whether or not you need to provide new disclosures has less to do with effective dates and more to do with whether or not the extension rises to the level of a “refinance” under Regulation Z. Reg Z defines a refinancing as follows:

    A refinancing is a new transaction requiring a complete new set of disclosures. Whether a refinancing has occurred is determined by reference to whether the original obligation has been satisfied or extinguished and replaced by a new obligation, based on the parties' contract and applicable law. The refinancing may involve the consolidation of several existing obligations, disbursement of new money to the consumer or on the consumer's behalf, or the rescheduling of payments under an existing obligation. In any form, the new obligation must completely replace the prior one. See 12 CFR 1026.20(a)

    In the situation you describe, it does not sound as if a new obligation is replacing the exiting one. If that is the case, then no new disclosures would be required. In any event, it would be best to have your documentation and situation reviewed by legal counsel to be sure. Posted 03-16-16.

    Q: We have a customer who has an owner financed modular home (it is his primary residence) that he is wanting to combine with his 152 acre agricultural loan, so that he can lower the rate on both loans. His source of income is cattle and construction. Would this be considered a TRID loan?

    A: The short answer is that you will need to determine the primary purpose of this transaction. The TRID rules apply to consumer credit loans that are secured real property. Consumer credit means credit offered or extended to a consumer primarily for personal, family, or household purposes. The loan you have described has mixed purposes, part of it will be used for the modular home (consumer purpose) and part will be used to acquire the agricultural land (Agricultural Purpose). Of those two purposes, you will need to determine which one is primary. The Commentary to 12 CFR 1026.3(b) provides additional guidance to help you make this determination For example:

    Comment 3. FACTORS.

    In determining whether credit to finance an acquisition—such as securities, antiques, or art—is primarily for business or commercial purposes (as opposed to a consumer purpose), the following factors should be considered:

    GENERAL:

    1. The relationship of the borrower's primary occupation to the acquisition. The more closely related, the more likely it is to be business purpose.
    2. The degree to which the borrower will personally manage the acquisition. The more personal involvement there is, the more likely it is to be business purpose.
    3. The ratio of income from the acquisition to the total income of the borrower. The higher the ratio, the more likely it is to be business purpose.
    4. The size of the transaction. The larger the transaction, the more likely it is to be business purpose.
    5. The borrower's statement of purpose for the loan . . .

    Comment 8. AGRICULTURAL PURPOSE.

    An agricultural purpose includes the planting, propagating, nurturing, harvesting, catching, storing, exhibiting, marketing, transporting, processing, or manufacturing of food, beverages (including alcoholic beverages), flowers, trees, livestock, poultry, bees, wildlife, fish, or shellfish by a natural person engaged in farming, fishing, or growing crops, flowers, trees, livestock, poultry, bees, or wildlife. The exemption also applies to a transaction involving real property that includes a dwelling (for example, the purchase of a farm with a homestead) if the transaction is primarily for agricultural purposes.” Posted 03-16-16.

    Q: I'm still a little foggy regarding coverage. The CFPB says the rule applies to closed end consumer transaction secured by RE. How does rental property fall into this? If a customer purchases a 1-4 family dwelling for business/investment purpose, does TRID apply?

    A: Presumably no if this property will not be owner occupied. Any transaction, TRID or non-TRID, that is for a business/investment purpose is not subject to Regulation Z. See 12 CFR 1026.3(a). The Commentary to Reg Z sets out some “bright-line” guidance for determining loan purpose where rental property is involved. This guidance turns on whether or not the rental property will be owner occupied and the number of units involved.

    Section 1026.3(a) – comments 4 and 5 state:

    4. Non-owner-occupied rental property. Credit extended to acquire, improve, or maintain rental property (regardless of the number of housing units) that is not owner-occupied is deemed to be for business purposes. This includes, for example, the acquisition of a warehouse that will be leased or a single-family house that will be rented to another person to live in. If the owner expects to occupy the property for more than 14 days during the coming year, the property cannot be considered non-owner-occupied and this special rule will not apply. For example, a beach house that the owner will occupy for a month in the coming summer and rent out the rest of the year is owner occupied and is not governed by this special rule. (See comment 3(a)-5, however, for rules relating to owner-occupied rental property.)

    5. Owner-occupied rental property. If credit is extended to acquire, improve, or maintain rental property that is or will be owner-occupied within the coming year, different rules apply:

    i. Credit extended to acquire the rental property is deemed to be for business purposes if it contains more than 2 housing units.

    ii. Credit extended to improve or maintain the rental property is deemed to be for business purposes if it contains more than 4 housing units. Since the amended statute defines dwelling to include 1 to 4 housing units, this rule preserves the right of rescission for credit extended for purposes other than acquisition. Neither of these rules means that an extension of credit for property containing fewer than the requisite number of units is necessarily consumer credit. In such cases, the determination of whether it is business or consumer credit should be made by considering the factors listed in comment 3(a)-3.

    To make your loan purpose determination, be sure to question the borrower’s occupancy intentions. In addition, be sure to verify whether the loan proceeds will used to acquire the rental property or to make improvements. Posted 01-22-16.

    Q: Is a loan secured by vacant land subject to the TRID rule?

    A: Yes. Currently loans secured by vacant land or by 25 acres or more are covered by the Truth in Lending Act but not RESPA. However, effective October 3, 2015, such loans will be subject to the TRID rule. Keep in mind, that you will want to consider the purpose of these types of transactions. If the loan has a business or agricultural purpose, that loan would not be subject to the TRID rule because it would exempt from Regulation Z generally.

    Q; What are the TILA\REG Z and RESPA\REG X disclosure requirements for those downpayment assistance programs or bond programs that meet the specific criteria described in §1026.3(h)?

    A: If a loan meets all of the TILA requirements of §1026.3(h) for “downpayment assistance program” or “bond programs”, it is exempt from the requirement to provide a Loan Estimate and Closing Disclosure. These loans are also exempt from numerous RESPA requirements, including the Settlement Cost booklet, GFE, and HUD-1\HUD-1A requirements. See §1024.5.

    Instead, the “traditional” disclosures of Section §1026.18 of Regulation Z are required, including an Itemization of Amount Financed. See §1026.3(h), §1026.18.

    Q: Does the integrated disclosure rule apply to home equity loans?

    A: Yes. The final rule applies to most closed-end consumer mortgages secured by real property, this includes a closed-end home equity loan. It does not apply to home equity lines of credit (HELOCs), reverse mortgages, or chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property. Also note that certain types of loans that are currently subject to TILA but not RESPA are subject to the TILA-RESPA rule’s integrated disclosure requirements, if consumer purpose. Such loans include construction-only loans, loans secured by vacant land or by 25 or more acres and credit extended to certain trusts for tax or estate planning purposes.

    Q: Our shop does only commercial and agricultural loans. At the present time, we have no RESPA or TIL requirements. Will these new regulations impact us? What if we did a rental loan on a 1-4 family residence? Loan on farm ground that includes a residence? What about a loan where we take the borrower's residence as an AOC or as dependent collateral?

    A: The TILA-RESPA integrated disclosure (TRID) rule applies to most closed-end consumer credit transactions secured by real property. Regulation Z defines the phrase “consumer credit” to mean credit offered or extended to a consumer primarily for personal, family, or household purposes. The transactions referred to in this question appear to be of a business or agricultural purpose and therefore would not be subject to the TRID rule. However, to make that determination a lender would need to know whether the 1-4 rental loan is owner-occupied. A loan for an owner-occupied, 1-4 unit rental apartment is considered consumer purpose. Remember, coverage focuses on the purpose of the transaction, not the type of collateral securing the transaction.

    Q: Can a loan be covered by RESPA for one purpose and not for another or is a loan a RESPA loan for all purposes or none? For instance, can a loan not be a RESPA loan in regard to disclosures (GFE, TIL, etc.), but be a RESPA loan for purposes of paying interest on a tax escrow account.

    A: No. Currently, RESPA applies to all federally related mortgage loans, unless a specific exemption applies. Once a loan falls into the federally related mortgage category, all provisions within RESPA/Regulation X would apply to that transaction including disclosures, prohibitions against kickbacks, escrow requirements, etc.

    Keep in mind, effective October 3rd, 2105, the TILA-RESPA Integrated Disclosure (TRID) rule amends components of the Truth in Lending Act (TILA) and the Real Estate Settlement Practices Act (RESPA). On or after October 3rd, 2015, a different set of early and closing disclosures will apply to most closed - end consumer credit transactions secured by real property. Note too that the TRID rule applies to certain loans currently exempted by RESPA such as construction-only loans and loans secured by vacant land or by 25 or more acres. Existing early and closing disclosures will continue to apply to mortgage loan transactions not covered by the TRID rule.




    Loan Estimate Disclosures

    Q: How often do you have to send the Settlement Service Providers List? I know you need to send it with the initial LE, but do you send it with each subsequent LE (change in circumstance) as well?

    A: The TRID rule itself is not crystal clear on whether or not an updated Written List of Providers must be provided with a revised Loan Estimate. However, the CFPB did address this very issue in its May 26th, 2016 CFPB webinar. In this session, the Bureau clarifies that one can provide either a brand new complete Written List of Providers, or an additional list that just contains the service providers for the service that has changed/added, basically an addendum to the original list. Also, since providing this List impacts fee tolerances, it might make sense to take the conservative approach and include the List with each revised Loan Estimate, even if services that may be shopped for haven’t changed.

    Q: What do you do if you do not send the disclosure package including the LE within 3 business days.

    A: Unfortunately, failure to provide the Loan Estimate to the consumer within 3 business days of receipt of application is a compliance violation. You will want discuss any remedial action with your local counsel.

    Going forward, you will want to identify the reason for failing to meet this timing requirement. Was it a one-time oversight or something more systemic with your policies, procedures and processes? If systemic, make sure to correct any internal problems and insure that staff is well trained to meet the TRID timing rules. Documentation of your efforts to correct problems will be acknowledged by most regulators. Posted 07-29-16.

    Q: The CFPB defines a refinance as: “refinance of an existing obligation” and a Home Equity as a loan that “will be used for any other purpose”. The FNMA 1003 (loan application) as well as our software and FNMA Desktop Underwriter does not have “Home Equity” as a loan product option. In the past, if someone wanted to refinance a home they own free and clear, we processed this as a Cash-Out refinance with the purpose being to pay off other debt, make home improvements or to purchase other property. Am I understanding correctly that the CFPB is saying we must process the refinance of a home owned free and clear as a home equity and not a cash-out refinance? To me, a Refinance and a Home Equity loan are two very different products with a home equity loan being much more limited in loan amount and term.

    First of all, these purpose describers are to be used in a cascading order. So you start with purchase and go from there. If a transaction is not to purchase the property, you move to the next category and ask is this a refinance. A refinance is defined in another section of Reg Z as follows:

    "A refinancing is a new transaction requiring a complete new set of disclosures. Whether a refinancing has occurred is determined by reference to whether the original obligation has been satisfied or extinguished and replaced by a new obligation, based on the parties' contract and applicable law. The refinancing may involve the consolidation of several existing obligations, disbursement of new money to the consumer or on the consumer's behalf, or the rescheduling of payments under an existing obligation. In any form, the new obligation must completely replace the prior one. See 12 CFR 1026.20(a)"

    It doesn’t sound like your transaction meets the definition of a refinancing (new obligation replacing a prior one). Even though you may refer to the transaction you describe a refinance, for TRID disclosure purposes, it would have to meet that technical Reg Z definition. Also, this doesn’t appear to be a construction loan, so the only “purpose” left is home equity. The CFPB intended “Home Equity” to be the catchall category and pick up any transaction that does not fit purchase, refinance or construction. See 1026.1026.37(a)(9) and Commentary.

    Bottom line, use of the purpose “home equity” really only means the loan isn’t a for the purpose of a purchase, refinance or construction. On the FNMA 1003, there is a loan field purpose for “other” and that may be the box to check for the transaction you describe. Posted 04-27-16.

    Q: Do we need to re-disclose if someone decides to get life insurance, and the payment goes up?

    A: The only time you have to redisclose a Loan Estimate is when the interest rate was not locked when the original was given, and later becomes locked. 1026.19(e)(iv)(D). A lender has the option of redisclosing the Loan Estimate at any time.

    For the closing disclosure, the borrower must have an accurate Closing Disclosure at or before closing. 1026.19(f)(2). Posted 03-23-16.

    Q: Can an Loan Estimate (LE) be given to the borrower before all of the time consuming application disclosures are given to the applicant? It would make sense to me that the LE is a borrower tool for shopping for a loan and requiring a lender to submit complete application disclosures which involve 80 pages would be cumbersome and confusing to the borrower who is merely shopping. I ask because this seems to be our understanding at present time.

    A: You are right in that the Loan Estimate is intended to be a shopping tool for the consumer. Towards that end, the TRID rule provides for a specific timing rule that places the LE in the consumer’s hands shortly after receipt of an application. TheTRID rule defines an application as the submission of the following pieces of information:

    • The consumer’s income
    • The consumer’s social security number to obtain a credit report
    • The property address
    • An estimate of the value of the property, and
    • The mortgage loan amount sought

    Once the above information is submitted, you must deliver the LE within three business days.

    You do want to be careful in providing the LE prior to receipt of the above pieces of application information. Once the LE is provided, you will be held the fee amounts disclosed for purposes of your good faith analysis. Increases to these fees are only permitted in limited situations including a change of circumstances and you can’t use the fact that you didn’t receive all six pieces of the application information as a reason to revise the LE.

    Bottom line: The TRID rule has its own timing rule for delivery of the LE and that is not dependent on delivery of other disclosures. Posted 03-09-16.

    Q: In regards to a new Loan Estimate (LE) with a new application - if a property falls through and the borrower selects a new property I would think this would be a case to issue a brand new LE to go along with that new application? But could a COC also be acceptable in this case?

    A: It seems in this situation, you would need consider the amount of information that is changing on the loan estimate from the original property to the new property. If there are considerable changes to terms and conditions, it might make sense to generate a new loan estimate in response to a new application that has been updated with the new property. That being said, presumably a new property could fit within the Change in Circumstance provisions if there were increases to settlement charges. The increases would be based on new information not relied upon when you issued the original loan estimate. See 12 CFR 1026.19(e(3).

    Ultimately, whether to issue a new loan estimate or a revised loan estimate would depend on your policies and procedures for handling changes in property. Posted 02-29-16.

    Q: In regards to a new LE with a new application - if a property falls through and the borrower selects a new property I would think this would be a case to issue a brand new LE to go along with that new application? But could a COC also be acceptable in this case?

    A: It seems in this situation, you would need consider the amount of information that is changing on the loan estimate from the original property to the new property. If there are considerable changes to terms and conditions, it might make sense to generate a new loan estimate in response to a new application that has been updated with the new property. That being said, presumably a new property could fit within the Change in Circumstance provisions if there were increases to settlement charges. The increases would be based on new information not relied upon when you issued the original loan estimate. See 12 CFR 1026.19(e(3).

    Ultimately, whether to issue a new loan estimate or a revised loan estimate would depend on your policies and procedures for handling changes in property. Posted 02-29-16.

    Q: On loans that are secured by rental property and land only, are we required to disclose the escrow information even though we are not escrowing?

    A: Assuming you are referring to the escrow disclosures on the Loan Estimate and the Closing Disclosure, there would be no requirement to disclose escrow information if you are not establishing an escrow account. The law does require disclosure of the sum of taxes, insurance and other assessments pursuant to 12 CFR 1026.37(c)(4) even if no escrow account for the payment of some or any of such charges will be established. The Closing Disclosure also requires disclosure of why an escrow account was not established under 12 CFR 1026.38((l)(7)(i)(B). Posted 12-03-15.

    Q: What are the correct Loan Estimate reason statements for changes in Monthly Principal & Interest payments for a 1 year interest only, 5/1 ARM?

    A: Presumably this question relates to the monthly principal and interest column of the loan terms table.

    Section 1026.37(b)(3) and (b)(6) of Regulation Z provide the disclosure requirements for this area of the Loan Estimate. Pursuant to those sections, you would disclose the initial monthly interest and principal payment (the projected payments table will identify this payment as only interest for 1 year). Under the heading “Can this amount increase after closing” you would state Yes. From there, you would disclose the scheduled frequency of adjustments, the due date of the first adjustment, and the maximum possible amount (and the earliest date it can occur) of the Monthly Principal & Interest payment. In addition, you would disclose the period during which only interest is required to be paid and the due date of the last periodic payment of such period. Finally, you will disclose and reference the Adjustable Payment (AP) Table on page 2 of the Loan Estimate.

    Appendix H-24(C) to Regulation Z provides a sample of an Interest Only Adjustable Rate Product. This sample illustrates how the statements should be phrased in the loan terms table.

    Q: Our bank policy is that all RE loans over $100,000 need to be board approved (board meets monthly), if we create a LE are we obligated to fulfill that LE or could we decline it after the board meets. 99.9% of the time the board approves everything brought to them, but just wondering.

    Answer: The TRID rule is not intended to override an institution’s ability to deny a loan. Just remember to be sure and follow the notification requirements contained in Regulation B – i.e. approval, counter-offer or adverse action within 30 days of after receipt of a completed application. Also note that if a decision to deny the application occurs within the 3 business day period between submission of an application and the time-frame for providing a Loan Estimate, the Loan Estimate would not need to be given.

    Q: Does the Your Home Loan Toolkit apply also to the construction only loans we have? They are not permanent loans. They are just interim construction only loans.

    Answer: No. According to the TRID rule, a lender is not required to provide the Toolkit for consumer credit transactions secured by real property, the purpose of which is not the purchase of a one-to-four family residential property. Such transactions, include, but are not limited to, the following:

    A. Refinancing transactions;

    B. Closed-end loans secured by a subordinate lien; and Reverse mortgages 1026.19(g)(1)(iii)

    Note that when it comes to disclosing loan purpose under the TRID rule, a loan is considered for construction purposes and not purchase where the lender extends credit to finance only the cost of initial construction (construction-only loan). See 12 CFR 1026.37(a)(9) – comment 1(iii).

    Q: I saw where the Loan Estimate now replaces the right to receive an appraisal form. Do we need to have a form that the customer signs acknowledging?

    A: There is no requirement that your customer sign or acknowledge receipt of the appraisal disclosure notice contained in the Other Considerations section of the Loan Estimate. The appraisal notice contained in the Loan Estimate satisfies the right to receive an appraisal notice requirements for Higher-priced mortgage loans (HPML) under Regulation Z and for loans secured by a first lien on a dwelling under Regulation B. Neither the Reg Z HMPL provisions or the Reg B provisions require that the appraisal notice be signed by the customer. That being said, separate appraisal notices (not built into the TRID disclosures) often included signature lines to demonstrate compliance but again, that signature is not a regulatory requirement.

    Q: When disclosing fees to the consumer from the purchase agreement, shouldn't we be disclosing on the proper columns i.e. buyer paying appraisal fee and/or on the seller column if seller is paying owners title insurance? I believe the Loan Estimate should reflect as close as possible cash to close from buyer. Is this correct?

    A: No. For purposes of the Loan Estimate, all loan costs associated with the transaction should be disclosed without reference to which party to the transaction might pay for the service. See 12 CFR 1026.37(f). Even though another party may ultimately pay for a particular fee, the goal is to “show” the consumer the costs of the transaction for shopping/comparison purposes and to illustrate the value of any credit. A specific credit for a particular fee that you are aware the seller may be paying should be included in the total amount of general seller credits that is disclosed as a part of the cash to close table.

    The CFPB notes in the Preamble that the consumer ultimately would be liable to pay for many of the services if the seller did not provide the credit at closing for some reason, and thus, the Bureau believes the consumer should be provided the information about the required and likely costs of the transaction.

    On the Closing Disclosure, you will be reflecting actual costs and the party that will pay for those costs.

    Q: If I provide a corrected CD after the loan has been closed, what do I date the CD? Do I use the date I am providing the CD to the customer and leave the Closing Date and Disbursement Date the same as they were at closing?

    A: The regulation does not specifically answer your question, but it would make sense to use the date you are issuing the revised CD (either the date you place it in the mail or the date it is given to the consumer). From an audit perspective, this date will “show” that it is a revised Closing Disclosure. Note that you can also track revisions by using a revision number suffix appended to the end of the loan number. The Closing and Disbursement dates would stay the same as these dates haven’t changed. Posted: 02-29-2016.

    Q: In the "Comparisons" box, it lists "loan costs" as part of the total that you will have paid in the first five years. If all loan costs are paid before closing and NOT financed, should they be still included in this figure and would that also affect the APR box?

    A: The disclosure contained in the 5 year comparison table pursuant section 1026.37(1) does not distinguish between loan costs paid before closing and not financed. So, yes loan costs paid before closing and not financed should be included in the 5 year calculation. The loan costs that must be disclosed as a part of the comparsion table are those disclosed pursuant to §1026.37(f)(1)(i). The purpose of the comparison table is really to provide yet another way for consumers to compare and shop for loan products. The goal is here is to simply identify the loan costs that will be a part of the transaction – not to identify how those costs are paid. The Closing Disclosure will contain more detailed information on which party pays loan costs and when they are paid.

    With respect to the APR, the TRID rule does not change how that percentage is calculated. For information on how to calculate the APR, see § 1026.22 and appendix J to Regulation Z.

    Q: In disclosing the loan product, how does the TRID rule defined the phase seasonal payment? Would an annual payment be considered seasonal

    A: Without greater clarification, it would seem that annual payments would be more of a unit period for purposes of disclosing principal and interest payments in areas such as the Loan Terms table under 12 CFR 1026.37(b)(3). With respect to seasonal payments, the TRID rule states:

    Seasonal payment. If the terms of the legal obligation expressly provide that regular periodic payments are not scheduled between specified unit-periods on a regular basis, the creditor shall disclose that the loan product has a “Seasonal Payment” feature. See 12 CFR 1026.37(a)(10)(ii)(E)

    Comment 5 to this section states:

    SEASONAL PAYMENT. If a loan product includes a seasonal payment feature, § 1026.37(a)(10)(ii)(E) requires that the creditor disclose the feature. The feature is not, however, required to be disclosed with any preceding time period. Disclosure of the label “Seasonal Payment” without any preceding number of years satisfies this requirement.

    The CFPB Guide to Forms provides further clarification on page 15 and states:

    Seasonal Payment is when the terms of the legal obligation expressly provide that regular periodic payments are not scheduled between specified unit-periods on a regular basis. For example, a “teacher” loan that does not require monthly payments during summer months has a Seasonal Payment.

    Keep in mind that if a seasonable payment is part of the transaction, that feature would also need to be disclosed in the adjustable payment table under section 1026,37(i)(4) which states:

    Whether the transaction is a seasonal payment product pursuant to paragraph (a)(10)(ii)(E) of this section as an affirmative or negative answer to the question “Seasonal Payments?” and, if an affirmative answer is disclosed, the period during which periodic payments are not scheduled.

    Q: We offer a variety of closed-end fixed rate 1st TD loan products. We do not charge any origination or discount points on our products, however, we do charge the borrower a $20 Wire Fee to wire the funds to the Settlement Agent at time of disbursement. Since this fee is collected and retained by us, the lender, we have disclosed as an Origination Charge. Are we interpreting this correctly?

    A: Yes. Origination Charges are items the consumer will pay to the creditor for originating and extending credit. See 12 CFR 1026.37(f)(1)). Note that under the law, you will need to describe this charge using terminology that clearly and conspicuously describes the service that is disclosed. See section 1026. 37(f)(1)- comment 3. The law does not prescribe labels for charges, but presumably, you will describe the charge as “wire transfer fee” or something to that effect. :

    Q: If a borrower is not escrowing for taxes and insurance, do the monthly amounts for these items have to be disclosed on the Loan Estimate in the Projected Payments section, Estimated Taxes, Insurance & Assessments?

    A: Yes. 12 CFR 1026.37(c)(4) states that the total sum of taxes, insurance and other assessments must be disclosed even if not escrowed. The CFPB Guide to Forms also states on page 27 also states:

    …include these amounts as Estimated Taxes, Insurance & Assessments even if an escrow account will not be established under the terms of the legal obligation.

    From this total, you must also indicate by way of a yes or no checkbox whether property taxes, homeowner’s insurance and other assessments are being escrowed. The Forms Guide goes on to state:

    by the use of checkboxes, disclose if Property Taxes, Homeowner’s Insurance, or Other required charges will be paid from an escrow account established under the terms of the legal obligation.

    Q: What if after the LE is delivered the consumer requests a new loan product, do we issue a revised LE or start over with a brand new Loan Estimate for that product?

    A: If the consumer is requesting the product change, that would be a triggering event allowing for a revised loan estimate. The revised loan estimate would then be updated to reflect the new product and any changes in terms related to that new product. This revised loan estimate would then be used for good faith purposes against the closing disclosure. If the request for a new product comes at a point when it is too late to provide a revised loan estimate, then the revisions as they relate to the new product can be reflected on the closing disclosure. Note that if the closing disclosure has already been provided, then you may issue a revised closing disclosure with the new product information; however, a new 3 day period must be imposed.

    We are not aware of any regulatory provisions that allow the creditor to terminate one loan estimate and start over with a new one. The exception would be if the consumer completed a new application for the new product. In that case, it would seem that the first loan estimate doesn’t make it to closing and drops off. The new application becomes a new transaction that will trigger a Loan Estimate within 3 business days of receiving the new application.

    Q: Under TRID rules it states we cannot re-issue the LE once the CD has been issued. What happens if the closing is delayed (maybe they did not sell their current home), and the rate expires. We would re-lock the rate, which could also mean they would have to now pay points.

    Can I re-issue an LE in this instance, and then send out a new CD once we know the new closing date?

    A: Once a consumer receives a Closing Disclosure, the creditor is prohibited from issuing a revised Loan Estimate.§1026.19(e)(4)(ii) The Closing Disclosure must be accurate, so any changes that occur must be disclosed on a Revised Closing Disclosure.§1026.19(f)(1)(i).

    If a rate is re-locked during the time period after the Closing Disclosure was provided, but before consummation, then a revised Closing Disclosure must be provided. The revised Closing Disclosure may be provided at consummation provided that the new rate does not mean that the APR disclosed is now inaccurate as defined by 1026.22(a). If as a result of the rate lock, the APR is now inaccurate, then the revised Closing Disclosure must be provided to the consumer no later than 3-days before consummation. §1026.19(f)(2)(ii). Because the lender must provide it 3 days before closing, this means the closing date may need to be changed.

    Revised charges on a Closing Disclosure can be used to calculate good faith tolerances under some circumstances. The Commentary says, "[i]f, however, there are less than four business days between the time the revised version of the disclosures is required to be provided pursuant to § 1026.19(e)(4)(i) and consummation, creditors comply with the requirements of § 1026.19(e)(4) if the revised disclosures are reflected in the disclosures required by § 1026.19(f)(1)(i). Comment 1026.19(f)(ii)-1.

    Q: Are the following statements about rounding, correct?

    • All whole number percentages must be truncated at the decimal point (e.g. 4.000% becomes 4%).
    • The APR must be displayed to 3 decimals, unless it is a whole number (e.g. 3.500%).
    • Non-APR, non-whole-number decimals must be displayed to 3 decimals, unless the 3rd decimal is a 0 (e.g. 3.875% and 3.75% would be properly disclosed decimals).
    • Non-APR, non-whole-number decimals must contain at least 2 decimals (e.g. 3.5% would NOT be proper, and would be required to be disclosed as 3.50%).

    A: Correct, All 4 rounding statements are true. 1026.37(o)(4)(ii); 1026.37(o)(4)(ii)-1.

    Q: We understand that when we indicate on the Loan Estimate our intent not to sell servicing of the loan, we are reflecting only our current intent at time of closing. We are not restricted from changing our intent later and selling the servicing. Is this correct?

    A: The Commentary to this section clarifies that a creditor complies with this requirement if the disclosure reflects the creditor's intent at the time the Loan Estimate is issued. Neither the Regulation nor the Compliance Guides provide any bright line tests to help a creditor determine its servicing transfer intentions. The preamble to the final rule issued back in November 2013 does provide some helpful insight. There, the CFPB stated that "if there is doubt regarding whether the creditor intends to transfer servicing, consumers will be better served by a disclosure that the creditor does intend to do so, in order that consumers are on notice about that possibility." If you choose to go this route, you may want to train your staff to explain to the borrower that historically you have retained servicing and transferred such servicing only on rare occasions. Keep in mind this is another piece of “shopping” data and some potential borrowers may be leery of the thought of having their loan servicing transferred.

    Q: When a survey is required by the sales contract, but not by the creditor, how should this be disclosed on the Loan Estimate?

    A: If the survey is required by the sales contract but not by the creditor, the fee for that survey should be disclosed on page 2 of the Loan Estimate under Other Costs in section H “Other” (assuming the creditor is aware of the survey provisions in the sales contract). If the survey is optional, it would seem that one would not need to include it in the Loan Estimate. However, if it’s likely the consumer will pay for the survey, then it should be included.

    Q: On the Loan Estimate, where is the appropriate place to put the attorney’s fees costs when the attorney is representing the lender?

    A: All the loan costs for a transaction will be disclosed in the Loan Costs section on page two of the Loan Estimate. There are three categories to choose from: A. Original Charges, B. Services You Cannot Shop For, and C. Services You Can Shop For. In the Origination Charges, you list the fees that are paid to (and retained by) the creditor or broker for originating and extended the credit.

    The attorney’s fees would not be retained by the creditor or broker; these fees would be passed on to the attorney. So the attorney’s fees would either be listed under B. Services You Cannot Shop For.

    When it comes time to do the Closing Disclosure, this attorney's fee would then go into the Services You Did Not Shop For category.

    Q: How should state grants be disclosed on the Loan Estimate?

    A: On the Loan Estimate, a state grant for a mortgage loan is disclosed in the Calculating Cash to Close table, on the Adjustments and Other Credits row. 1026.37(h)(1)(vii).

    The Official Commentary clarifies that "[f]unds that are provided to the consumer from the proceeds of subordinate financing, local or State housing assistance grants, or other similar sources are included in the amount disclosed under §1026.37(h)(1)(vii). 1026.37(h)(1)(vii)-5.

    Q: Does a change in term count as a loan product change and therefore require a new disclosure?

    A: There are two parts to a loan product description, the first is whether the loan is: Adjustable Rate, Step Rate, or Fixed Rate.

    The second component are the following loan features that change the periodic payment: Negative Amortization, Interest Only, Step Payment, Balloon Payment, or Seasonal Payment. As we can see, loan term is not included in the definition of product description. So a change in loan term is not a change in loan product. 1026.37(a)(10).

    Q: If there are fees for services that the bank did not require upfront but that the borrower opted for as part of the sales contract such as termite inspection and the bank required review of the documentation prior to approving the loan, is there a requirement to disclose the fee on the Loan Estimate?

    A: Yes and you would disclosure the fees on page 2 of the Loan Estimate under the Other Costs column, under “H. Other”.

    Please see the commentary to 1026.37(g)-2 ‘CHARGES PURSUANT TO PROPERTY CONTRACT.’ The creditor is required to disclose charges that are described in § 1026.37(g)(1) through (3). Other charges that are required to be paid at or before closing pursuant to the property contract for sale between the consumer and seller are disclosed on the Loan Estimate to the extent the creditor has knowledge of those charges when it issues the Loan Estimate, consistent with the good faith standard under § 1026.19(e). A creditor has knowledge of those charges where, for example, it has the real estate purchase and sale contract. See also § 1026.37(g)(4) and comment 37(g)(4)-3.

    Q: For Fees that CANNOT change, is a Loan Estimate considered accurate if the amount of some fees goes down?

    A: Creditors are responsible for ensuring that the figures stated in the Loan Estimate are made in good faith and consistent with the best information reasonably available to the creditor at the time they are disclosed. (§1026.19(e)(3) and Comments 19(e)(3)(iii)-1 through -3).

    That being said, the CFPB clarifies that a:

    "Loan Estimate is considered to be in good faith if the creditor charges the consumer less than the amount disclosed on the Loan Estimate, without regard to tolerance limitations."

    See the TILA-RESPA Integrated Disclosure Rule - Small Entity Compliance Guide - March 2014, page 35.

    Q: What is TIP?

    A: The TIP is the total amount of interest that the consumer will pay over the life of the loan, expressed as a percentage of the amount of credit extended, using the term “Total Interest Percentage,” the abbreviation “TIP,” and the statement “The total amount of interest that you will pay over the loan term as a percentage of your loan amount”. § 1026.37(l)(3) For example, if the Loan Amount is $100,000 and the total amount of interest that the consumer will pay over the Loan Term is $50,000, then the TIP is 50%.

    Q: Regarding appraisal fees, tax service fees, etc., we often don't know what the fee will be. Can we over-estimate the fee and then lower the amount?

    A: While no longer called a "Good Faith Estimate", the Loan Estimate still requires a general standard of good faith in the estimates you are providing. The Good Faith determination requires that the actual charges do not exceed the estimated amount disclosed. In the TILA-RESPA Integrated Disclosure Rule - Small Entity Compliance Guide - March 2014, on page 35, the CFPB clarifies that a "Loan Estimate is considered to be in good faith if the creditor charges the consumer less than the amount disclosed on the Loan Estimate, without regard to tolerance limitations."

    Keep in mind there is still an expectation that your estimates be consistent with the best information you have available at the time of disclosure. Over disclosing to create a “cushion” may be frowned upon by your regulator and not considered in compliance with the spirit of the law.




    Closing Disclosures

    Q: If the mortgage loan amount decreases after the issuance of a CD is a COC and new CD required with the lower loan amount? How is this affected by Tolerance limits?

    A: The provisions regarding re-disclosure of the Closing Disclosure are set out in 12 CFR 1026.19(f)(2). If the decrease in mortgage loan amount creates an inaccurate APR or involves a loan product change, you would need to provide a corrected Closing Disclosure to the consumer and provide a new 3 day waiting period before consummation.

    Assuming the APR is not impacted and a new loan product is not involved, you will still need to provide a corrected Closing Disclosure, reflecting the new mortgage loan amount, to the consumer. However, this corrected Closing Disclosure can be provide at or before consummation. A new 3 day waiting period would not be required.

    You will also need to consider whether or not the change in mortgage loan amount impacts loan fees subject to the zero and 10 percent cumulative tolerance restrictions. Note that if there are decreases to fees, these tolerances rules do not come into play. However, if there are increases to tolerance fees, you will need to address whether or not the increases are due to a change in circumstance event. These events are spelled out in 12 CFR 1026.19(30(iv). According the CFPB Compliance Guide:

    If the event occurs after the first Closing Disclosure has been provided to the consumer (i.e., within the three-business-day waiting period before Consummation), the creditor may use revised charges on the Closing Disclosure provided to the consumer at consummation, and compare those amounts to the amounts charged for purposes of determining good faith and tolerance. (Comment 19(e)(4)(ii)-1).

    If the change in mortgage loan amount is not due to a qualifying change in circumstance event, refunds to cure tolerance violations may need to be made and documented on your revised Closing Disclosure.

    Q: Does an owner of the property who is not a borrower need to sign the CD. They are on the deed, but not a borrower.

    The TRID rule does not mandate the signature of any consumer in the transaction. Such signatures are at the discretion of the creditor. See 12 CFR 1026.38(s). That being said, you should ascertain whether or not non-borrower signatures are required by a specific loan program or investor for purposes of insuring the loan or purchasing the loan.

    Finally, remember that if the transaction is subject to the right of rescission, the non-borrower with an ownership interest in the property must receive the notice of the right to rescind and the Reg Z material disclosures which would be contained in the Closing Disclosure. See 12 CFR 1026.23. Some lenders require the non-borrower owners to sign the Closing Disclosure because they use that signature to demonstrate that the Closing Disclosure was provided to that party for right to rescind compliance. Posted 04-27-16.

    Q: If I provide a corrected CD after the loan has been closed, what do I date the CD? Do I use the date I am providing the CD to the customer and leave the Closing Date and Disbursement Date the same as they were at closing?

    A: The regulation does not specifically answer your question, but it would make sense to use the date you are issuing the revised CD (either the date you place it in the mail or the date it is given to the consumer). From an audit perspective, this date will “show” that it is a revised Closing Disclosure. Note that you can also track revisions by using a revision number suffix appended to the end of the loan number. The Closing and Disbursement dates would stay the same as these dates haven’t changed. Posted 02-29-16.

    Q: According to the new TRID guidelines a corrective Closing Disclosure can be provided to the borrower within 30 days of closing. What if it exceeds the 30 days? Can anything else be done to remedy the issue?

    A: First, we need to clarify that the CFPB response to the Mortgage Bankers Association regarding investor concerns over liability for minor errors on the TRID disclosures does not rise to the level of formal guidance. However, it certainly provides a solid gauge as to the CFPB’s (as well as other regulators’) TRID enforcement intentions in the next few months.

    With respect to corrections, the TRID rule does contain provisions for providing updated disclosures due to changes in settlement. Under the law, lenders must provide a corrected Closing Disclosure if an event in connection with the settlement occurs during the 30-calendar-day period after consummation that causes the Closing Disclosure to become inaccurate and results in a change to an amount paid by the consumer from what was previously disclosed. 12 CFR 1026.19(f)(2)(iii); Comment 19(f)(2)(iii)-1. When a post-consummation event requires a corrected Closing Disclosure, the creditor must deliver or place in the mail a corrected Closing Disclosure not later than 30 calendar days after receiving information sufficient to establish that such an event has occurred. Note that the corrected disclosure is not required within 30 days of closing but rather within 30 days of receiving information that establishes an inaccuracy.

    Example: Assume the loan is consummated on day 1, a recording fee increases 20 days after consummation and you are made aware of the increase 35 days after consummation. The “event” occurred within 30 calendar days after consummation so you are obligated to provide a corrected disclosure. You are made aware of the increase 45 days after consummation, so you would have 30 days starting at day 45 to provide the updated Closing Disclosure.

    If you fail to respond within the time-frame described above, you can still avoid liability for the underlying error and provide a corrected Closing Disclosure pursuant to existing TILA/Regulation Z. According to 15 USC 1640(b), a lender can avoid compliance liability if finds the error before the borrower does and makes the appropriate adjustments and provides notice of this adjustment to the borrower within 60 days of discovering the error. As always with compliance violations, you may want to consider consulting with your legal counsel. Posted 01-14-16.

    Q: On loans that are secured by rental property and land only, are we required to disclose the escrow information even though we are not escrowing?

    A: Assuming you are referring to the escrow disclosures on the Loan Estimate and the Closing Disclosure, there would be no requirement to disclose escrow information if you are not establishing an escrow account. The law does require disclosure of the sum of taxes, insurance and other assessments pursuant to 12 CFR 1026.37(c)(4) even if no escrow account for the payment of some or any of such charges will be established. The Closing Disclosure also requires disclosure of why an escrow account was not established under 12 CFR 1026.38((l)(7)(i)(B). Posted 12-03-15.

    Q: Is the closing date the same as the disbursement date?

    A: Not necessarily. For purposes of the TRID rule, the closing date that is disclosed on the Closing Disclosure is the date of consummation. 1026.38(a)(3)(ii). Consummation means the time that a consumer becomes contractually obligated to you the creditor on the transaction and that point in time is defined according to your state law. 1026.2(a)(13) and Commentary. The disbursement date is the date funds are expected to be paid to the consumer and seller in a purchase transaction or the consumer or other third party in a non-purchase transaction. 1026.38(a)(3)(iii).

    Often the closing date and the disbursement date are the same, but you will want to verify what “consummation” means in the state you are doing business. Consummation is often the closing date, but in some states, this point in time can occur earlier.

    Q: Do adjustments and other credits include money that the consumer gets from the proceeds of subordinate financing, local or State housing assistance grants or other similar sources?

    A: Yes. Comment 5 to section 1026.37(h)(1)(vii) specifically addresses your question and states: Adjustments and Other Credits includes funds provided to the consumer from the proceeds of subordinate financing, local or State housing assistance grants, or other similar sources.

    Q: What is the length of time to make a refund after closing? Length of time to make correction?

    A: Creditors must refund excess charges to the consumer no later than 60 days after consummation. The creditor must also deliver or place in the mail corrected disclosures that reflect such refund no later than 60 days after consummation. 12 CFR 1026.19(f)(2)(v).

    If during the 30-day period following consummation, an event in connection with the settlement of the transaction occurs that causes the disclosures to become inaccurate, and such inaccuracy results in a change to an amount actually paid by the consumer from that amount disclosed, the creditor shall deliver or place in the mail corrected disclosures not later than 30 days after receiving information sufficient to establish that such event has occurred. If the error is clerical in nature, the corrected disclosure must be provided not later than 60 days after consummation. 12 CFR 1026.19(f)(2)(iii) and (iv)

    Q: Are signatures required on the Closing Disclosure?

    A: No. According to the regulation, signatures are optional. However, FNMA is requiring signatures on the Closing Disclosure. If the lender is planning on selling to the secondary market, it should carefully review their requirements in addition to the regulations.

    Q: We believe that an HVE or AVM should be disclosed as an "Estimated Property Value," not an "Appraised Property Value," as an HVE or AVM are not full appraisals. Is this correct?

    A: Yes, That is correct. An HVE or an AVM are valuations of a property's value, not a full appraisal. If an AVM or HVE is used to determine approval, then it should be disclosed as "Estimated Prop. Value." The Interpretation says, "To comply with this requirement, the creditor discloses the value determined by the appraisal or valuation used to determine approval of the credit transaction. If the creditor has not obtained an appraisal, the creditor may disclose the estimated value of the property. Where an estimate is disclosed, rather than an appraisal, the label for the disclosure is changed to “Estimated Prop. Value.”§1026.38(a)(4)-1.

    Q: How should state grants be disclosed on the Closing Disclosure?

    A: On the Closing Disclosure, a state grant for a mortgage loan is disclosed on page 3 in the Summaries of Transactions Table, in section L. Paid Already by or on Behalf of Borrower at Closing in the subsection 'Other Credits'. 1026.38(j)(2)(vi). This 'other credits' section acts as a catch-all for credits paid on behalf of the borrower that were not otherwise disclosed on page 2 or section K on page 3. 1026.38(j)(2)(vi).

    Q: For an escrow state such as California, the term consummation means when the borrower signs the note. The note does not have a date field. Can we assume the date the note is signed will be used to determine if the 3-day waiting period expired?

    A: Yes, that is probably a safe assumption. If consummation occurs when the borrower signs the note, then the date to determine compliance with the 3-day rule will likely be the date next to the borrower's signature. You may want to consider updating your policies and procedures and documenting that for purposes of determining the 3-day waiting period, you consider the date the borrower signs the note to be the date of consummation.

    Q: We do business in states like California where we fund the loan one day and close/record the transaction the next day. Is the requirement to provide the Closing Disclosure 3 days before consummation based on the funding date or the recording date (i.e. closing)?

    A: The general rule is that the consumer must receive the Closing Disclosure no later than three business days before consummation. (§1026.19(f)(1)(ii).

    Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan. The point in time when a consumer becomes contractually obligated to the creditor on the loan depends on applicable state law. (§ 1026.2(a)(13) and Comment 2(a)(13)-1).

    In California, provided the loan documents identify the lender, consummation occurs when the borrower signs the loan documents which generally happens at closing. So the Closing Disclosure would need to be provided 3 days prior to the closing.




    Tolerances/Variations

    Q: How often do you have to send the Settlement Service Providers List? I know you need to send it with the initial LE, but do you send it with each subsequent LE (change in circumstance) as well?

    A: The TRID rule itself is not crystal clear on whether or not an updated Written List of Providers must be provided with a revised Loan Estimate. However, the CFPB did address this very issue in its May 26th, 2016 CFPB webinar. In this session, the Bureau clarifies that one can provide either a brand new complete Written List of Providers, or an additional list that just contains the service providers for the service that has changed/added, basically an addendum to the original list. Also, since providing this List impacts fee tolerances, it might make sense to take the conservative approach and include the List with each revised Loan Estimate, even if services that may be shopped for haven’t changed.

    Q: If the mortgage loan amount decreases after the issuance of a CD is a COC and new CD required with the lower loan amount? How is this affected by Tolerance limits?

    A: The provisions regarding re-disclosure of the Closing Disclosure are set out in 12 CFR 1026.19(f)(2). If the decrease in mortgage loan amount creates an inaccurate APR or involves a loan product change, you would need to provide a corrected Closing Disclosure to the consumer and provide a new 3 day waiting period before consummation.

    Assuming the APR is not impacted and a new loan product is not involved, you will still need to provide a corrected Closing Disclosure, reflecting the new mortgage loan amount, to the consumer. However, this corrected Closing Disclosure can be provide at or before consummation. A new 3 day waiting period would not be required.

    You will also need to consider whether or not the change in mortgage loan amount impacts loan fees subject to the zero and 10 percent cumulative tolerance restrictions. Note that if there are decreases to fees, these tolerances rules do not come into play. However, if there are increases to tolerance fees, you will need to address whether or not the increases are due to a change in circumstance event. These events are spelled out in 12 CFR 1026.19(30(iv). According the CFPB Compliance Guide:

    If the event occurs after the first Closing Disclosure has been provided to the consumer (i.e., within the three-business-day waiting period before Consummation), the creditor may use revised charges on the Closing Disclosure provided to the consumer at consummation, and compare those amounts to the amounts charged for purposes of determining good faith and tolerance. (Comment 19(e)(4)(ii)-1).

    If the change in mortgage loan amount is not due to a qualifying change in circumstance event, refunds to cure tolerance violations may need to be made and documented on your revised Closing Disclosure.

    Q: On a refinance loan, we quoted title as a fee that the borrower could not shop for. They didn't understand and ordered their own title and set up closing. We wanted to go ahead and allow them to use theirs. So it becomes a fee we didn't allow them to shop for that they shopped for. As long as we guarantee the fee that we quoted and don't charge any more (even if it's more with the company they shopped at), will we be in compliance or is there a change needed in any forms that initially said they "could not shop" but then we allowed them to since they did or is it just the fee itself that is tied to the "could shop" or "could not shop"?

    A: Interesting Question. The Regulation doesn't address this situation. Whatever course of action you take, you will want to ensure that there are notes in the loan file explaining what you did and why. I also highly recommend that you discuss this with legal counsel.

    For any fee that the borrower is allowed to shop for, there should be a corresponding entry on the written list of providers. §1026.19(e)(1)(vi)(C). By allowing your borrower to shop, both the LE and the Written List of Providers are inaccurate. You may be able to send a revised LE and use it to determine tolerance by categorizing this as a "revision requested by the customer" 1026.19(e)(3)(iv)(C). Although the Reg doesn't explicitly authorize the use of a revised Written list of Providers, in this case, it seems that one would be appropriate because the customer has requested a revision to the credit terms (the customer wants to shop) and to stay in compliance with 1026.19(e)(3)(iv)(C) that shoppable service must be on the Written List.

    The other option you mentioned is going forward with the documents as they are and simply not charging more than you originally quoted. The question says, "As long as we guarantee the fee that we quoted and don't charge any more (even if it's more with the company they shopped at), will be be in compliance".

    If the borrower selected company is cheaper than the one you told the borrower that they must use, then you should only charge the amount that they actually paid. I suspect that is your plan, but I thought it would be worth mentioning. If the borrower is overcharged, the regulators would likely consider that to be a UDAAP.

    One more thing to keep in mind, because this is not a regular situation, your LOS may not be able to properly calculate the tolerance if you don't use a revised LE because it could be looking for a matching fee by category B or C. (this is just speculation). In other words, there may be a technical component to this issue too.

    In summary, as this is a gray area, I would discuss this with legal counsel and make sure there are good notes to the file explaining the problem and the resolution. Finally, you may have to confirm w/ your LOS provider that the software can correctly handle your preferred solution.

    The good news is we are still in the TRID enforcement "grace period." Good Luck! Posted 03-23-16.

    Q: On the Loan Estimate, we disclosed for State Tax Stamps on the Deed as a borrower cost. This is a 0% tolerance. When we were preparing a Closing Disclosure, the Tax Stamps increased but they became a seller cost. Do we still need to cure the tolerance even though the seller is now paying them?

    A: Unfortunately, it appears the answer to your question is Yes.

    For purposes of the Loan Estimate, only that portion of the state tax stamps (transfer taxes) imposed on or paid by the consumer should be disclosed. 12 CFR 1026.37(g(1). Transfer taxes paid by the seller in a purchase transaction are not disclosed on the Loan Estimate under §1026.37(g)(1), but are disclosed on the Closing Disclosure pursuant to §1026.38(g)(1)(ii).

    According to the TRID rule, your transfer taxes are governed by your state or local law which determines if the seller or consumer is ultimately responsible for paying the transfer taxes. If State or local law is unclear or does not specifically attribute transfer taxes to the seller or the consumer, then you are deemed in compliance if the amount of the transfer tax disclosed is not less than the amount apportioned to the consumer using common practice in the locality of the property. Presumably you disclosed the transfer taxes the consumer was responsible for on the Loan Estimate based on such state or local law or common practice.

    It sounds like during the real estate settlement process, the seller agreed to pay the transfer taxes that were to be imposed on the consumer. In this scenario, the transfer taxes do not become a seller cost, but rather a consumer cost that is being paid by the seller. Because this is a fee imposed on the consumer (regardless of which party ultimately pays), the tolerance restriction do apply and you would be subject to the zero tolerance provisions. Unless some type of change in circumstance occurred that triggered the increase in the transfer taxes, you would be subject to the cure provisions. Posted 02-29-16.

    Q: If you determine that the filing fees on the closing disclosure issued to the borrower prior to loan closing increase due to the addition of more pages to the deed of trust, does the lender have to credit the increase back to the borrower since a lower amount was originally disclosed? For example, say the recording fees disclosed on the closing disclosure issued the 3 days prior to closing was $75.00 and prior to closing it is determined that the recording fees are actually $85.00, does the lender have to eat the additional $10 or is everything based on the comparison with the loan estimate?

    A: Charges for third-party services and recording fees paid by or imposed on the consumer are grouped together and subject to a 10% cumulative tolerance. This means you the creditor may charge the consumer more than the amount disclosed on the Loan Estimate for any of these charges so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than 10%. See 12 CFR 1026.19(e)(3)(ii)). Charges under the 10 percent cumulative tolerance include recording Fees. See comment 4 to section 19(e)(3)(ii).

    In the situation described, it will be important to perform a good faith analysis that compares the cumulative 10 % tolerance items disclosed on the loan estimate with the cumulative amount the consumer pays at closing. For those charges subject to a 10% cumulative tolerance, 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 consumer no later than 60 calendar days after consummation. Posted 12-08-15.

    Q: What is the length of time to make a refund after closing? Length of time to make correction?

    A: Creditors must refund excess charges to the consumer no later than 60 days after consummation. The creditor must also deliver or place in the mail corrected disclosures that reflect such refund no later than 60 days after consummation. 12 CFR 1026.19(f)(2)(v).

    If during the 30-day period following consummation, an event in connection with the settlement of the transaction occurs that causes the disclosures to become inaccurate, and such inaccuracy results in a change to an amount actually paid by the consumer from that amount disclosed, the creditor shall deliver or place in the mail corrected disclosures not later than 30 days after receiving information sufficient to establish that such event has occurred. If the error is clerical in nature, the corrected disclosure must be provided not later than 60 days after consummation. 12 CFR 1026.19(f)(2)(iii) and (iv)

    Q: How should we disclose a settlement service where there is only one provider in our community – would that be a service that cannot be shopped for?

    A: The TRID rule does not address situations where there is only provider available for a particular service. Therefore, you will still need to make the determination as to whether it is a service that can or cannot be shopped for. If you decide to list the service as one that cannot be shopped for, the fee for that service will be subject to zero tolerance. If you decide to list the service as one that can be shopped for, you will also need to list a provider for that service on your Written List of Service Providers. If the consumer picks the provider you include on your list, that fee will be subject to a 10 percent tolerance. Presumably the consumer will pick from your List as that provider is the only provider in the area. But, you have allowed the consumer to shop, and if they find and select a provider not on your list, you will want to insure that the provider has the proper qualifications to perform the service. The fee for a provider not on your List would be a no tolerance item.

    Q: When the creditor identifies providers on the "Written List", is the list of providers specific by location or for example if company has multiple offices can you simply list the name of the provider and not specify the location?

    A: The TRID rule doesn’t contain any hard and fast rules regarding the contact information listed on the Written Provider List. It simply states that creditors must provide sufficient information to allow the consumer to contact the provider. The Commentary to 12 CFR 1026.19(e)(1)(vi)(C) – 4 states:

    Section 1026.19(e)(1)(vi)(C) provides that the creditor must identify settlement service providers that are available to the consumer. A creditor does not comply with the identification requirement in § 1026.19(e)(1)(vi)(C) unless it provides sufficient information to allow the consumer to contact the provider, such as the name under which the provider does business and the provider's address and telephone number. Similarly, a creditor does not comply with the availability requirement in § 1026.19(e)(1)(vi)(C) if it provides a written list consisting of only settlement service providers that are no longer in business or that do not provide services where the consumer or property is located.

    Note that the model forms in Appendix H do include a name, mailing address, email address and phone number for each provider listed. Since the law does not specifically address this situation, it might be best to select a provider closest to the address of the property identified in the Loan Estimate. Otherwise, if the provider has a home office, perhaps list that office’s name, address and phone number. Presumably the home office would be able to direct the consumer to the local office that would best fit their needs. The Written List is intended to help facilitate shopping and certainly providing information on a home office is a move in that direction.

    Whatever path you choose to take, be sure to document it in your policies and procedures to ensure a consistent approach within your organization.

    Q: I really want to eliminate the extra work and training around the Written Provider List. We know, for example, what each of the four attorneys charge in our community, so can’t we just tell our consumer that information verbally?

    A: First of all, the TRID rule does not require that you allow your consumer to shop for settlement services. You can choose to list all settlement services as those that cannot be shopped for. If your consumers cannot shop, the Written List of Providers is not triggered. Keep in mind though, all of those fee that cannot be shopped for will be zero tolerance items, so it is important to be comfortable with the accuracy of fees disclosed on the loan estimate.

    Once you have listed services as those that cannot be shopped for, you may still provide the consumer with your own internal list of providers to pick from or verbally list the providers they can choose. Limiting the consumer to someone on your internal list still means they cannot shop for TRID rule purposes and fees for those services are still zero tolerance items. If you offer such an internal list, be sure to select the provider with the highest fee for Loan Estimate disclosure purposes. This will help insure you stay within the zero tolerance threshold. Remember, it is acceptable to charge less at consummation as long as what was originally disclosed on the Loan Estimate was done in good faith.

    Finally, note that not allowing a consumer to shop for an attorney is illegal in some states and you will want to be sure and consult with your legal counsel as to the law in your state.

    Q: For a zero tolerance item, if we charge less on the closing disclosure than what was disclosed on the Loan Estimate, do we still meet the good faith standard or are we somehow out of tolerance?

    A: Creditors may charge a consumer less for a service on the Closing Disclosure than what was disclosed on the Loan Estimate and still meet the good faith standards. The CFPB Compliance Guide, page 35 specifically states:

    …a Loan Estimate is considered to be in good faith if the creditor charges the consumer less than the amount disclosed on the Loan Estimate, without regard to any tolerance limitations.

    The only requirement is that Loan Estimate fees be disclosed using the best information available and be determined in good faith. In other words, it is not permissible to intentionally “over disclose” on the Loan Estimate to avoid tolerance issues.

    Q: On the Service Provider List we name our affiliate as the tax service provider. Because we cannot require use of our affiliate, the Provider List advise the borrower that use of the affiliate is optional. If the borrower chooses not to use the affiliate, then we will require use of a non-affiliate tax service provider that we specify. How do we handle this in the TRID forms and tolerance calculations?

    A: If the customer must choose between two service providers selected by the creditor, then under the Reg, this is considered to be "non-shoppable," despite the fact the borrower has a choice between 2 service providers. The Reg says, "A creditor permits a consumer to shop for a settlement service if the creditor permits the consumer to select the provider of that service, subject to reasonable requirements." 1026.37(e)(1)(vi)(A). The Official Interpretation says that an example of a reasonable requirement is a requirement, "that a settlement agent chosen by the consumer must be appropriately licensed in the relevant jurisdiction. In contrast, a creditor does not permit a consumer to shop for purposes of § 1026.19(e)(1)(vi) if the creditor requires the consumer to choose a provider from a list provided by creditor." §1026.19(e)(1)(vi)-1. This is a little tricky; while the consumer gets to choose a provider, it is also true that the consumer does not get to shop.

    Q: CFPB has been quite clear that only the amount of a fee actually retained by an affiliate must be included in TILA's "points & fees" total (for high-cost and QM tests). Suppose a creditor has title and hazard insurance affiliates that retain part of the premium paid by the consumer and pass through part to a non-affiliate. Is this something that must be specifically disclosed on the Loan Estimate or Closing Disclosure?

    A: A fee split between an affiliate and a non-affiliate is not something that is required to be specifically disclosed on the Loan Estimate or the Closing Disclosure. The creditor must comply with the affiliated business arrangement rules in 12 CFR 1024.15, but there is not any new affiliated business disclosure requirements in the TRID rules. Unfortunately, the fact that the affiliate splits the fee does not impact the tolerance calculation. A fee paid to an title service provider affiliate is subject to zero tolerance regardless of whether the affiliate then uses vendors to perform the title services. Pg. 350 of the Preamble.

    Q: If the lender makes a counter-offer and the fees do not change beyond 10%, or fees decrease, is the lender required to provide a new Loan Estimate (LE)?  If not required, is the lender still allowed to provide a new LE?  For example, perhaps the only change is a small decrease to loan amount (which would have little effect on fees, and if anything would decrease fees).  It would seem useful for the applicant to have exact and updated information, but it is not clear that one of the listed triggers allowing or requiring for a new LE has occurred.

    A: In this situation, a revised loan estimate would be permissible, but not for purposes of fee tolerances. Your fee tolerance and good faith determination would be measured using the original loan estimate because any change in circumstance would need to involve an increase in a fee beyond the permissible tolerances. Using the original loan estimate in this situation won’t hurt you since what you originally disclosed is higher than what it sounds like the actual fee will be. The TRID rule does allow for re-disclosure in situations that do not arise to the level of a change in circumstance, so you still would be allowed to re-disclosure here and provide the applicant with more accurate information.

    Q: We understand that amounts placed into escrow ​in order to pay property taxes are subject to unlimited tolerance/variance for purposes of the good faith analysis. What deviation from the LE is permitted for amounts to pay for property taxes that are not placed into escrow?

    A: There does not appear to be any variation allowed for a prepaid property taxes that is not paid into escrow. The general rule is that an estimated charge disclosed on the Loan Estimate cannot increase on the Closing Disclosure. 1026.19(e)(3)(i). However, there are lots of exceptions to this general as outlined in 1026.19(e)(3)(i)-(iv). As you note, property taxes that are placed in escrow are allowed to increase without limit provided that the original estimate was made using the best information reasonably available at the time. 1026.19(e)(3)(iii)(C). Unfortunately, none of the exceptions apply to prepaid property taxes, so we are stuck with the general rule.

    Q: Assume that the creditor and the borrower did not originally anticipate that a survey would be obtained. Just prior to closing, the closing agent may advise that while a clear Lender’s Policy will not require a survey, the Owner’s Policy will have an exception for matters of survey unless a survey is obtained. The Owner’s Policy is optional and it is up to the borrower whether any exceptions on Owner’s Policy are acceptable. In this instance, since the Lender’s Policy does not require a survey, and the credito sets no requirements as to the optional Owner’s Policy, if the borrower decides to obtain a survey in order to have a clear Owner’s Policy, may we safely assume the survey need not be treated as a “required” service? And no re-disclosure is required, other than ensuring that the last Closing Disclosure reflects the survey in “Other” (with unlimited tolerance)?

    A: Yes, in this instance, the survey does not appear to be required by the creditor. Therefore, the creditor is not be required to provide a revised disclosure for tolerance purposes because the fee is subject to unlimited tolerance. However as you mention, the fee should be disclosed on the final Closing Disclosure in the “Other” section and subject to unlimited tolerance.

    Q: If the loan product requires an inspection (such as a pest or well inspection) we are aware that we must disclose the anticipated cost of the inspection. But must we disclose the anticipated cost of a normal termite treatment or well treatment? If we become aware of repairs that will be needed as a result of an inspection (whether a required inspection or a borrower-option inspection) must we disclose the anticipated cost of repairs (although in most cases it would be a wild guess as we would have no knowledge of the true extent of the repair project and lmited expertise as to pricing it)?

    A: You do not need to disclose the anticipated cost of a normal termite treatment or well treatment if you do not have information to suggest that one will be required. If you become aware that repairs are required, then you can send a revised disclosure and reset tolerances. This is a changed circumstance because the creditor has received new information specific to the transaction that the creditor did not rely on when providing the original disclosures. 1026.19(e)(3)(iv)(A)(3).

    Q: If an amount collected as an "Initial Escrow Payment at Closing" is held for payment to an affiliate of the creditor, is that payment subject to 0 tolerance, or unlimited tolerance?

    A: Amounts disclosed for the "initial escrow payment at closing" are subject to unlimited tolerance, provided that the original estimate was consistent with the best information reasonably available to the lender at the time of the disclosure. 1026.19(e)(3)(iii).

    Q: What loan product changes require new a disclosure and waiting period?

    A: The regulation requires corrected disclosures and a new waiting period for the following changes:

    1. The annual percentage rate becomes inaccurate, as defined in § 1026.22,
    2. The loan product is changed, or
    3. A prepayment penalty is added. 1026.19(f)(2)(ii).

    Q: Can a bank lower a lender credit if a changed circumstance reduces the fee it is offsetting?

    A: Unfortunately, no. A creditor may not lower a lender credit if a changed circumstance reduces the fee it is offesetting. The Official Interpretation says, “If the creditor discloses a $750 estimate for “lender credits” to cover the cost of a $750 appraisal fee, but subsequently reduces the credit by $50 because the appraisal fee decreased by $50, then the requirements of § 1026.19(e)(3)(i) have been violated because, although the amount of the appraisal fee decreased, the amount of the lender credit decreased” 1026.19(e)(3)(i)-5.

    Q: Is the annual percentage rate tolerance still .125%?

    A: Yes. The annual percentage rate (APR) continues to be considered accurate if it is not more than 1⁄8 of 1 percentage point (.125%) above or below the annual percentage rate determined in accordance with paragraph §1026.22(a)(1). §1026.22(a)(2).



    Q: What about a final inspection fee? This is an appraisal fee, but it might not necessarily be known at the time of the initial disclosure. What are the tolerance rules here? Can it be added later?

    A: The rules for providing the Loan Estimate do require that the creditor disclose all costs associated with the transaction. See 12 CFR 1026.37 (f) and (g). The rules also state that if any information necessary for an accurate disclosure is unknown to the creditor, the creditor shall make the disclosure based on the best information reasonably available to the creditor at the time the disclosure is provided to the consumer. The “reasonably available” standard requires that the creditor, acting in good faith, exercise due diligence in obtaining information. See 12 CFR 1026(19)(e)(1) and Commentary. Assuming that you know a final inspection fee will be imposed, you will need to include it on the Loan Estimate, using the best information available to you.

    The tolerances for this fee will depend up whether it is required by you and whether or not the consumer can shop for the service provider. If required and no shopping is permitted, the fee will be subject to a zero tolerance threshold. If required but the consumer can shop for the provider, the fee will subject to a 10 percent cumulative tolerance threshold that applies to all fees in the 10% threshold category. Although it sounds as if the fee is required by you, if it were not required by you, then the fee would not be subject to any tolerance restrictions (as long as disclosed in good faith).

    The law does allow for providing a revised Loan Estimate if a change in circumstances or other specific events occur that cause the original fee disclosure to be inaccurate. Revisions are also permitted to the Closing Disclosure, if you find that a change is necessary after the time permitted for providing a revised loan estimate. See 12 CFR 1026.19(e)(3)(iv) and 1026.19(f)(2).

    As far as adding the fee later, that would only be permissible if at the time of disclosure you were not aware that such a service would be necessary. In this case, you could issue a revised Loan Estimate and add the fee, but your reason for adding it would have to fall within one of the specific reasons for revision outlined in 1026.19(3)(iv).




    Rate Lock

    Q: Does the paragraph that allows for redisclosure of the LE following a rate lock (1026.19(e)(3)(iv)(D)) require redisclosure for other locking events? We understand that rates which are floating and become locked are covered by this provision, but does it also cover other locking events such as float-downs, re-lock, and lock extension?

    A: No, 1026.19(e)(3)(iv)(D) does not appear to apply to float-downs, relock, or lock extensions. The text of 1026.19(e)(3)(iv)(D) says a redisclosure of the Loan Estimate is required in situations where the rate was not locked when the Loan Estimate is provided, but later becomes locked. In a float-down, a relock, or lock extension situation, the rate was presumably locked when the original loan estimate was provided so 1026.19(3)(3)(iv)(D) would not apply. However, under 1026.19(e)(3)(iv)(c) a lender has the option of sending a revised Loan Estimate whenever a consumer requests revisions to the credit terms or settlement that cause an estimated charge to increase. A consumer's request for a float-down or relock would likely fall under this category.

    Q: Can a creditor determine the applicable time zone for rate lock , even if it is different from either the borrower's or the mortgage loan originator's location? 1026.37(a)(13)-3.

    A: The bank may choose any time zone. The regulation says that the "creditor must provide the date and time (including applicable time zone) when that period ends." 1026.37(a)(13). The Commentary says, "the disclosure required by § 1026.37(a)(13) requires the applicable time zone for all times provided, as determined by the creditor." 1026.37(a)(13)-3.

    Q: Is a lender required to send a revised disclosure for a rate lock when the interest rate remains the same?

    A: The regulation is not clear on whether a revised disclosure is required when the rate that is locked is the same rate that was originally disclosed. It says,

    "[n]o later than three business days after the date the interest rate is locked, the creditor shall provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section to the consumer with the revised interest rate, the points disclosed pursuant to § 1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms." §1026.19(e)(3)(iv)(D).

    The regulation does not explicitly state that a revised loan estimate needs to be provided if there is a rate lock that does not change any of the charge information, but arguably that is the implication. As the rules are not clear on this matter, it is best to consult with a legal professional for guidance.

    Q: If the loan is not locked at the time of initial disclosure and then locked - does this mean we cannot add any origination fees if they were not disclosed initially?

    A: Technically, a lender can always send a revised disclosure that contains new origination fees. The TRID rule does allow a lender to provide corrected or updated disclosures even if there hasn’t been a §1026.19(e)(3)(iv) triggering event. However, in this situation, whatever charge is changed cannot be used for purposes of resetting a good faith tolerance. Only revised disclosures that are produced pursuant to one of the §1026.19(e)(3)(iv) triggering events allow a lender to reset the tolerance for purposes of determining good faith. This means that if a lender a sends a revised disclosure because of a rate lock, and it adds new origination fees to the disclosures, then the revised disclosures can be used to calculate some good faith tolerances, but not others.

    When a consumer locks an interest rate, this is §1026.19(e)(3)(iv) triggering event. The lender has 3 days to provide a revised disclosure that shows, "the revised interest rate, the points disclosed pursuant to § 1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms." §1026.19(e)(3)(iv)(D). When calculating good faith, the updated interest rate dependent charges that were listed on the revised disclosure may be used. If a lender also adds an additional origination fee that is unrelated to the rate lock, then that unrelated origination fee cannot be used to reset the base tolerances.

    While the Bureau allows a lender to provide a revised disclosure outside of a triggering event situations, doing so may make the good faith tolerance calculations more complicated because instead of comparing the most recent revised loan estimate to the closing disclosure, the lender will have to compare some fees from the initial loan estimate and some fees from revised loan estimates to the final fees as shown on the closing disclosure.




    Disclosure Delivery

    Q: Under the mailbox rule, what if we receive confirmation of receipt of disclosures 4 days after they are placed in the mail? Should we rely on the “mail box” rule and delivery 3 days after being placed in the mail or do we need to work off the date the consumer provides confirmation?

    A: The TRID rule does rely on the mailbox rule for purposes of determining when disclosures delivered by mail or electronically are considered received by the consumer. Pursuant to this rule, disclosures placed in the mail or delivered electronically are considered received 3 business days after delivery. The Commentary to section 12 CFR 1026.19(1)(iv) – 1 states:

    Mail delivery. Section 1026.19(e)(1)(iv) provides that, if any disclosures required under § 1026.19(e)(1)(i) are not provided to the consumer in person, the consumer is considered to have received the disclosures three business days after they are delivered or placed in the mail. The creditor may, alternatively, rely on evidence that the consumer received the disclosures earlier than three business days. For example, if the creditor sends the disclosures via overnight mail on Monday, and the consumer signs for receipt of the overnight delivery on Tuesday, the creditor could demonstrate that the disclosures were received on Tuesday. (Note Comment 2 addresses electronic delivery and is similar to Comment 1; however, it also addresses consumer consent to electronic delivery and compliance with the E-Sign Act).

    Based on the Commentary the mailbox rule would “trump” confirmations received more than 3 business days after disclosures were mailed or delivered electronically. That being said, it would be wise to insure that your policies and procedures state your practices for determining when disclosures are received by the consumer (i.e. reliance on the mailbox rule or consumer confirmations). Also, make sure your disclosures accurately reflect the date they are placed the mail or delivered electronically. If you retain consumer confirmations received after the mail box rule expiration period, be sure to document, that for purposes of disclosure timing, you relied on the mail box rule and not the date of the confirmation.

    Q: Can we provide the integrated disclosures electronically?

    A: Yes, However, creditors using electronic delivery methods, such as email, must also comply with the Electronic Signatures in Global and National Commerce Act (E-Sign Act) which was signed into law on June 30, 2000. This Act provides a general rule of validity for electronic records and signatures for transactions in or affecting interstate or foreign commerce. The E-Sign Act allows the use of electronic records to satisfy any statute, regulation, or rule of law requiring that such information be provided in writing, if the consumer has affirmatively consented to such use and has not withdrawn such consent.

    Q: Does an applicant have to confirm the "intent to proceed" or does the creditor have to obtain the "intent to proceed" from ALL applicants?

    A: The TILA-RESPA Integrated Disclosure (TRID) rule does require that the consumer indicate to the creditor his or her intent to proceed with the credit transaction. Except for a reasonable fee to obtain a credit report, the creditor may not impose any fee on a consumer in connection with the consumer’s application for a mortgage transaction until the consumer has received the Loan Estimate and has indicated intent to proceed with the transaction. The consumer can indicate an intent to proceed with the transaction in any manner that the consumer chooses after the Loan Estimate has been delivered, unless a particular manner of communication is required by the creditor. A consumer’s silence is not indicative of intent to proceed. See (12 CFR 1026.19(e)(2)(i)(A)).

    The creditor must document the intent to proceed communication to satisfy the record retention requirements of 12 CFR 1026.25.

    If there are multiple applicants, it appears the rules under 12 CFR 1026.17(d) and Commentary would help determine if all applicants need to indicate an intent to proceed. The Commentary states:

    When two consumers are joint obligors with primary liability on an obligation, the disclosures may be given to either one of them. If one consumer is merely a surety or guarantor, the disclosures must be given to the principal debtor... When two consumers are joint obligors with primary liability on an obligation, the early disclosures required by § 1026.19(a), (e), or (g), as applicable, may be provided to any one of them…. See 12 CFR 1026.17(d) – comment 2 By way of analogy, the provisions of 1026.17 (d) would suggest that only one consumer to the transaction would need to indicate an intent to proceed. Presumably this would be the same consumer who received the Loan Estimate.




    Implementation

    Q: I understand that new disclosures cannot be used prior to October 3rd, 2015. Does this mean that early roll out is prohibited and that we can’t “practice” these disclosures before the effective date?

    A: The regulation is clear that for transactions where the application is received prior to October 3rd, 2015, creditors will still need to follow the current disclosure requirements under Regulations X and Z, and use the existing forms (Truth-in-Lending disclosures, GFE, HUD-1). See the TILA-RESPA Integrated Disclosure Rule - Small Entity Compliance Guide - March 2014, page 18. That being said, institutions may want to set a target date, prior to October 3rd, 2015, for testing actual transactions against the new disclosures. Test disclosures should not be provided to the consumer but rather used to verify compliance. Such testing should be part of an institution’s overall TILA-RESPA integrated disclosure implementation plan.

    Q: Can I comply early and begin using the new integrated disclosure prior to October 3rd, 2015?

    A: No. The CFPB has stated that for transactions where the application is received prior to October 3rd, 2015, creditors will still need to follow the current disclosure requirements under Regulations X and Z, and use the existing forms (Truth-in-Lending disclosures, GFE, HUD-1). As a tool for consumer credit shopping, it is important that potential borrowers are comparing comparable disclosure models.




    Regulatory Updates

    Q: Will the CFPB be publishing FAQ Guidance on the integrated disclosure rule?

    A: Yes, the CFPB has published a Compliance Guide that is in a FAQ format. It also has published a Guide to Forms that contains information on how to complete the Loan Estimate and the Closing Disclosure. Additionally, the CFPB and the Federal Reserve Bank of Philadelphia created a series of webinars. The first TILA-RESPA webinar was held on Monday June 17, 2014 and provided an overview of the final rule and the new disclosures.





    Other Documents

    Q: How often do you have to send the Settlement Service Providers List? I know you need to send it with the initial LE, but do you send it with each subsequent LE (change in circumstance) as well?

    A: The TRID rule itself is not crystal clear on whether or not an updated Written List of Providers must be provided with a revised Loan Estimate. However, the CFPB did address this very issue in its May 26th, 2016 CFPB webinar. In this session, the Bureau clarifies that one can provide either a brand new complete Written List of Providers, or an additional list that just contains the service providers for the service that has changed/added, basically an addendum to the original list. Also, since providing this List impacts fee tolerances, it might make sense to take the conservative approach and include the List with each revised Loan Estimate, even if services that may be shopped for haven’t changed.

    Q: Once we receive an appraisal are we required to get the consumer to sign an Acknowledgment of Appraisal at the time we give them a copy of the appraisal we have received?

    A: No. The rules on providing appraisals and other valuations can be found under Regulation B at 12 CFR 1002.14. None of the provisions under this section require any kind of an acknowledgment of receipt. Pursuant to individual policies and procedures, some lenders may choose to use an acknowledgement of receipt of appraisal to help document the actual receipt of the appraisal by the applicant, but again this is not required by law. Posted 12-03-15.

    Q: Is the CHARM booklet required in a transaction subject to the TILA-RESPA Integrated Disclosure (TRID) rule?

    A: Yes. Pursuant to Regulation Z section 1026.19(b)(1), if the annual percentage rate may increase after consummation in a transaction secured by the consumer's principal dwelling with a term greater than one year, the Consumer Handbook on Adjustable Rate Mortgages (CHARM) booklet or a suitable substitute must be provided at the time an application form is provided or before the consumer pays a non-refundable fee, whichever is earlier. The TRID provisions do not override or replace the adjustable rate mortgage disclosures required by section 1026.19(b).

    Q: Regarding the CFPB Mortgage Shopping Toolkit Book, can a creditor provide the consumer with a disclosure that includes a link to the Toolkit instead of the hard copy?

    A: No, The TRID specifically states in 12 CFR 1026.19 (g) (1) (i) that creditors must deliver or place in the mail the booklet no later than 3 days after receipt of an application. The Compliance Guide also states that creditors are required to provide a copy of the toolkit booklet. Finally, the CFPB addressed delivery of the Toolkit in its May 2015 webinar. During the presentation, the question was asked if it was sufficient to include the booklet on the creditor’s website. The CFPB responded by stating:

    No. By simply making a special information booklet, also known as the toolkit, available on its web site, a creditor does not satisfy the rule's delivery requirement. Section 1026.19(g)(1)(i) requires that the creditor deliver or place in the mail the special information booklet not later than three business days after receiving the consumer's application.

    Q: For loans subject to a Loan Estimate and Closing Disclosure, does the lender still have an obligation to provide a separate Itemization of Amount Financed upon the consumer's request?​

    A: There is no legal obligation to provide an itemization of the Amount Financed for loans subject to the TRID rule. Section 1026.38(o)(3) only requires disclosure of the amount financed, not an itemization.

    Q: Appraisal disclosure is now on the Loan Estimate. Is there any need for the separate appraisal disclosure?

    A: Yes – the separate Appraisal Disclosure document is still needed for covered transactions that are outside the scope of the Loan Estimate. Please recall that the Loan Estimate is required for closed-end consumer credit secured by real property.

    The scope of the Appraisal Disclosure is complicated, since it is required under two different regulations with different scope. Here are the regulations:

    REGULATION B SCOPE. Required for any application for credit secured by a first lien on a dwelling (including commercial purpose loans)

    REGULATION Z SCOPE. Required for a consumer purpose closed-end loan secured by the principal dwelling in which the Higher Price Mortgage Loan (HPML) thresholds have been exceeded.

    The scope of the appraisal disclosure under Regulation B is broader than that of Regulation Z and the Loan Estimate. UNDER REGULATION B, there is still the need for a separate Appraisal Disclosure in the following situations:

    1. Consumer purpose open-end applications for credit secured by a first lien on a dwelling (real or personal property)
    2. Consumer purpose closed-end applications for credit secured by a first lien on dwelling (personal property)
    3. Commercial purpose applications for credit secured by a first lien on a dwelling (real or personal property)
    4. For renewals, when the creditor develops a new appraisal or other written valuation. Please note that Regulation B has not been changed; its existing timing requirements and definitions remain in place.

    UNDER REGULATION Z, there is still the need for a separate Appraisal Disclosure in the following situation:

    1. Required for a consumer purpose closed-end loan secured by the principal dwelling (personal property) in which the Higher Price Mortgage Loan (HPML) thresholds have been exceeded.

    Q: RESPA Servicing Disclosure is now on the Loan Estimate. Is there any need for the separate documents?

    A: No (with one exception). Under the RESPA reg amendments, the servicing disclosure (as a separate document) will only be required for reverse mortgages.