TILA-RESPA Integrated Disclosures Rule Flashcards
Original Loan Estimate delivery requirement
Once an application is received, a creditor must issue the Loan Estimate to a loan applicant and may not require additional information or verification until that document is provided.
- Mail or deliver within three business days
- Provide a revised Loan Estimate within
* three business days of receipt of qualified new information
* not later than the seventh business day before consummation of the transaction
(information which qualifies as a “changed circumstance”)
Define: Loan estimate business day
Any day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions
Loan estimate delivery methods
- Hand-delivery
-
Mail
- Consumer is deemed to have received it three days after it is mailed
- If actual delivery is documented, it may be used for compliance purposes
-
Electronically
- Must comply with all of the requirements of the federal E-Sign Act
(consumer must agree to receive the disclosures electronically)
Seven-day closing rule
The Loan Estimate must also be provided to the borrower no later than seven business days before consummation of the loan
(the seven-day period does not apply to a revised Loan Estimate)
Note: After receipt of the initial Loan Estimate, a consumer may waive the seven-day waiting period in cases of bona fide personal financial emergency which requires the transaction to close quickly (e.g., the imminent sale of the consumer’s home at a foreclosure sale)
Collection of fees rule
A lender or broker may not charge the borrower anything other than a reasonable credit report fee until the borrower has received the Loan Estimate and expressed their intent to proceed with the transaction.
Obtaining the borrower’s authorization to charge for anything but a credit report before the above conditions are met is considered a violation.
Intent to proceed
After receipt of the Loan Estimate, a borrower may communicate intent to proceed
- Orally over the phone
- In person, or
- In writing via e-mail or a pre-printed form
(A lender has the option of requiring that intent be communicated in a specific manner.)
Silence on behalf of the borrower may not be used as consent.
Imposing a fee would include requiring the borrower to provide to the licensee:
- An executed check, even with the disclosure that the check would not be cashed until the borrower signals intent
- A credit card number to cover processing fees which would accrue upon the borrower’s communication of intent to proceed
The borrower’s intent to proceed must be documented and retained
Zero tolerance fees/charges
On the Closing Disclosure, the following fees may not vary at all from the amount set forth in the Loan Estimate:
-
Fees paid to the
- creditor
- mortgage broker
- affiliate of either
- Fees paid for third-party provider services for which the consumer was not allowed to shop
- Transfer taxes
10% tolerance fees/charges
The following fees and charges, in total, may differ from the total amount of these specific fees and charges set forth in the Loan Estimate by no more than 10%:
- Recording fees
- Third-party provider fees for which the consumer was allowed to shop off of the creditor’s list of service providers
Fees which were disclosed, but not charged, may not be considered in the tolerance calculations.
If one or more charges exceed the estimate, the lender will be in compliance so long as the total of all charges remains within the 10% limitation.
Preferred provider list
The written list of providers from which the loan applicant can shop must
- Be provided if the borrower is allowed to shop for services
- Include at least one provider for each service that is available
- State that the consumer may select another provider
- Correspond with required services listed on the Loan Estimate
- Include contact information by which the applicant can reach the providers
No required tolerance fees/charges
Certain charges may change from the amount set forth in the Loan Estimate without being subject to a tolerance limitation:
- Prepaid interest
- Property insurance premiums
- Property taxes
- Amounts required to be placed into escrow accounts
- Third-party service providers
- for which the consumer was allowed to shop
- which were not on the provider list offered by the lender
- Charges for third-party service providers NOT required by the creditor
These charges may change provided that the amount charged is bona fide (i.e., reasonable and lawful) and the estimate provided was based on the best information available at the time.
These charges may change provided that the amount charged is bona fide (i.e., reasonable and lawful) and the estimate provided was based on the best information available at the time.
Define: Changed circumstances
The following represent specific “changed circumstances” under which a revised Loan Estimate may be provided:
- Changed circumstance affecting settlement charges:
- An extraordinary event beyond the control of any party which specifically affects the transaction
- Information relied upon by the creditor at the time of disclosure that is later found to be inaccurate
- New information specific to the transaction that is provided to the creditor
- Any changes which affect the consumer’s eligibility for the terms for which the consumer applied
- Requested revisions by the consumer
- A change in points or lender credits based on a change in an **interest rate **that was not locked
- Failure of the consumer to communicate an intent to proceed within ten days of issuance of a Loan Estimate
- If a construction loan, the expectation that loan closing will be occurring more than 60 days from issuance of a Loan Estimate
Define: Tolerance
The allowed variances between estimated closing costs and the actual amounts paid by or imposed on the consumer
Define: Resetting tolerances
Use of a revised estimate to determine good faith
Define: Tolerance level
How much the good faith estimated charges can increase at closing
Define: Good faith estimate
A list of the expected charges for a single provider or facility
(Used now only for reverse mortgages)
The HUD Good Faith Estimate (GFE) used to be the definitive guide to what mortgage expenses were estimated to be but has been replaced by the Loan Estimate
When does a Loan Estimate expire?
A Loan Estimate is good for ten business days, after which a revised Loan Estimate may be issued without having to meet one of the defined changed circumstances
Documentation for Loan Estimate changes
Creditors must retain documentation regarding any change made to a Loan Estimate in order to prove compliance with the TRID Rule. Documentation must be retained for three years after the later of:
- The date of consummation
- The date on which disclosures are required to be made, or
- The date on which action is required
Revised Loan Estimate delivery requirements
A creditor must provide a revised Loan Estimate within three business days of receiving the information that qualifies as a valid change.
However, a revised Loan Estimate may not be provided to the consumer
- On or after the date on which they receive the Closing Disclosure from the creditor
- Later than four business days prior to consummation
If a changed circumstance occurs fewer than four business days prior to consummation, the revised charges may be provided to the consumer on the Closing Disclosure
When are Points and Lender Credits guaranteed?
Once the interest rate is locked in pursuant to a lock-in agreement and disclosed in a revised Loan Estimate
Define: Loan Estimate
A three-page form that a consumer receives after applying for a mortgage. It contains important details about the request.
It must include the six required items from the loan application:
- Name
- Monthly income
- Social Security Number for purposes of obtaining a credit report
- Property address
- Estimate of the value of the property
- Loan amount sought
Define: Closing Disclosure
The document setting forth the final terms and conditions of a mortgage loan transaction
(AKA: Loan Cost Disclosure Form)
Closing Disclosure delivery requirements
Mail or deliver within three business days before consummation
Who’s responsible for delivering the Closing Disclosure
Creditors are responsible for the preparation and delivery of the Closing Disclosure to the borrower
To whom is the Closing Disclosure provided?
- In a rescindable transaction, a Closing Disclosure must be given separately to each borrower who has a right of rescission.
- In other transactions, only one borrower need be provided with the Closing Disclosure.
Who provides the Closing Disclosure to sellers?
Settlement agents
- The settlement agent may provide the seller with the same form provided to the borrower, so long as it contains all of the borrower and seller information
- Alternately, the agent may provide the seller with a Closing Disclosure containing just the seller information.
- In either case, the settlement agent must ensure that the lender (if it is not also the settlement agent) is provided with a copy of the Closing Disclosure containing the seller’s information.
Closing Disclosure revision
Three circumstances under which a revised Closing Disclosure must be issued and the waiting period restarted:
- The loan’s disclosed APR becomes inaccurate
- Changes in the terms of the loan product offered
- Addition of a prepayment penalty
If changes affect amounts previously disclosed but do not fall under these three specific circumstances
- The borrower must still be given a revised Closing Disclosure prior to consummation
- A new waiting period is not required.
3-day rule
A lender is required by law to give the borrower the standardized Closing Disclosure at least 3 business days before closing
(AKA: Closing disclosure waiting period)
The Closing Disclosure waiting period is also called ___
3-Day rule
May a creditor provide a revised Loan Estimate and Closing Disclosure on the same day?
No. If a change necessitating re-disclosure occurs between the third and fourth business days prior to consummation, the creditor may
- use the initial Closing Disclosure in lieu of a revised Loan Estimate
- disclose the change
- determine if charges fall within the appropriate tolerance ranges.
What if terms or costs change after consummation?
- If within 30 days after consummation, and the event causes a change in the amount that a buyer or seller paid at consummation, a revised Closing Disclosure must be mailed within 30 days after the creditor receives the new information.
-
Clerical errors
- which do not affect the numbers in the Closing Disclosure, and
- cures of tolerance issues
must be set forth in a revised Closing Disclosure and mailed to the borrower within 60 days of consummation.
Disclosures
As a consumer protection and legal compliance measure, the timing and accuracy of disclosures is an important component of loan origination. Lending laws and regulations create long lists of obligatory disclosures.
The disclosures are intended to
* Educate consumers
* Provide consumers with information on loan costs
* Notify consumers of risky lending terms
* Notify consumers of their rights under federal lending laws
* Ensure that consumers know the status of their loan applications
* Give notice to consumers about changes in the servicing of their loans
Your Home Loan Toolkit: A Step-by-Step Guide
Required by: RESPA
Due: 3 business days after completion of application
Reviews settlement procedssd and outlines thr rights and protections that the law creates for borrowers
Consumer Handbook on Adjustable Rate Mortages Booklet
CHARM
Required by: TILA
Due: 3 business days of application for all ARMS
Alerts consumers to the risks of accepting an ARM
When Your Home Is on the Line: What You Should Know about Home Equity Lines of Credit
Required by: TILA
Due: At time of application
Required by TILA for loan applicants who are considering home equity loans
List of homeownership counseling organizations
Required by: RESPA
Due: 3 business days after completion of application
A clear, conspicuous list of homeownership counseling organizations. The organizations must be local to the consumer and provide relevant counseling services. The list may not be more than 30 days old when it is provided.
Loan estimate
Required by: TILA
Due:
- Initial: 3 days after receiving a loan application
- Final: 7 days prior to consummation
Provides information on the estimated cost of credit and settlement services for a mortgage loan transaction. As discussed in a previous module of this course, there are limitations on the differences allowed between the estimates provided on this disclosure and the actual costs of services provided in a transaction.
Revised loan estimate
Required by: TILA
Due: 3 days after receiving information requiring revision
Mandatory if:
- The rate was not locked at the time the original Loan Estimate was issued.
- When the rate is subsequently locked, the creditor must provide a revised Loan Estimate listing the locked interest rate and any other rate-dependent charges and terms.
- Due: no later than 3 days after the date on which the rate is locked
- The APR varies by more than one eighth of 1%
- Due: 3 days before closing
- Potential borrower decides to switch from a fixed-rate loan to one with an adjustable rate
- Also needs the CHARM Booklet and the program disclosures related to adjustable-rate mortgages.
Note: A creditor may not provide a revised Loan Estimate and Closing Disclosure on the same day
Closing disclosure
Required by: TILA
Due: 3 days prior to consummation
(Replaced HUD-1 Settlement Statement & the final Truth in Lending)
States the actual costs of a loan and settlement fees
Note: A creditor may not provide a revised Loan Estimate and Closing Disclosure on the same day
Revised closing disclosure
Required by: TILA
Due:
-
Initial: 3 days after receiving the information
prompting the revision - Final: 3 days prior to consummation
Certain changes would require a new three-business day waiting period before consummation could occur:
* APR
* prepayment penalties
* loan product changes
Three-day loan disclosure waiting period
The 3-day waiting period between receiving the closing disclosure and the consummation date
Gives borrower time to review all the documents to ensure that the terms theyre agreeing to match the terms outlined at the beginning of the mortgage process when they received your loan estimate
Certain changes to the *closing disclosure *would require a new three-business day waiting period before consummation could occur
Affiliated Business Arrangement Disclosure
Required by: RESPA
Due: At the time of referring a loan applicant to a settlement service provider
(Five-year record retention)
- Describe the business arrangement, including the percentage of ownership interest of the referring party and service provider
- Indicate that the referral may result in a financial benefit for the referring party
- Estimate the costs that will be charged by the provider to whom the loan applicant is referred
- Advise the borrower that he/she is not required to use the service provider to whom he/she was referred and that other providers are available (note, however, that lenders can require the use of a particular attorney, appraiser, and credit reporting agency)
- The only “thing of value” allowable (other than payment for the actual cost of services rendered by the affiliate) is a return on the ownership interest or franchise relationship
Re-disclosure of APR
Required by: TILA
Due: 3 days prior to closing
- Anytime the APR varies by more than one-eighth of 1%
- For an irregular transaction, required if the APR varies by more than one-fourth of 1%
Initial Escrow Account Statement:
Required by: RESPA
Due: 45 days after closing
- The amount of the borrower’s mortgage payment and the portion that is deposited into the escrow account
- Itemized estimated of escrow payments (e.g., taxes, insurance, and other payments) to be made from the escrow account during the first 12 months of the loan
- The amount that the servicer has selected as a cushion
- A “trial running balance” (the accounting process used to reach target balances over the course of subsequent computation years)
Annual Escrow Account Statement
Required by: RESPA
Due: Annually within 30 days of completion of the escrow account computation year
- An account history and a projection of the payments for the coming year
- A statement showing both last year’s and the current year’s monthly mortgage payment, and the amount of the payment that is deposited into the escrow account
- The total amount paid both into and out of the escrow account for the past computation year
- The escrow account balance at the end of the period and an explanation of how the servicer is handling any surplus
- An explanation of how the borrower is to pay any deficiency
Escrow Closing Notice
Required by: RESPA
Due:
- When a borrower requests cancellation of an escrow account, 3 days before the closing of the consumer’s escrow account
- When a creditor or servicer cancels an escrow account, 30 days before the account closes
Required prior to the closing of an escrow account
Initial Rate Change Disclosure
(for ARMs)
Required by: TILA
Due:
- between 210 days and 240 days before the initial rate change occurs and the first payment based on the new rate is due
- At consummation if the first rate and payment changes are due within 210 days after consummation
- Intended to provide borrowers with information to prepare them for interest rate adjustments that will result in changes in payment amounts.
- The disclosure must also provide
- an explanation of how the rate is calculated
- disclose the index and margin used to make this calculation
- identify any caps that will limit the increase in the rate.
Subsequent Rate Change Disclosure
(for ARMs)
Required by: TILA
Due:
- between 60 days and 120 days prior to an interest
rate and payment change
- Intended to provide borrowers with information to prepare them for interest rate adjustments that will result in changes in payment amounts.
- The disclosure must also provide
- an explanation of how the rate is calculated
- disclose the index and margin used to make this calculation
- identify any caps that will limit the increase in the rate.
Notice that completion of loan application and receipt of disclosure does not obligate borrower to complete transaction
Required by: TILA
Due: 3 days after application received
- The signature line for the Loan Estimate reminds consumers that they are not required to accept a loan simply because they have signed the disclosure form.
- If the loan involved is a high cost mortgage loan, the disclosure must also warn the consumer of the risks of losing their home when signing a lending agreement for all loans
Notice of Right to Rescind
Required by: TILA
Due: at closing
In transactions that are not related to a home purchase or to a refinance with the lender who made the loan being refinanced
Servicing Transfer Statement
Required by: RESPA
Due: 3 days after application received
(Found on page three of the Loan Estimate)
States whether or not the servicing of a mortgage loan may be transferred
Servicing Disclosures
Required by: RESPA
Due:
-
Transferor servicer must provide notice to the consumer no less than 15 days before the effective date of the transfer of servicing
- Transferee servicer must provide notice to the consumer no more than 15 days after the transfer
- A combined transfer notice from both servicers is permitted if provided to the consumer at least 15 days before the effective date of the transfer
Servicers to provide notice to consumers of any assignment, sale, or transfer of servicing
- The effective date of the transfer
- A name, address, and toll-free phone number that the consumer can use to contact the transferee servicer for answers to questions about the transfer
- The date on which the transferor servicer will no longer accept payments and the transferee will accept them (these must be the same date or consecutive dates)
- An indication of whether the transfer will impact the continued availability of optional insurance products
- A statement that the transfer does not change the terms or conditions of the mortgage
Reverse Mortgage Disclosures
Required by: TILA
The same disclosures as for open-end, closed-end, and variable-rate mortgages must also be provided as applicable to reverse mortgage loan applicants
Loan Cost Disclosure Form
Required by TILA
This form discloses the total annual loan cost, which incorporates all of the following:
- Upfront costs, for example, the origination fee, the third-party closing fee, and any upfront mortgage insurance premium
- Interest
- Ongoing charges (e.g., monthly service charges)
Disclosure delivery
Required by: RESPA and TILA
When disclosures are provided via the Postal Service, receipt by the consumer is considered to take place 3 business days after the disclosures are placed in the mail.
The E-Sign Act allows creditors and other mortgage professionals to make disclosures electronically when a consumer consents to the electronic receipt of disclosures.
- When disclosures are provided electronically, they are considered received when acknowledged (opened) by the consumer.
What does TRID mean?
TILA-RESPA Integrated Disclosure Rule
Created new Loan Estimate and Closing Disclosure forms that consumers receive when applying for and closing on a mortgage loan
Purpose of TRID?
Harmonizes the RESPA and TILA disclosures and regulations
Focuses on the Loan Estimate and Closing Disclosure forms that are required for most closed-end mortgage loan transactions
Scope of TRID?
Includes most closed-end consumer credit transactions secured by real property
Excludes
- HELOCs
- Reverse mortgages
- Chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property (i.e., land)
Special information booklet
Closed-end loans:
- Your Home Loan Toolkit: A Step-by-Step Guide
Open-end loans:
- What You Should Know about Home Equity Lines of Credit
The information booklets are not required for transactions involving:
- A refinance
- A closed-end loan secured by a subordinate lien
- A reverse mortgage loan
Your Home Loan Toolkit: A Step-by-Step Guide
Required by: RESPA
Due: 3 days after the completion of a loan application for a purchase transaction
(AKA: Special information booklet)
- Explains the settlement process
- Tells borrowers that they have the right to negotiate the terms of a loan
- Reviews the protections that RESPA creates for borrowers
- Warns borrowers that their use of false information on a loan application can lead to loss of their home, a poor credit rating, and even criminal prosecution for fraud
What You Should Know about Home Equity Lines of Credit
Required by: TILA
Due: at time of loan application
(AKA: Special information booklet)
- Required by TILA for loan applicants who are considering home equity loans
- Explains the settlement process
- Tells borrowers that they have the right to negotiate the terms of a loan
- Reviews the protections that RESPA creates for borrowers
- Warns borrowers that their use of false information on a loan application can lead to loss of their home, a poor credit rating, and even criminal prosecution for fraud
Loan Estimate
Required by: TILA & RESPA
Due: 3 days after application received
Replaced the RESPA Good Faith Estimate (GFE) and the early Truth in Lending disclosure
Notice of Right to Rescend
Required by: TILA
Due: At closing
