Frequently Asked Questions

Know Before You Owe (KBYO or TRID)

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Rule Applicability

The new disclosures are effective for applications received on or after October 3, 2015. They apply to all closed-end loans securing real property. The following loans are excluded:

  • HELOC
  • Reverse Mortgages
  • Loans secured by mobile home (not attached to real property)
  • Partial exemption for certain junior lien loans associated with housing assistance loans for low/moderate-income consumers*
  • Creditors making five or less mortgage loans per year
*Note: Partial exemption for certain mortgage loans. The special disclosure requirements in §1026.19(e), (f), and (g) do not apply to a transaction that satisfies ALL of the following criteria:
  • The transaction is secured by a subordinate lien;
  • The transaction is for the purpose of:
    • Down payment, closing costs, or other similar home buyer assistance, such as principal or interest subsidies;
    • Property rehabilitation assistance;
    • Energy efficiency assistance; or,
    • Foreclosure avoidance or prevention.
  • The credit contract does not require the payment of interest;
  • The credit contract provides that repayment of the amount of credit extended is:
    • Forgiven either incrementally or in whole, at a date certain, and subject only to specified ownership and occupancy conditions, such as a requirement that the consumer maintain the property as the consumer’s principal dwelling for five years;
    • Deferred for a minimum of 20 years after consummation of the transaction;
    • Deferred until sale of the property securing the transaction; or,
    • Deferred until the property securing the transaction is no longer the principal dwelling of the consumer.
  • The total of costs payable by the consumer in connection with the transaction at consummation is less than one percent of the amount of credit extended and includes no charges other than:
    • Fees for recordation of security instruments, deeds, and similar documents;
    • A bona fide and reasonable application fee; and,
    • A bona fide and reasonable fee for housing counseling services.
  • The creditor complies with all other applicable requirements of this part in connection with the transaction, including without limitation the disclosures required by §1026.18.

The Loan Estimate, Closing Disclosure, and other relevant disclosures implemented by the rule are effective on October 3, 2015. They cannot be used until that date since the provisions governing their use are not effective until then.

No, the current provisions providing an exemption under RESPA (§1024.5(b)(1)) for properties of 25 acres or more is eliminated (reserved) under the rule.

It would depend on whether an individual state has any provisions in which a cooperative unit is defined or considered "real property."

The responsibilities for compliance with the disclosure requirements do not affect the property appraiser, nor does the rule contain any revisions to valuation independence.

The Loan Estimate is not required under 1026.19(e)(1)(i) as long as the adverse action occurs prior to the expiration of the three general business day requirement after receipt of the application by the creditor or mortgage broker. If the creditor fails to provide early disclosures and the transaction is later consummated on the terms originally applied for, then the creditor does not comply with §1026.19(e)(1)(i). If, however, the consumer amends the application because of the creditor’s unwillingness to approve it on the terms originally applied for, no violation occurs for not providing disclosures based on those original terms. But the amended application is a new application subject to §1026.19(e)(1)(i).

It depends on the provisions contained within the security instrument for the particular state. In many cases an open-end mortgage is simply a title used for the instrument, but it does not function as an open-end credit instrument defined under Regulation Z (i.e., whether it may only state a maximum indebtedness, etc.). The answer depends on whether the instrument contains provisions that comport to the definition of open-end credit (meaning: the creditor reasonably contemplates repeated transactions; the creditor may impose a finance charge from time to time on an outstanding unpaid balance; and, the amount of credit that may be extended to the consumer during the term of the plan (up to any limit set by the creditor) is generally made available to the extent that any outstanding balance is repaid).

It would certainly be recommended that you not issue both sets of disclosures. Although the provisions under the rule do not specifically address this issue, it would no doubt be confusing to the consumer and not provide the requisite "clear and conspicuous" disclosure standards required. You also run the risk of an unfair, deceptive, or abusive act or practice (UDAAP) violation as well.

Neither the Loan Estimate or the Closing Disclosure mandates an obligation to make a loan. The consumer must continue to qualify for the loan as determined by your approval/commitment to them after the disclosures have been issued.

If the first lien is a closed-end transaction secured by real property, then you would use the Loan Estimate and Closing Disclosure. If the second lien is an exempt transaction (see previous questions above regarding their use on exempt transactions) it does not change compliance with provisions under 1026.19(e), (f) & (g) regarding the first lien mortgage transaction.

It depends on whether the specific transaction falls within the partial exemption provisions established under §1026.3(h) regarding certain mortgage loans that would be specifically exempt from the provisions under §1026.19(e), (f) & (g). See also responses to questions above regarding the use of the Loan Estimate and Closing Disclosure on exempt transactions. This type of question should be discussed this with your compliance experts and counsel.

Exempt meaning not applicable under the requirements of §1026.19(e), (f) & (g) regarding the use of the Loan Estimate and Closing Disclosure. However, the use of the model forms is allowable if properly completed with accurate content and meets the provisions requiring clear and conspicuous and segregation requirements regarding non-federally related mortgage transactions.

In terms of a HELOC loan or Reverse Mortgage specifically, the use of the Loan Estimate and Closing Disclosure would be problematic since the HELOC disclosure requirements under §1026.40(d) and the Reverse Mortgage requirements under §1026.33(b) would not be supported by the use of these forms.

In terms of all transactions (such as the partial exemption for certain junior liens), there are too many possible scenarios and potential transaction types to provide a complete answer in this document. We would recommend you have policies based on an analysis of each property type, product type, occupancy, lien position, etc., after consultation with legal counsel or your compliance department. In addition, you will need to ascertain the acceptance of the use of any variance in disclosure forms used with your investors if you sell your mortgage loans in the secondary market.

The new disclosures are effective for applications received on or after 10/3/15. If an application is received prior to this date the transaction would be covered by existing law, which requires the Good Faith Estimate, TIL Disclosure statement, and HUD-1 Settlement Statement. The provisions regarding the new Loan Estimate and Closing Disclosure are not applicable for an application received prior to this date, nor can they be used prior to 10/3/15.

Each creditor is responsible for the Loan Estimate(s) and Closing Disclosure(s) compliance associated with its transactions, regardless of the entity which may actually be providing the specific disclosure.

In terms of exemptions from the requirement of each transaction requiring a HUD-1 Settlement Statement (or Closing Disclosure, as applicable) you should:

  • refer to the guidelines provided for each of the housing programs;
  • determine whether the specific product and program falls under the provisions of §1026.19(e), (f) & (g) or is exempt for purposes of file record retention (i.e., the appropriate disclosures);
  • determine on a transactions-specific basis whether a GFE, TIL, and HUD-1 will be used for an exempt transaction or whether the subordinate creditor can and will use the Loan Estimate and Closing Disclosure (or other acceptable compliant disclosure) again for purposes of file record retention;
  • ascertain the acceptability of the decisions above to the loan investor if loans are sold on the secondary market; and,
  • establish policies based on consultation with your compliance expert or attorney.

It depends. If the manufactured home is or will be attached to real property and therefore considered "real property" it would be considered a covered loan under the rule. If the manufactured home is not attached to real property the Good Faith Estimate, Truth in Lending Statement, and the HUD-1 Settlement Statement would continue to be used given the CFPB notes in the preamble to the rule that these disclosures would be more appropriate and more beneficial to the consumer than the integrated disclosures under this property type.

There are many issues you should consider for advance preparation prior to October 3, including (but not limited to): service provider oversight of your LOS provider and appropriate testing of the revised LOS and documents for your purposes, remembering you (as a creditor) are responsible for compliance with the rule and oversight of your business partners; the amount of time you will need to dedicate to training the organization on the new requirements and use of the revised LOS; establishment of policies and procedures for your organization for compliance with the rule, and those policies and procedures you may not presently have (such as a partial payment policy); preparation for the amount of coordination that will be required between you the creditor and settlement agents; revisions to auditing and quality control reviews; etc. You should review the Readiness Guide published by the CFPB (starting on page 15 there is a checklist specific to the integrated disclosure rule).

There is not sufficient information to completely answer this question. However, based on the wording of the question it appears as though the concern stems from determining who is considered the actual creditor on the transaction. The answer, given the question, is more subjective than it may seem. You should refer to the CFPB "Policy Guidance on Supervisory and Enforcement Considerations Relevant to Mortgage Brokers Transitioning to Mini-Correspondent Lenders," which offers guidance on determination of the true creditor based on the "real source of funding" and the "real interest of the funding lender" for specific clarification in this scenario. That being said, if the loan purchase to the correspondent purchaser is considered a secondary market transaction (the correspondent purchaser is not the "creditor") then the correspondent purchaser does not have assignee liability, but would have record retention requirements as well as compliance by the selling entity with its guidelines, and quality control and third-party service provider oversight, to name a few.

Yes. In this case you would refer to the policies established by your organization regarding such changes. Generally speaking, such a change would most likely trigger an adverse action notice on the original application and a re-origination of the owner-occupied transaction as a new application. Commentary under ¶19(e)(1)(iii)-3 states in part, "If the creditor fails to provide early disclosures and the transaction is later consummated on the terms originally applied for, then the creditor does not comply with §1026.19(e)(1)(i). If, however, the consumer amends the application because of the creditor’s unwillingness to approve it on the terms originally applied for, no violation occurs for not providing disclosures based on those original terms. But the amended application is a new application subject to §1026.19(e)(1)(I)."



Definition of Application

Under Regulation Z and therefore for purposes of providing a Loan Estimate, receipt of ALL six pieces of information defined as an application include:

  • Consumer’s Name
  • Consumer’s Monthly Income
  • Consumer’s SSN/ITIN (to obtain a credit report)
  • Property Address (ZIP CODE)
  • Estimated Property Value
  • Estimated Mortgage Loan Amount Sought

The six items listed above define an "Application" under Regulation Z and if those items are received a Loan Estimate must be issued; however, you are not prohibited from issuing a Loan Estimate prior to receipt of all six items. If you decide to issue a Loan Estimate prior to receipt of all six items, you are bound by that Loan Estimate, barring any future changed circumstance, as well as assumed to have had the appropriate six items at the time you provided the Loan Estimate. For instance, if issued without a property address, the identification (addition) of a property address is not a changed circumstance. In addition, you must provide the minimum of a zip code when you provide the Loan Estimate to the consumer.

There are limited reasons where someone might elect to provide a Loan Estimate prior to receipt of all six items, such as: under a preapproval program (see question below regarding preapproval programs); under provisions contained in the Fair Credit Reporting Act regarding permissible purposes an application may have been taken and that would require either disclosure of the Loan Estimate or adverse action; or provisions regarding oral or written applications under Equal Credit Opportunity Act if the creditor has such procedures for the type of credit requested. There are also provisions under both Regulations G & H that define "taking a loan application" under Appendix A.

Although receipt of the six items constitutes an "Application" under Regulation Z, you are not restricted from requesting the additional information necessary to compliantly provide the Loan Estimate. A mailing address would clearly be necessary to place the disclosure in the mail. The six items dictate that the Loan Estimate must be issued as Commentary ¶2(2)(a)(3)-1 states, "This definition does not prevent a creditor from collecting whatever additional information it deems necessary in connection with the request for the extension of credit. However, once a creditor has received these six pieces of information, it has an application for purposes of the requirements of Regulation Z.

Since the Residential Loan Application (1003) is not a regulated form under either RESPA or TILA, but rather a widely-used industry form (remember that an "Application" could occur orally as well) to document a written application due to its required use regarding specific products (such as government loans) and/or investor guidelines (GSE and private investors), we would refer you to the guidelines established by those entities.

However, your internal policies should dictate when your organization has "taken an application" based on a careful analysis of various regulatory definitions of an application under Regulations B, C, G, H, X & Z, FCRA (and don’t forget state law), as applicable. When the appropriate actions occur, based on such a policy, and an "Application" has been taken would be your application date for such purposes. You should refer to your compliance expert or attorney for details on this policy.

Note: The definition of application under Regulation Z (TILA) contains the six items; in contrast, under Regulation X (RESPA) the definition of an application is unchanged by this rule and continues to contain the seven items (including the existing "catch all" provision).

Regulation Z prohibits the collection of any documentation to verify information contained on the application prior to providing the Loan Estimate (effective on October 3, 2015).

However, this is likewise prohibited today. Regulation X contains language that also prohibits the collection of such documentation. This is also restated in HUD’s Frequently Asked Questions regarding use of the current GFE. Here is the language contained in Regulation X today: "The lender may at any time collect from the loan applicant any information that it requires in addition to the required application information. However, the lender is not permitted to require, as a condition for providing a GFE, that an applicant submit supplemental documentation to verify the information provided on the application."

See also the previous question regarding the collection of documents prior to delivering a Loan Estimate.

Other than the required use of the APR in an oral response to a consumer’s inquiry regarding the cost of credit (both closed-end and open-end credit) under §1026.26(a) & (b), or the provisions associated with disclosure of the APR on the Loan Estimate and Closing Disclosure, the rule does not identify how to disclose the APR on a pre-application estimate, if subject to §1026.19(e), (f) & (g). However, even though not applicable to APR disclosure under §1026.19(e), (f) & (g), it would certainly be recommended to consider provisions contained under §1026.37(l)(2) and §1026.38(o)(4) in crafting a policy for disclosure of the APR on a pre-application estimate. Commentary also identifies, “if the creditor provides a document showing the estimated monthly payment for a mortgage loan, and the estimate was based on the estimated loan amount and the consumer’s estimated credit score, then the creditor must include the statement on the document. In contrast, if the creditor provides the consumer with a preprinted list of closing costs common in the consumer’s area, the creditor need not include the statement. Similarly, the statement would not be required on a preprinted list of available rates for different loan products. This requirement does not apply to an advertisement, as defined in 26.2(a)(2).

A written estimate of terms or costs (pre-application estimate) is authorized prior to providing the Loan Estimate. If a pre-application estimate is used there are specific requirements for its use.

Conspicuous Statement: "Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan." This statement must be clear and conspicuous on the top of the front of the first page of the pre-application estimate in a font size that is no smaller than 12-point font, using a black background and white color font.

Note: This statement is not required for providing the consumer with a preprinted list of closing costs common in the area, or a preprinted list of available rates for different loan products. Likewise the statement is not applicable to advertisements as defined under §1026.2(a)(2).

The pre-application estimate is also prohibited from having headings, content, and format substantially similar to model Loan Estimate forms.

This scenario could be problematic for several reasons:

  • The prohibition against verifying any information contained on the application prior to issuing either disclosure (in other words, verifying the value versus sales price);
  • The restriction on imposition/incurring fees upon the consumer prior to receipt of either disclosure and providing their intent to proceed. If the broker pays the fee and the loan request is denied the fee could not be incurred by the consumer since it was imposed prior to receipt of the disclosure and before the consumer provided intent to proceed. If the broker pays the fee in anticipation of collecting it after receipt of the disclosure by the consumer and provided intent to proceed, or at the loan closing, it could be construed as "imposed on" or "incurred by" the consumer prior to receipt of the disclosure and providing the intent to proceed; and,
  • Various other conflict of interest considerations under valuation independence provisions; such as, avoiding any affiliate relationships the broker may have with the appraiser, or perhaps provisions regarding multiple settlement services, etc.

Refer to the response to the previous question.

You may need to analyze your processes and policies regarding the difference between a preapproval and a prequalification (presently and on the effective date of October 3, 2015). Also refer to the questions below regarding obtaining verification documents prior to issuance of a Loan Estimate (and presently the GFE). Providing a preapproval under the definitions indicated below could possibly place yourself in a difficult position to defend that providing a "true" preapproval is not an application for credit to a regulatory agency, particularly if you are collecting documents prior to issuance of the Loan Estimate. You should request clarity from your compliance expert or attorney.

HMDA – a preapproval program under Regulation C is defined as:

"A request for preapproval for a home purchase loan is an application under Regulation C (Application means 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) if the request is reviewed under a program in which the financial institution, after a comprehensive analysis of the creditworthiness of the applicant, issues a written commitment to the applicant valid for a designated period of time to extend a home purchase loan up to a specified amount. The written commitment may not be subject to conditions other than:

  • Conditions that require the identification of a suitable property;
  • Conditions that require that no material change has occurred in the applicant’s financial condition or creditworthiness prior to closing; and
  • Limited conditions that are not related to the financial condition or creditworthiness of the applicant that the lender ordinarily attaches to a traditional home mortgage application (such as certification of a clear termite inspection)."
In addition, the CFPB has defined preapprovals and prequalification in this manner within its Frequently Asked Questions (FAQ):
What does it mean to be preapproved for a mortgage loan (updated 7/11/2013)?

To be preapproved for a mortgage loan means that a lender has evaluated your creditworthiness and has made a commitment to extend you a loan up to a specified amount. The preapproval will say how long it is valid for and may contain some other conditions for you to get the loan. But in general, a preapproval means that the lender is ready to make you a particular mortgage loan based on the information you provided at the time of your preapproval.

What’s the difference between being prequalified and preapproved for a mortgage (updated 5/8/2013)?

Prequalification is a lender’s estimate of how much you could be eligible to borrow based on information you supply. Prequalification does not mean you will get the loan. Prequalifications are usually free.

Note: HUD also provided comments regarding preapprovals in its FAQ’s (dated 4/1/2010, page 11) regarding issuance of the current GFE identified as "a preapproval is a document issued by a lender stating that a consumer qualifies for a specific loan amount. A preapproval is intended to assist a consumer who is shopping for a house by enabling the consumer to enter into a purchase contract that does not contain a financing contingency. A preapproval is never to be used as a substitute for a GFE. If an applicant has chosen a property to purchase and the loan originator is willing to qualify the applicant for a specific loan amount, then a loan originator should issue the applicant a GFE that facilitates shopping for a loan, not just a preapproval used to shop for a property. For example, a lender may never issue only a preapproval to an applicant seeking to refinance his or her loan; the lender must also issue a GFE."

However, the preamble to the rule makes it clear that the CFPB indicates their intention not to prevent preapprovals by the consumer “voluntarily” providing documents to verify provided information, where the six items defined as an application have not been provided. The industry is calling this scenario a “loophole” in the rule. This is a sticky issue when you’re operating with a scenario of “requiring” versus “voluntarily” receiving documents from a consumer for this purpose. It’s recommended you proceed with caution and seek legal counsel or your compliance experts’ input in order to provide this service.

This depends on how your organization defines an application (see previous questions above on this subject). If based on a policy that receipt of the six items under Regulation Z is the basis for when an application has been received, Commentary ¶37(d)(6)-1 identifies requirements for the use of zip codes and lot numbers by stating, "Section 1026.37(a) (6) ("Property") requires disclosure of the address including the zip code of the property that secures or will secure the transaction. A creditor complies with §1026.37(a)(6) by disclosing a complete address for purposes of the U.S. Postal Service. If the address is unavailable, a creditor complies with §1026.37(a)(6) by disclosing the location of such property including a zip code, which is required in all instances. Location of the property under §1026.37(a)(6) includes location information, such as a lot number. The disclosure of multiple zip codes is permitted if the consumer is investigating home purchase opportunities in multiple zip codes."

That depends on how your organization defines an application (see previous question above and the note regarding the Regulation X definition). If based on a policy that receipt of the six items under Regulation Z determines that an application has been received and receipt of the last item occurs on October 4th, 2015, then the Loan Estimate would be appropriate (if the loan is for closed-end credit secured by real property).

If you are taking the application from the consumer via internet, then you would want to capture as much information necessary for you to compliantly provide a Loan Estimate, as well as other disclosures required at the time of providing a loan application form (e.g., ARM disclosures), as well as any state-required disclosures at the time of loan application as opposed to those that can be provided within three general business days. Refer also to questions below regarding preapprovals.

After consultation with your compliance expert or attorney it may be prudent to consider providing the ability for a consumer to choose between a prequalification and an actual application for credit via the website. This way a limit can be placed on the information requested and obtained to only that necessary for a prequalification, or providing a pre-application estimate, and not trigger an application. Refer also to questions below regarding a prequalification and the definition of an application.



Loan Estimate – Miscellaneous Questions

Yes, both disclosures can be provided in electronic form subject to compliance with E-Sign provisions; however, there is no regulatory requirement that either the Loan Estimate or the Closing Disclosure must actually contain a signature (optional), but a signature may be required by a specific program or investor. You should seek policy guidance for compliance with your compliance expert or attorney.

It’s not recommended for a creditor to accept a Loan Estimate disclosing a different creditor since the creditor is ultimately responsible for the accuracy of the Loan Estimate if issued by a mortgage broker. If the creditor is unknown at the time a mortgage broker may provide the Loan Estimate then Regulation Z provides that the creditor’s name should be left blank.

In a standard wholesale transaction in which the wholesale lender is the creditor, there is no substantive difference between the issuance of the Good Faith Estimate (GFE) and Truth in Lending Statement (TIL) versus the Loan Estimate in terms of timing of issuance and receipt by the consumer, or the obligation regarding accuracy on the part of the creditor for compliance of the disclosure (except a difference in language presently regarding whether the GFE if issued is binding, if accepted by the creditor). In accordance with the question, creditor name is required on the existing GFE and TIL; however, required disclosure of the loan number and its associated requirements is an addition under the new rule.

There are two assumptions made regarding this question: 1) the intent of the question regarding "multiple Loan Estimates" was assumed to mean an initial Loan Estimate and subsequent revised Loan Estimates issued (rather than multiple Loan Estimates issued at the time of initial disclosure); and, 2) "which one is chosen" was assumed to mean the consumer provided intent to proceed. That being the case, there is no mandate to document intent to proceed regarding subsequent revised Loan Estimates, but yes, you should always document the intent to proceed based on the Loan Estimate initially issued, in retainable form and in a manner that can be reproduced for examination, auditing and record retention purposes.

There is also no prohibition on obtaining subsequent intent to proceed by the consumer, but there is no requirement to do so. In such a case though, you should not erase or remove the original intent to proceed since proceeding with the loan request, requesting documentation from the consumer, and the imposition of fees is contingent upon the intent to proceed initially provided.

It would depend on whether the counter-offer was initiated by a subsequent request by the borrower or other valid change of circumstance affecting eligibility, or whether you as the creditor are unwilling to approve the loan on the terms originally applied for.

<You should follow established policies within your organization regarding how to treat the original loan request under adverse action requirements, but it would be prudent to provide adverse action and originate a new application for the brokered product if the counter-offer is based on the creditor’s unwillingness to approve the loan on the original terms requested. Commentary ¶19(e)(1)(iii)-3 provides the following "If the creditor fails to provide early disclosures and the transaction is later consummated on the terms originally applied for, then the creditor does not comply with §1026.19(e)(1)(i). If, however, the consumer amends the application because of the creditor’s unwillingness to approve it on the terms originally applied for, no violation occurs for not providing disclosures based on those original terms. But the amended application is a new application subject to §1026.19(e)(1)(i)."

It depends on whether your policies are to collect these fees on the bridge loan financing or on the permanent financing.

Commentary ¶37-1 states, “The disclosures required by §1026.37 are required to reflect the terms of the legal obligation between the parties, and if any information necessary for an accurate disclosure is unknown to the creditor, the creditor shall make the disclosure in good faith, based on the best information reasonably available to the creditor pursuant to §§1026.17(c) and 1026.19(e). See comments 17(c)(1)– 1, 17(c)(2)(i)–1 and –2, and 19(e)(1)(i)– 1. Where a disclosure is not applicable to a particular transaction, unless otherwise provided by §1026.37, form H–24 of appendix H to this part may not be modified to delete the disclosure from form H–24, or to state ‘‘not applicable’’ or ‘‘N/A’’ in place of such disclosure. The portion of the form pertaining to the inapplicable disclosure may be left blank, unless otherwise provided by §1026.37. For example, in a transaction for which the consumer does not pay points to the creditor to reduce the interest rate, the amounts required to be disclosed by §1026.37(f)(1)(i) may be left blank on form H–24. As provided in §1026.37(i) and (j), however, the adjustable payment and adjustable interest rate tables required by those paragraphs may be included only if those disclosures are applicable to the transaction and otherwise must be excluded.”

There are a few issues to consider here: 1) E-Sign responsibilities under 15 USC 7001(c) consumer consent specifically applies to disclosures provided via electronic format and does not indicate an alternative disclosure method for subsequent disclosures provided via other means after consent has been received (other than the consumer rescinding the consent to receive disclosures electronically in which paper or other non-electric versions must be provided, or changes to your hardware or software prohibits access to retain the disclosure in which case the consumer would receive information on the updated hardware or software requirements); 2) concerns regarding privacy under Regulation P relative to protection of the consumer’s non-public personal information; and 3) state laws relative to privacy and security breaches.

Therefore, it would not be recommended to email disclosures to a consumer, nor receive disclosures back from the consumer, unless via an E-SIGN compliant solution, and/or particularly if the disclosures in question contain non-public personal information.



Loan Estimate – Timing and Consumer Receipt

As the creditor (lender) you will need to ascertain any applicable information and/or documentation, as applicable, from your business partners since you are ultimately responsible for the compliance of the disclosures issued. See also the question above regarding who must receive the Loan Estimate.

There could be. In terms of the Loan Estimate no, as long as the adverse action notice has been provided to the consumer. However, there are disclosures specific to timing related to the presentation of an application form (Example: ARM disclosures – unless a nonrefundable fee has been collected first in which it would have to be given at that time; Affiliated Business Arrangement Disclosure, if applicable; etc.), and various other state required disclosures that must be provided prior to or at the time of completion of the application rather than within the three business day time period. You should consult with your compliance expert or attorney regarding the specific programs, products and states to ascertain the appropriate disclosures for your organization.

The new forms are driven via an Application date, so if a creditor provides a Good Faith Estimate (application received prior to 10/3/2015) then closing documents would be HUD-1 and Final TIL. If the Application is received 10/3/2015 or after then a Loan Estimate and Closing Disclosure would be provided for most closed-end loans secured by real property.

It depends on whether you are talking about the Loan Estimate or the Closing Disclosure.

Loan Estimate: If there is more than one consumer then the Loan Estimate may be provided to any consumer who is primarily liable on the obligation. If one consumer is merely a surety or guarantor then the Loan Estimate must be given to the principal debtor.

Closing Disclosure: In contrast to disclosure of the Loan Estimate the Closing Disclosure must be provided to each consumer who has the right to rescind in rescindable transactions.

Yes, the creditor (or mortgage broker – see above) must deliver or place in the mail the Loan Estimate no later than the seventh [specific] business day before consummation of the transaction.

Example:

  • Deliver or Mail on Monday, June 1
  • Consummation may occur on or after Tuesday, June 9
  • Assume Saturday is business day for this example

If there is more than one consumer the Loan Estimate may be provided to any consumer who is primarily liable on the obligation. If one consumer is merely a surety or guarantor then the Loan Estimate must be given to the principal debtor.

In contrast to current disclosure requirements regarding the TIL Disclosure Statement (which continues to apply to those non-applicable transactions in which the TIL is still used), and in contrast to disclosure of the Loan Estimate, the Closing Disclosure must be provided to each consumer who has the right to rescind in rescindable transactions.

Regulation Z provides that if any disclosures required are not provided to the consumer in person then the consumer is considered to have received the disclosures three specific 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 then the creditor could demonstrate that the disclosures were received on Tuesday.

Yes, if a creditor delivers the Loan Estimate to a consumer via email, but the creditor did not obtain the consumer’s consent to receive disclosures via email prior to delivering the disclosures, then the creditor does not comply with both the required form (§1026.37(o)(3)(iii)) and timing requirements (§1026.19(e)(1)(iii)), assuming the disclosures were not provided in a different manner.

Yes, see the previous question above regarding the use of electronic delivery.

Yes, see the previous question above regarding the use of electronic delivery.

Yes, in terms of the 3-day mailbox rule. The creditor may rely on evidence that the consumer received the emailed disclosures earlier. For example, if the creditor emails the disclosures at 1 p.m. on Tuesday and the consumer emails the creditor with an acknowledgement of receipt of the disclosures at 5 p.m. on the same date then the creditor could demonstrate that the disclosures were received on the same day. Creditors using electronic delivery methods, such as email, must also comply with §1026.37(o)(3)(iii), which provides that the Loan Estimate may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. For example, if a creditor delivers the Loan Estimate to a consumer via email, but the creditor did not obtain the consumer’s consent to receive disclosures via email prior to delivering the disclosures, then the creditor does not comply, assuming the disclosures were not provided in a different manner in accordance with appropriate timing requirements.

If not provided in person, receipt is assumed 3 [specific] business days after providing the disclosure by:

  • Mail delivery
  • Overnight Mail (FedEx, UPS)
  • Electronic delivery
  • Facsimile

The date the mortgage broker receives the application. There is only one application date per transaction.

Yes.

Example 1: If creditor sends the Loan Estimate via overnight mail on Monday and consumer signs for receipt on Tuesday, the creditor can demonstrate the Loan Estimate was received on Tuesday.

Example 2: If creditor emails the Loan Estimate at 1 pm on Tuesday and the consumer emails creditor an acknowledgement of receipt at 5 pm on the same day, the creditor can then demonstrate that the Loan Estimate was received on the same day. Creditors using electronic delivery methods must also comply with 1026.37(o)(3)(iii), which provides that the Loan Estimate may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. For example, if the creditor delivers the Loan Estimate to a consumer via email but did not obtain the consumer’s consent to receive disclosures via email prior to delivering the Loan Estimate, then the creditor does not comply with 1026.37(o)(3)(iii), and the creditor does not comply with 1026.19(e)(1)(i), assuming the Loan Estimate was not provided in a different manner in accordance with the timing requirements of 1026.19(e)(1)(iii).

No, not in terms of time of providing the Loan Estimate. However, see questions below regarding "receipt" of the disclosure by the consumer. In terms of providing the Loan Estimate, the creditor shall deliver or place in the mail the Loan Estimate not later than the 3rd general business day after the creditor (or mortgage broker) receives the consumer’s application.

If a mortgage broker receives a consumer’s application either the creditor or the mortgage broker may provide a consumer with the Loan Estimate. If the mortgage broker provides the Loan Estimate, the mortgage broker shall comply with all relevant requirements. The creditor shall ensure that the Loan Estimate is provided in accordance with all requirements. A Loan Estimate provided by a mortgage broker in accordance with the requirements satisfies the creditor’s obligation. If a mortgage broker provides a Loan Estimate, the mortgage broker shall also comply with the recordkeeping/ retention requirements under §1026.25(c).

You should refer to the specific state laws and regulations in this case, as well as your compliance expert or attorney. However, for purposes of federal compliance it would not be considered a general business day unless your offices are open to the public for carrying on substantially all of your business functions.

It depends on whether you are talking about a general or specific business day.

If general, for timing of initial issuance of the Loan Estimate, it would depend on whether your company is open for a substantially all of your business functions.

If specific business day such as for waiting periods after issuance of the Loan Estimate or Closing Disclosure, counting dates regarding "receipt" by the consumer, or for purposes of rescission the observed date of the holiday would apply. In this case, if measuring receipt, then Friday (July 3rd) would be treated as a business day for purposes of the specific business day definition, and Saturday, July 4 would be treated as the holiday.

General Business Day (for purposes of the question "creditor’s business day"):
A day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions.

Business Functions – availability of personnel to:

  • make loan disbursements
  • open new accounts
  • handle credit transaction inquiries
A creditor is not open for substantially all of its business functions due to:
  • merely accepting credit cards for purchases
  • customer-service window open only for limited purposes
    • deposits and withdrawals
    • bill paying
    • related services
Federal (Specific) Business Day:
All calendar days except Sundays and the legal public holidays specified in 5 U.S.C. § 6103(a), such as New Year’s Day, the Birthday of Martin Luther King, Jr., Washington’s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.



Four Holidays Identified by a Specific Date:

January 1 New Year’s Day
July 4 Independence Day
November 11 Veteran’s Day
December 25 Christmas Day

Effective on October 3, 2015, no later than three business days after the date the interest rate is locked, the creditor shall provide a revised version of the Loan Estimate to the consumer with the revised interest rate, the points disclosed, lender credits, and any other interest rate dependent charges and terms.

The creditor shall deliver or place in the mail the Loan Estimate no later than the third [general] business day after receipt of the consumer’s application. If a mortgage broker receives a consumer’s application, either the creditor or the mortgage broker shall provide a consumer with the Loan Estimate.

Example:

  • Application received Monday, June 1
  • Deliver or Mail on or before Thursday, June 4

Saturday would be considered a general business day if your offices are open to the public for carrying on substantially all of your business functions. You should consult your compliance experts or attorney to determine your business days for purposes for these requirements.

No. There is no cure for timing of disclosure issuance, once you have the 6 items defined as an application the clock starts regarding the three (general) business days regarding providing the Loan Estimate without violating provisions under §1026.19(e)(1)(iii)(A). You could also have issues with selling the loan in the secondary market with a mortgage in violation of disclosure delivery timing.

The creditor shall deliver or place in the mail the Loan Estimate no later than the third [general] business day after receipt of the consumer’s application. If a mortgage broker receives a consumer’s application, either the creditor or the mortgage broker shall provide a consumer with the Loan Estimate.

Example:

  • Application received Monday, June 1
  • Deliver or Mail on or before Thursday, June 4


Loan Estimate – Details of Disclosure Completion

By using a composite rate.

If there is no mortgage broker involved in the transaction, the column for the Mortgage Broker is left blank; but the column remains on the Closing Disclosure Contact Information table. In the event there is more than one of each person required for a column (e.g., two sellers' real estate brokers splitting a commission), then the space in the contact information table may be altered to accommodate the information for such persons. If the space does not accommodate the addition of such information, an additional table may be provided on a separate page, with an appropriate reference to the additional table. However, before an additional table on an additional page is created, the system may omit a column on the table that is inapplicable or, if necessary, replace an inapplicable column with the contact information for the additional person.

There are no provisions requiring use or disclosure of the TIP beyond disclosure on the Loan Estimate and Closing Disclosure.

Section §1026.28 provides information regarding inconsistent disclosure requirements where there is a conflict between federal and state laws. This section additionally allows for a state to request a determination by the CFPB regarding the inconsistencies. You will need to ascertain from each state where this conflict exists and how the state is anticipating compliance with those state laws inconsistent with federal regulation.

There is no tolerance specified regarding the TIP.

If the cost of the builder’s risk insurance is being paid by the consumer and the costs are known prior to consummation for the construction loan, or can be estimated at the time of consummation, then in good faith they would be disclosed.

Signature lines are optional and their use is determined solely by the creditor.

The TIP is based upon the note amount.

When calculating the total interest percentage, the creditor assumes that the consumer will make each payment in full and on time, and will not make any additional payments. The figures provided by the amortization schedule are for determining the amount of interest using the assumptions in the first sentence.

For Adjustable Rate products under §1026.37(a)(10)(i)(A), §1026.37(l)(3) requires that the creditor compute the total interest percentage in accordance with comment 17(c)(1)-10 (using a composite rate calculation). For Step Rate products under §1026.37(a)(10)(i)(B), §1026.37(l)(3) requires that the creditor compute the total interest percentage in accordance with §1026.17(c)(1) and its associated commentary.

TIP = total amount of interest (including prepaid interest). Discount points are prepaid finance charges but they are not "interest" for purposes of the TIP.

Not necessarily. The Adjustable Payment Table is disclosed when the periodic principal and interest payment may change after consummation. If the loan does not contain these features, the AP Table is not disclosed.

The Total Interest Percentage (TIP) = The total amount of interest that is paid over the loan term as a percentage of the loan amount. 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%.

The state abbreviation for the associated license number.

If the interest rate may increase after consummation, a separate table under the master heading "Closing Cost Details" and under the heading "Adjustable Interest Rate (AIR) Table" that contains the following information is required:

  1. Index and margin. If the interest rate may adjust and the product type is not a "Step Rate" under paragraph (a)(10)(i)(B) of this section, the index upon which the adjustments to the interest rate are based and the margin that is added to the index to determine the interest rate, if any, labeled "Index + Margin."
  2. Increases in interest rate. If the product type is a "Step Rate" and not also an "Adjustable Rate" under paragraph (a)(10)(i)(A) of this section, the maximum amount of any adjustments to the interest rate that are scheduled and pre-determined, labeled "Interest Rate Adjustments."
  3. Initial interest rate. The interest rate at consummation of the loan transaction, labeled "Initial Interest Rate."
  4. Minimum and maximum interest rate. The minimum and maximum interest rates for the loan, after any introductory period expires, labeled "Minimum/Maximum Interest Rate."
  5. Frequency of adjustments. The following information, under the subheading "Change Frequency":
    1. The month when the interest rate after consummation may first change, calculated from the date interest for the first scheduled periodic payment begins to accrue, labeled "First Change"; and
    2. The frequency of interest rate adjustments after the initial adjustment to the interest rate, labeled, "Subsequent Changes."
  6. Limits on interest rate changes. The following information, under the subheading "Limits on Interest Rate Changes":
    1. The maximum possible change for the first adjustment of the interest rate after consummation, labeled "First Change"; and
    2. The maximum possible change for subsequent adjustments of the interest rate after consummation, labeled "Subsequent Changes."
The TIP is a percentage of the amount of credit extended which would correspond to the Note Amount. Amount Financed is a defined term in Regulation Z, and has its own calculation and meaning.

Yes, although the NMLSR ID should be entered for the appropriate party if one has been assigned.

In the event the creditor or the mortgage broker has not been assigned an NMLSR ID, the license number or other unique identifier issued by the applicable jurisdiction or regulating body with which the creditor or mortgage broker is licensed and/or registered shall be disclosed.

The name and NMLSR ID of the individual loan officer (labeled "Loan Officer" and "NMLS ID/License ID," respectively) of the creditor and the mortgage broker, if any, who is the primary contact for the consumer are required. In the event the individual loan officer has not been assigned an NMLSR ID, the license number or other unique identifier issued by the applicable jurisdiction or regulating body with which the loan officer is licensed and/or registered shall be disclosed.

Yes. There also would be an associated lender credit (non-specific) disclosed under the total closing costs.

You will need to look at the amortization schedule. Add up all of the "interest payments" for the life of loan, then add the amount of per diem interest, and finally divide that amount by the note amount.

Under "Other Costs, H. Other". Any other amounts the consumer is likely to pay or has contracted with a person other than the creditor or loan originator to pay at closing and of which the creditor is aware at the time of issuing the Loan Estimate, a descriptive label of each such amount, and the subtotal of all such amounts should be entered, including:

  • Title Insurance Fees are labeled as "Title – "
  • Items disclosing any premiums paid for separate insurance, warranty, guarantee, or event-coverage products labeled as (optional). For example:
    • Title - Owner’s Title Policy (optional)
    • Home Warranty Fee (if paid by borrower)
    • Real Estate Commission (if paid by borrower)

Yes. It would appear either as a Lender Credit under the total closing costs or as a Seller Credit under the "Calculating Cash to Close" section.

Under "Other Costs, H. Other". Any other amounts the consumer is likely to pay or has contracted with a person other than the creditor or loan originator to pay at closing and of which the creditor is aware at the time of issuing the Loan Estimate, a descriptive label of each such amount, and the subtotal of all such amounts should be entered, including:

  • Title Insurance Fees are labeled as "Title – "
  • Items disclosing any premiums paid for separate insurance, warranty, guarantee, or event-coverage products labeled as (optional). For example:
    • Title - Owner’s Title Policy (optional)
    • Home Warranty Fee (if paid by borrower)
    • Real Estate Commission (if paid by borrower)
The Loan Estimate applies to all estimated closing costs disclosed in good faith whether the charge was paid by or imposed on the consumer.

In Section J. Total Closing Costs represent the sum of non-specific lender credits and specific lender credits. Non-specific lender credits are generalized payments from the creditor to the consumer that do not pay for a particular fee. Specific lender credits are specific payments, such as a credit, rebate, or reimbursement, from a creditor to the consumer to pay for a specific fee. Non-specific lender credits and specific lender credits are negative charges to the consumer. See also 1026.19(e)(3)(iv)(D) and comment 19(e)(3)(iv)(D)-1 for a discussion of lender credits in the context of interest rate dependent charges. Lender credits = sum of non-specific lender credits and specific lender credits disclosed as a negative number.

To the extent known by lender, disclose as Seller Credits under Calculating Cash to Close.

Disclosures may be estimated when the exact information is unknown at the time disclosures are made. Information is unknown if it is not reasonably available to the creditor at the time the disclosures are made. The "reasonably available" standard requires that the creditor, acting in good faith, exercises due diligence in obtaining information.

Yes, in "Other Costs, H. Other". Any other amounts the consumer is likely to pay or has contracted with a person other than the creditor or loan originator to pay at closing and of which the creditor is aware at the time of issuing the Loan Estimate, a descriptive label of each such amount, and the subtotal of all such amounts should be entered, including:

  • Title Insurance Fees are labeled as "Title – "
  • Items disclosing any premiums paid for separate insurance, warranty, guarantee, or event-coverage products labeled as (optional). For example:
    • Title - Owner’s Title Policy (optional)
    • Home Warranty Fee (if paid by borrower)
    • Real Estate Commission (if paid by borrower)

It still needs to be disclosed. It would appear as a Seller Credit under the "Calculating Cash to Close" section.

To the extent known by lender, disclose as Seller Credits under Calculating Cash to Close. Seller Credits are the total amount the seller will pay for total loan costs as determined by §1026.37(f)(4) and total other costs as determined by §1026.37(g)(5), to the extent known, and disclosed as a negative number. Seller Credits can be defined as:

  • Seller Credits = sum of non-specific seller credits and specific seller credits, to the extent known, disclosed as a negative number.

You will either need to ascertain the fees charged by each of these title companies, you have the option of using "average charges", or the use of estimates in "good faith".

Depending on the transaction, for purposes of the Calculating Cash to Close Section, Adjustments and Other Credits line, Commentary ¶37(h)(1)(vii)-6 states: "Adjustments that require additional funds from the consumer pursuant to the real estate purchase and sale contract,… or adjustments that will be disclosed on the Closing Disclosure… [may] be included [on this line]… because the amount disclosed is a sum of adjustments and other credits, [and] such amount would reduce the total amount disclosed. Additional examples of such adjustments for additional funds from the consumer include prorations for property taxes and homeowner’s association dues."

The document preparation fee would still be considered an origination charge and be located on the Loan Estimate under the "Closing Cost Details – Origination charges" section. Under the subheading "Origination Charges," an itemization of each amount and a subtotal of all such amounts that the consumer will pay to each creditor and loan originator for originating and extending the credit should be entered.

Commentary to this section provides that "Items that are listed under the subheading "Origination Charges" may include, for example, application fee, origination fee, underwriting fee, processing fee, verification fee, and rate-lock fee."

This scenario only applies in those states which have allowances for reduced lender policy premiums when a simultaneous owner’s policy is also issued. The CFPB and Title Insurance providers associations are aware of this conflict and the title association (ALTA) has prepared documentation for use by title insurers for this purpose. It would be recommended you work with your legal counsel or compliance experts to determine if and how you may want to identify this issue to the consumer.

Under the subheading "Taxes and Other Government Fees," on the first line, the sum of all recording fees and other government fees and taxes (except for transfer taxes paid by the consumer and disclosed) are to be entered. If an amount required to be disclosed by this paragraph (g)(1) is not charged to the consumer, the amount disclosed on the applicable line required by this paragraph (g)(1) must be blank.
Commentary ¶37(g)(1) Taxes and other government fees, states:

"Recording fees listed under §1026.37(g)(1) are fees assessed by a government authority to record and index the loan and title documents as required under State or local law. Recording fees are assessed based on the type of document to be recorded or its physical characteristics, such as the number of pages. Unlike transfer taxes, recording fees are not based on the sale price of the property or loan amount. For example, a fee for recording a subordination agreement that is $20, plus $3 for each page over three pages, is a recording fee, but a fee of $1,250 based on 0.5 percent of the loan amount is a transfer tax, and not a recording fee.

No additional items may be listed under the subheading in §1026.37(g)(1)."

Creditors determine the level of itemization of "Origination Charges" that is appropriate. The creditor may use a general label that uses terminology that clearly and conspicuously describes the service that is disclosed as an origination charge pursuant to §1026.37(f)(1). Items that are listed under the subheading ‘‘Origination Charges’’ may include, for example, application fee, origination fee, underwriting fee, processing fee, verification fee, and rate-lock fee.

It depends on the type of payment: Specific fees can be found under the following scenarios:

Services Did Not Shop For -

  • Fee charged at consummation and is not a prepayment of future premiums over a specific future time period or a payment into an escrow account. Government funding fees include VA Funding Fee, USDA guarantee fee, or any other fee paid to a government entity as part of a governmental loan program, that is paid at consummation.
Services Did Shop For -
  • Could apply if creditor allowed consumer to shop for PMI; provided fee is charged at consummation; is not a prepayment of future premiums over a specific future time period; is not a payment into an escrow account.
Prepaids -
  • Fee is prepayment of future premiums over a specific future time period. "Mortgage insurance or any functional equivalent" means amounts identified in 1026.4(b)(5).
Initial Escrow Payment at Closing -
  • Fee is a payment into an escrow account.

Origination charges other than "points" are disclosed using the dollar amount. For purposes of the Loan Estimate and Closing Disclosure, "points" are charged in connection with the transaction to reduce the interest rate and disclosed as a percentage and a dollar amount.

What will be required is a statement that the consumer will not have an escrow account, the reason why an escrow account will not be established, a statement that the consumer must pay all property costs, such as taxes and homeowner’s insurance, directly, a statement that the consumer may contact the creditor to inquire about the availability of an escrow account, and a table, titled "No Escrow," that contains, if an escrow account will not be established, an itemization of the following:

The estimated total amount the consumer will pay directly for charges described in §1026.37(c)(4)(ii) during the first year after consummation that are known to the creditor and a statement that, without an escrow account, the consumer must pay the identified costs, possibly in one or two large payments, labeled "Property Costs over Year 1."

It depends on type of payment. Specific fees should be placed under the following categories:

  • B. Services Cannot Shop For
    • The following are examples of fees in this section: homeowner’s association certification fee...
  • H. Other
    • Examples of other items disclosed in this section if the creditor is aware of those items when it issues the Loan Estimate: homeowner’s association and condominium charges associated with the transfer of ownership.
  • Calculating Cash to Close Section, Adjustments and Other Credits
    • "Adjustments that require additional funds from the consumer pursuant to the real estate purchase and sale contract,… or adjustments that will be disclosed on the Closing Disclosure… [may] be included [on this line]… because the amount disclosed is a sum of adjustments and other credits, such amount would reduce the total amount disclosed. Additional examples of such adjustments for additional funds from the consumer include prorations for property taxes and homeowner’s association dues."

In disclosing the "Closing Cost Details" all loan costs associated with the transaction are to be labeled using terminology that describes each item, subject to the requirements of paragraphs §1026.37(f)(1)(i), §1026.37(f)(2)(i), and §1026.37(f)(3)(i). The item prescribed in paragraph (f)(1)(i) of this section for points must be the first item listed in the disclosure pursuant to paragraph (f)(1) of this section. All other items must be listed in alphabetical order by their labels under the applicable subheading.

Yes. Wherever "monthly" is used to describe the frequency of any payments or uses "month" to describe the applicable unit-period the creditor can substitute the appropriate term to reflect the fact that the transactions terms provide for other than monthly periodic payments, such as bi-weekly or quarterly payments.

The Loan Estimate contains good faith estimates of the fees and charges that will be paid by or imposed on the consumer. A charge ‘‘paid by or imposed on the consumer’’ refers to the final amount for the charge paid by or imposed on the consumer at consummation or settlement, whichever is later.

An addendum to the Loan Estimate may not be used for items described under "Origination Charges" or "Services you cannot shop for". If the creditor is not able to itemize every service and every corresponding charge required in two sections, the remaining charges must be disclosed as an aggregate amount in the last line permitted under each section, as applicable, labeled "Additional Charges."

An addendum to the Loan Estimate may be used for items described in the "Services you can shop for". If the creditor is not able to itemize all of the charges required to be disclosed in the number of lines provided, the remaining charges must be disclosed as follows:

(A) Label the last line permitted with an appropriate reference to an addendum (e.g., See attached page for additional items you can shop for) and list the remaining items on the addendum in accordance with the requirements in paragraphs (f)(3) and (5) of 1026.37; or

(B) Disclose the remaining charges as an aggregate amount in the last line permitted under paragraph (f)(3)(ii), labeled "Additional Charges."

The loan estimate requires the creditor to disclose the initial periodic payment or range of payments. The disclosure required is of the actual periodic payment or range of payments that corresponds to the interest rate that will apply at consummation. Commentary ¶37(c)(1)(i)(C)-1, states:

"Mortgage insurance or any functional equivalent" includes any mortgage guarantee that provides coverage similar to mortgage insurance (such as a United States Department of Veterans Affairs or United States Department of Agriculture guarantee), even if not technically considered insurance under State or other applicable law. The fees for such a guarantee are included in "mortgage insurance premiums."

Commentary ¶37(c)(1)(i)(C)-2, states:

"The table required by §1026.37(c) should reflect the consumer's mortgage insurance premiums until the date on which the creditor must automatically terminate coverage under applicable law, even though the consumer may have a right to request that the insurance be cancelled earlier. Unlike termination of mortgage insurance, a subsequent decline in the consumer's mortgage insurance premiums is not, by itself, an event that requires the disclosure of additional separate periodic payments or ranges of payments in the table required by §1026.37(c). For example, some mortgage insurance programs annually adjust premiums based on the declining loan balance. Such annual adjustment to the amount of premiums would not require a separate disclosure of a periodic payment or range payments.



Where "mortgage insurance or any functional equivalent" decreases, the projected payments table requires the disclosure of the maximum amount payable for mortgage insurance premiums corresponding to the principal and interest payment for the column under which it is disclosed pursuant to 1026.37(c)(2)(i)."

The disclosures are required to reflect the terms of the legal obligation between the parties, and if any information necessary for an accurate disclosure is unknown to the creditor the creditor shall make the disclosure in good faith based on the best information reasonably available to the creditor. Information is unknown if it is not reasonably available to the creditor at the time the disclosures are made. The "reasonably available" standard requires that the creditor, acting in good faith, exercise due diligence in obtaining information. For example, the creditor must at a minimum utilize generally accepted calculation tools, but need not invest in the most sophisticated computer program to make a particular type of calculation. The creditor normally may rely on the representations of other parties in obtaining information. For example, the creditor might look to the consumer for the time of consummation, to insurance companies for the cost of insurance, or to realtors for taxes and escrow fees. The creditor may utilize estimates in making disclosures even though the creditor knows that more precise information will be available by the point of consummation.

The use of the Loan Estimate satisfies the requirement that the disclosure state clearly that the disclosure is an estimate.

It would be disclosed out to two decimals as 3.50%.

Unrounded number. It may be disclosed out to 2 or 3 decimals. If it is a whole number truncate at decimal point.

Examples: 3.5%, 3.000%, 3.00% Not Allowed
3.50%, 3.501%, 3% Allowed



Yes. It would be reflected in the Projected Payments Table Estimated Escrow row, if applicable. It also would be reflected in the Estimated Taxes, Insurance & Assessments section. Section §1026.37(c)(4)(ii) defines what insurance is to be included, which are charges listed under section §1026.43(b)(8). This includes "premiums or other charges for insurance against loss of or damage to property, or against liability arising out of the ownership or use of property, written in connection with a credit transaction".

It depends on the section of the Loan Estimate. Certain sections, like the numeric fields for the Projected Payments Table, require "0" in some circumstances and "-" in others. In the Calculating Cash to Close section, "$0" for no value appears to be appropriate. However, in the Loan Costs and Other Costs sections, it appears if a hardcoded named fee is zero; it would be left blank, and not contain a "$0" or "0". See Model H-24(B). See also Commentary ¶37-1. Where a disclosure is not applicable to a particular transaction, unless otherwise provided by §1026.37, form H-24 of appendix H to this part may not be modified to delete the disclosure from form H-24, or to state "not applicable" or "N/A" in place of such disclosure. The portion of the form pertaining to the inapplicable disclosure may be left blank, unless otherwise provided by §1026.37. For example, in a transaction for which the consumer does not pay points to the creditor to reduce the interest rate, the amounts required to be disclosed by §1026.37(f)(1)(i) may be left blank on form H-24. As provided in §1026.37(i) and (j), however, the adjustable payment and adjustable interest rate tables required by those paragraphs may be included only if those disclosures are applicable to the transaction and otherwise must be excluded.

If a dollar amount that is required to be rounded has component unrounded numbers, the unrounded numbers are added up and then the resulting amount is rounded. If an amount that is required to be rounded on the Loan Estimate is a total of one or more components that are also required to be rounded, the total amount must be calculated using such rounded amounts.

For example: The subtotals disclosed under §1026.37(f)(1), (2), and (3) are calculated using the rounded amounts. However, the amounts required to be disclosed by §1026.37(l) reference actual amounts for their components, rather than other amounts disclosed under §1026.37 and rounded pursuant to §1026.37(o)(4)(i), so they are calculated using unrounded numbers.

When rounding is required the number is rounded to the nearest dollar, whether it’s up or down.

The disclosure requires the applicable time zone for all times provided, as determined by the creditor.

The Loan Estimate is a creditor required disclosure; if a mortgage broker issues the Loan Estimate the creditor still maintains responsibility for ensuring that the requirements of §1026.19(e) have been met. It is recommended you communicate with the list of creditors that you do business with to determine what time zones would be accepted by the creditors in good faith. In this scenario the creditor to which the loan request is submitted would make decisions on whether or not the time zone on the Loan Estimate is acceptable in satisfying the requirements of §1026.37(a)(13).

There is no allowance for placing a notice on the Loan Estimate regarding the distinction that the rate lock expiration date for a refinance is tied to the funding date (disbursement date) rather than the closing date. If you want to make that distinction to the consumer, a recommendation could be that you either identify this fact in any rate lock agreement with the consumer or include a separate notice when the revised Loan Estimate is delivered stating this fact.

The creditor should use the time zone appropriate to the actual time zone at the time. For instance, in the example provided under the commentary to the rule states, "if the creditor is located in New York and determines that the Loan Estimate will expire at 5:00 p.m. in the time zone applicable to its location, while standard time is in effect, the disclosure must include a reference to the Eastern time zone (i.e., 5:00 p.m. EST)."

The rule uses standard rounding (less than 5 is down, 5 and more is up).

The disclosure requires the applicable time zone for all times provided, as determined by the creditor. The time zone itself would not change as result of daylight savings time being in effect.

The additional language regarding "Before closing, your interest rate, points, and lender credits can change unless you lock the interest rate", is promulgated language contained in the model forms. There are no provisions allowing this statement to be removed in the case where the interest rate is locked when the Loan Estimate is delivered to the consumer.

In the case of a closed-end transaction where the purpose is a Home Equity Loan (meaning not a purchase money, refinance or construction loan), you would disclose the interest rate lock as "no" for purposes of the Loan Estimate and provide the expiration date with regard to estimated closing costs. There is no requirement to identify whether the interest rate is locked on the Closing Disclosure.

Construction, unless the transaction also is associated with the purchase of the property.

A Loan ID Number determined by the creditor should be entered. Because it must allow for the identification of the particular credit transaction, a creditor must use a unique loan identification number, i.e., the creditor may not use the same loan identification number for different, but related, loan transactions (such as different loans to the same borrower). Where a creditor issues a revised Loan Estimate, the loan identification number must be sufficient to enable identification of the transaction.

The disclosure requires the applicable time zone for all times provided, as determined by the creditor.

For example: A creditor is located in New York and determines that the Loan Estimate will expire at 5:00 PM in the time zone applicable to its location while standard time is in effect would result in "5:00 p.m. EST".

The Loan Term should be stated in years or months, or both, as applicable.

For example:

Term >= 24 months and not equal to a whole number of years: 185 months = 15 yr. 5 mo.

Term < 24 months and does not equal to a whole number of years:
6 months = 6 mo.
16 months = 16 mo.
12 months = 1 year

Assuming the Creditor's Loan ID# is not reasonably available to the mortgage broker it may be left blank. CFPB staff has said this is consistent with official commentary, which states the creditor's name can be left blank if unknown.

At the time of delivery of the Loan Estimate, "If the creditor has obtained any appraisals or valuations of the property for the application at the time the disclosure is issued to the consumer, the value determined by the appraisal or valuation to be used during underwriting for the application is disclosed as the estimated property value."

At the time of delivery of the Closing Disclosure, "Where an estimate is disclosed, rather than an appraisal, the label for the disclosure is changed to ‘‘Estimated Prop. Value.’’

The date the Loan Estimate is delivered to the consumer or placed in the mail. The method of delivery does not affect the Date Issued. For example:

  • Creditor hand delivers LE to consumer on August 14
  • Creditor places LE in the mail on August 14

The address including the zip code of the property that secures or will secure the transaction (complete address for purposes of the U.S. Postal Service) should be entered. If the address is unavailable, you may disclose location of the property including the zip code, which is required in all instances. Location of the property includes location information, e.g., a lot number. Disclosure of multiple zip codes is permitted if the consumer is investigating home purchase opportunities in multiple zip codes.

In this case date the mortgage broker mails or delivers Loan Estimate to the consumer should be used, if the mortgage broker receives the application.
Yes. Regulation Z defines the date issued as the date the creditor or mortgage broker mails or delivers the Loan Estimate to the consumer. Therefore if a revised disclosure is issued it needs to reflect the revised date in which it is being re-delivered or mailed to the consumer.

There is not sufficient information to completely answer this question. In many cases, as long as the "broker or mini-correspondent" is acting in the capacity as a creditor in a true secondary market transaction then their name will go on the Loan Estimate as creditor. However, based on the wording of the question it appears as though the concern stems from determining who is considered the actual creditor on the transaction. The answer, given the question, is more subjective than it may seem. You should refer to the CFPB "Policy Guidance on Supervisory and Enforcement Considerations Relevant to Mortgage Brokers Transitioning to Mini-Correspondent Lenders," which offers guidance on determination of the true creditor based on the "real source of funding" and the "real interest of the funding lender" for specific clarification in this scenario.

For transactions without a mortgage broker; the creditor making the disclosures must be identified as the creditor. Creditor is a person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract.

On transactions with a mortgage broker; the name and address of the creditor must be disclosed, if known, even if the mortgage broker provides Loan Estimate to the consumer. The mortgage broker must make a good faith effort to disclose the name and address of the creditor, but if the name of the creditor is not yet known it may be left blank.

For transactions with multiple creditors; the creditors must agree among themselves which creditor must comply with the requirements that Regulation Z imposes on any or all of them.

See also the answer to the previous question, "What name is used for the Creditor/Lender?" The mortgage broker must make a good faith effort to disclose the name and address of the creditor, but if the name of the creditor is not yet known it may be left blank.



Loan Estimate – Intent to Proceed

No, this is applicable today under Regulation X.

One time. There is no requirement to obtain evidence of a consumer’s intent to proceed for each Loan Estimate issued, only after issuance of the initial Loan Estimate.

Yes. Commentary to rule provides that the consumer must have received the disclosures required under §1026.19(e)(1)(i), and indicated an intent to proceed with the transaction described by those disclosures before paying or incurring any other fee (other than a credit report fee) imposed by a creditor or other person in connection with the consumer's application for a mortgage loan. Even if the consumer is only paying such costs at closing or the loan is a “no-cost” loan the fee is being “incurred” regardless of when it is actually paid.

From the preamble under the rule: “With respect to the request that the Loan Estimate contain a signature line that could be signed by the consumer to indicate the consumer’s intent to proceed, the Bureau believes that allowing the Loan Estimate to be signed by the consumer to document the consumer’s intent to proceed is contradictory to the intent of TILA section 128(2)(B)(i). This section of TILA, implemented in this final rule in §1026.37(n)(1), provides that consumers are not required to proceed with the transaction merely because they have received the Loan Estimate or signed a loan application. Specifically, form H-24 of appendix H to Regulation Z, which illustrates the optional signature line permitted on the Loan Estimate under §1026.37(n)(1), states that the consumer’s signature only documents receipt of the Loan Estimate.”

Except for obtaining a credit report, neither a creditor nor any other person may impose a fee on a consumer in connection with the consumer's application for a mortgage transaction before the consumer has received the loan estimate and indicated to the creditor their intent to proceed with the transaction described by those disclosures. Commentary also indicates: “A creditor or other person may not impose any fee, such as for an application, appraisal, or underwriting, until the consumer has received the disclosures required by §1026.19(e)(1)(i) and indicated an intent to proceed with the transaction."

In any manner the consumer chooses, unless a particular manner is required by the creditor. The creditor must document this communication to satisfy the record keeping requirements of §1026.25. For example, oral communication in person immediately upon delivery of the Loan Estimate is sufficiently indicative of intent. Oral communication over the phone, written communication via email, or signing a pre-printed form are also sufficiently indicative of intent if they occur after receipt of the Loan Estimate. A consumer’s silence is not indicative of intent.

The expiration date regarding the closing costs reflected in the Loan Estimate is for the initial delivery. Intent to proceed is only required once and not for subsequent revised Loan Estimates, therefore there is no mandate for changing the initial closing cost expiration date. Commentary to the rule indicates: “Expiration date. The disclosure required by §1026.37(a)(13)(ii) related to estimated closing costs is required regardless of whether the interest rate is locked for a specific period of time or whether the terms and costs are otherwise accepted or extended.”

No, the consumer cannot indicate intent to proceed until after receipt of the Loan Estimate. Otherwise, there is nothing in which to base the intent to proceed. This is also stated under the provisions regarding collection of fees. A fee cannot be imposed (other than a credit report fee) before the consumer has received the Loan Estimate AND indicated an intent to proceed with the transaction described by that Loan Estimate.

No. The optional signature lines are for confirming receipt of the disclosure not for indicating intent to proceed with the transaction (see the next question also).



Loan Estimate – Variances

Regulatory citations regarding the curing of violations under the rule are found under §1026.19(f)(2)(iii), (iv) & (v).

Changes due to events occurring after consummation. If during the 30-day period following consummation an event in connection with the settlement of the transaction occurs that causes the disclosures required under paragraph (f)(1)(i) of this section to become inaccurate, and such inaccuracy results in a change to an amount actually paid by the consumer from that amount disclosed under paragraph (f)(1)(i) of this section, then 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.

Changes due to clerical errors. A creditor does not violate paragraph (f)(1)(i) of this section if the disclosures provided under paragraph (f)(1)(i) contain non-numeric clerical errors, provided the creditor delivers or places in the mail corrected disclosures no later than 60 days after consummation.

Refunds related to the good faith analysis. If amounts paid by the consumer exceed the amounts specified under paragraph (e)(3)(i) or (ii) of this section, the creditor complies with paragraph (e)(1)(i) of this section if the creditor refunds the excess to the consumer no later than 60 days after consummation, and the creditor complies with paragraph (f)(1)(i) of this section if the creditor delivers or places in the mail corrected disclosures that reflect such refund no later than 60 days after consummation.

The answer depends on whether the consumer is permitted to shop for, or cannot shop for the specific service. The creditor may identify on the written list providers of services for which the consumer is not permitted to shop, provided that the creditor clearly and conspicuously distinguishes those services from the services for which the consumer is permitted to shop. This may be accomplished by placing the services under different headings. For example, if the SSPL identifies providers of pest inspections and surveys but the consumer may select a provider other than those identified on the list for only the survey, then the list must specifically inform the consumer that the consumer is permitted to select a provider other than a provider identified on the list for only the survey. In this example, the pest inspection fee would fall under the “zero” variance bucket, and the survey fee would be in the “10% variance bucket” if the provider selected is on the list. If the provider of the survey fee is not on the list, it would move to the “Can Change variance bucket”.

When a consumer chooses to use a service provider on the list of “services the consumer can shop for” provided by the creditor, the service provider becomes one in which the consumer did not shop. In this case, the fee is under the category of a 10% variance for purposes of the Closing Disclosure. Therefore, you should have documentation to identify this shift in category for analysis regarding variance violations in preparing the Closing Disclosure. Also, see the previous question regarding service providers that are selected by the consumer from the list of services in which the consumer cannot shop for as well (falling into the zero variance category). In addition, if a service provider is an affiliate of the creditor it would then fall into the zero tolerance category, rather than the 10% category.

See variance categories in the following question.

Yes. §1026.37(f)(2) requires an itemization of each amount, and a subtotal of all such amounts, the consumer will pay for settlement services for which the consumer cannot shop in accordance with §1026.19(e)(1)(vi)(A) and that are provided by persons other than the creditor or mortgage broker.

If the creditor permits the consumer to shop for a settlement service, Regulation Z requires the creditor to provide a SSPL identifying at least one available provider of that service and stating that the consumer may choose a different provider for that service. The settlement service providers identified on the SSPL must correspond to the settlement services for which the consumer may shop. The creditor also may identify on the SSPL services for which the consumer is not permitted to shop, provided that the creditor clearly and conspicuously distinguishes those services from the services for which the consumer is permitted to shop. This may be accomplished by placing the services under different headings. For example, if the SSPL identifies providers of lender’s title insurance and surveys, but the consumer may select a provider other than those identified on the list for only the survey, then the list must specifically inform the consumer that the consumer is permitted to select a provider, other than a provider identified on the list, for only the survey. §1026.19(e)(3)(ii) provides that if the creditor requires a service and permits the consumer to shop for that service, but the consumer either does not select a settlement service provider or chooses a settlement service provider identified by the creditor on the list, then good faith is determined pursuant to §1026.19(e)(3)(ii) (10% Category), instead of § 1026.19(e)(3)(i) (0% Category). For example, if a creditor discloses an estimated fee for an unaffiliated settlement agent and permits the consumer to shop for that service, but the consumer either does not choose a provider or chooses a provider identified by the creditor on the SSPL, then the estimated settlement agent fee is included with the fees that may, in aggregate, increase by no more than 10%. If, however, the consumer chooses a provider that is not on the written list, then good faith is determined according to §1026.19(e)(3)(iii) (Fees that can change category).

Yes, there are some variance differences effective on 10/3/15 for applicable loans under the new rule. Here are the new variances:

Variance Categories

  • Zero % Variance Category
    • Fees paid to creditor or mortgage broker
    • Fees paid to affiliate of creditor or mortgage broker
    • Fees paid for services for consumer not permitted to shop
    • Transfer Taxes
    • Lender Credits
  • 10% Variance Category (Aggregate Variance)
    • Recording Fees
    • Fees paid for 3rd-party services consumer permitted to shop for
  • Charges that Can Change
    • Prepaid interest
    • Property insurance premiums
    • Amounts placed into escrow
    • Fees paid to 3rd-party service providers selected by consumer not on list provided by creditor
    • Fees paid for 3rd-party services not required by creditor. These fees may be paid to affiliates

It would require a valid reason for denial. A creditor may use a revised estimate of a charge instead of the estimate of the charge originally disclosed under paragraph (e)(1)(i) of this section if the revision is due to any of the following reasons:

  1. Changed circumstance affecting settlement charges. Changed circumstances cause the estimated charges to increase or, in the case of estimated charges identified in paragraph (e)(3)(ii) of this section, cause the aggregate amount of such charges to increase by more than 10%. For purposes of this paragraph, “changed circumstance” means:
    1. An extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction;
    2. Information specific to the consumer or transaction that the creditor relied upon when providing the disclosures required under paragraph (e)(1)(i) of this section and that was inaccurate or changed after the disclosures were provided; or
    3. New information specific to the consumer or transaction that the creditor did not rely on when providing the original disclosures required under paragraph (e)(1)(i) of this section.
  2. Changed circumstance affecting eligibility. The consumer is ineligible for an estimated charge previously disclosed because a changed circumstance, as defined under paragraph (e)(3)(iv)(A) of this section, affected the consumer's creditworthiness or the value of the security for the loan.
  3. Revisions requested by the consumer. The consumer requests revisions to the credit terms or the settlement that cause an estimated charge to increase.
  4. Interest rate dependent charges. The points or lender credits change because the interest rate was not locked when the disclosures required under paragraph (e)(1)(i) of this section were provided. On 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.
  5. Expiration. The consumer indicates an intent to proceed with the transaction more than ten business days after the disclosures required under paragraph (e)(1)(i) of this section are provided pursuant to paragraph (e)(1)(iii) of this section.
  6. Delayed settlement date on a construction loan. In transactions involving new construction, where the creditor reasonably expects that settlement will occur more than 60 days after the disclosures required under paragraph (e)(1)(i) of this section are provided pursuant to paragraph (e)(1)(iii) of this section, the creditor may provide revised disclosures to the consumer if the original disclosures required under paragraph (e)(1)(i) of this section state clearly and conspicuously that at any time prior to 60 days before consummation, the creditor may issue revised disclosures. If no such statement is provided, the creditor may not issue revised disclosures, except as otherwise provided in paragraph (f) of this section.

To conduct the good faith analysis required under §1026.19(e)(3)(i) and (ii), Regulation Z requires the creditor to use unrounded numbers to compare the actual charge paid by or imposed on the consumer for a settlement service with the estimated cost of the service. It is recommended that you develop a method for performing these calculations either by customizing a solution using your Loan Origination System (LOS) or in a manner separate from the LOS.

Fees can decrease for all categories except for Lender Credits. Lender Credits can change only under specific circumstances.

The actual total amount of lender credits, whether specific or non-specific, provided by the creditor that is less than the estimated “lender credits” is an increased charge to the consumer for purposes of determining good faith. Comment 19(e)(3)(i)–5 provides illustrations of these requirements as well as §1026.19(e)(3)(iv)(D) and comment 19(e)(3)(iv)(D)–1. With respect to whether a changed circumstance or borrower-requested change can apply to the revision of lender credits, the Bureau stated in the Section-by-Section Analysis of the Final Rule that “a changed circumstance or borrower-requested change can decrease such credits, provided that all of the requirements of § 1026.19(e)(3)(iv) are satisfied.” Without a valid changed circumstance, the Bureau declined to provide a specific exemption that would allow the amount of lender credits to decrease so that the creditor would be able to stay within guidelines under streamlined refinancing programs that limit the amount of cash that the creditor could pay the consumer at closing. The CFPB stated in the Section-by-Section Analysis of the Final Rule that “lenders are not permitted to reduce the lender credits they provide to the borrower under current Regulation X. See HUD RESPA FAQs p. 27, # 4 (“GFE-Block 2”). Under current Regulation X, the loan originator may only apply the amount of the excess lender credits to additional closing costs previously not anticipated to be included in the loan, apply the excess to a principal reduction to the outstanding balance of the loan, pay the consumer the excess in cash, or reduce the interest rate and the credit accordingly. Creditors will be able to take the same actions with respect to lender credits in streamlined refinancing programs under this final rule.”

We recommend you discuss this issue with your in-house compliance experts or outside legal counsel.

The new disclosure rule did not change any APR calculations.

Yes. Refund of fees paid in excess of actual amount may be shown on the closing disclosure as lender credit. In addition, a statement regarding the differences with a reference to the variation compared to the Loan Estimate must be prominently displayed identifying the section in which the consumer can identify this difference.

If amounts paid by the consumer exceed the amounts specified in the loan estimate, the creditor complies with the good faith estimate requirements if the creditor refunds the excess to the consumer no later than 60 days after consummation, and the creditor complies with the closing disclosure requirements if the creditor delivers or places in the mail corrected disclosures that reflect such refund no later than 60 days after consummation.

Yes. The revised disclosures may reflect increased charges only to the extent that the reason for revision, as identified in §1026.19(e)(3)(iv)(A) through (F), actually increased the particular charge. For example, if a consumer requests a rate lock extension, then the revised disclosures may reflect a new rate lock extension fee, but the fee may be no more than the rate lock extension fee charged by the creditor in its usual course of business, and other charges unrelated to the rate lock extension may not change.

See response to previous question regarding when the APR becomes inaccurate. You should additionally seek legal counsel or your compliance expert’s policy guidance regarding this scenario.

Yes, if the APR falls within the definition of an “inaccurate” APR for a mortgage loan. Regulation Z states:

“As a general rule, the annual percentage rate shall be considered accurate if it is not more than 1/8 of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.

In an irregular transaction, the annual percentage rate shall be considered accurate if it is not more than ¼ of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.

For purposes of paragraph (a)(3) of this section, an irregular transaction is one that includes one or more of the following features: multiple advances, irregular payment periods, or irregular payment amounts (other than an irregular first period or an irregular first or final payment).

Mortgage loans. If the annual percentage rate disclosed in a transaction secured by real property or a dwelling varies from the actual rate determined in accordance with paragraph (a)(1) of this section, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, the disclosed annual percentage rate shall also be considered accurate if:

The rate results from the disclosed finance charge; and the disclosed finance charge would be considered accurate under §1026.18(d)(1) or §1026.38(o)(2), as applicable; or for purposes of rescission, if the disclosed finance charge would be considered accurate under §1026.23(g) or (h), whichever applies.”

Yes. APR tolerances are not changing under this rule.

If the APR becomes "inaccurate" under section §1026.22 of Regulation Z (“regular” (.125%) or "irregular" (.25%) transaction), then the three business day waiting period applies.

Inaccurate APR is defined under Regulation Z (§1026.18 & §1026.22) and depends on whether the loan is a “regular” (.125%) or "irregular" (.25%) transaction.

No, we have no information on the potential of such an event at this time.

The creditor should provide a revised Loan Estimate within 3 business days of receiving information sufficient to establish that one of the reasons under §1026.19(e)(3)(iv)(A) through (C), (E) and (F) has occurred. For example:

Assume a creditor receives information on Monday that, because of a changed circumstance under §1026.19(e)(3)(iv)(A), the title fees will increase by an amount totaling 6% of the originally estimated settlement charges subject to §1026.19(e)(3)(ii).

The creditor had received information three weeks before that, because of a changed circumstance under §1026.19(e)(3)(iv)(A), the pest inspection fees increased by an amount totaling 5% of the originally estimated settlement charges subject to §1026.19(e)(3)(ii). Thus, on Monday, the creditor has received sufficient information to establish a valid reason for revision and must provide revised disclosures reflecting the 11% increase by Thursday to comply with §1026.19(e)(4)(i).

Tolerances/variances are slightly different under the TILA/RESPA Integrated Mortgage Disclosure Rule. There are additional amounts applied to the “zero” variance category.

Variance Categories

  • Zero % Variance Category
    • Fees paid to creditor or mortgage broker
    • Fees paid to affiliate of creditor or mortgage broker
    • Fees paid for services for consumer not permitted to shop
    • Transfer Taxes
    • Lender Credits
  • 10% Variance Category (Aggregate Variance)
    • Recording Fees
    • Fees paid for 3rd-party services consumer permitted to shop for
  • Charges that Can Change
    • Prepaid interest
    • Property insurance premiums
    • Amounts placed into escrow
    • Fees paid to 3rd-party service providers selected by consumer not on list provided by creditor
    • Fees paid for 3rd-party services not required by creditor. These fees may be paid to affiliates.


Loan Estimate – Change of Circumstance

An initial or revised Loan Estimate must be provided in good faith. If a creditor uses a revised Loan Estimate for the purpose of determining good faith, Regulation Z says the creditor must provide a revised version of the Loan Estimate within three business days of receiving information sufficient to establish a changed circumstance, not a portion of the revised Loan Estimate. A Loan Estimate is in good faith if it is consistent with 1026.17(c)(2)(i). 1026.17(c)(2)(i) provides 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.

We recommend you discuss this issue with your in-house compliance experts or outside counsel. The actual total amount of lender credits, whether specific or non-specific, provided by the creditor that is less than the estimated “lender credits” is an increased charge to the consumer for purposes of determining good faith. Comment 19(e)(3)(i)–5 provides illustrations of these requirements as well as §1026.19(e)(3)(iv)(D) and comment 19(e)(3)(iv)(D)–1. With respect to whether a changed circumstance or borrower requested change can apply to the revision of lender credits, the Bureau stated in the Section-by-Section Analysis of the Final Rule that “a changed circumstance or borrower-requested change can decrease such credits, provided that all of the requirements of § 1026.19(e)(3)(iv) are satisfied.” Without a valid changed circumstance, the Bureau declined to provide a specific exemption that would allow the amount of lender credits to decrease so that the creditor would be able to stay within guidelines under streamlined refinancing programs that limit the amount of cash that the creditor could pay the consumer at closing. The CFPB stated in the Section-by-Section Analysis of the Final Rule that “lenders are not permitted to reduce the lender credits they provide to the borrower under current Regulation X. See HUD RESPA FAQs p. 27, # 4 (“GFE-Block 2”). Under current Regulation X, the loan originator may only apply the amount of the excess lender credits to additional closing costs previously not anticipated to be included in the loan, apply the excess to a principal reduction to the outstanding balance of the loan, pay the consumer the excess in cash, or reduce the interest rate and the credit accordingly. Creditors will be able to take the same actions with respect to lender credits in streamlined refinancing programs under this final rule.”

The creditor must refund the excess to the consumer no later than 60 calendar days after consummation. Also, see the previous question regarding decreasing a lender credit.

Closing Disclosure, with a valid changed circumstance and specific timing. Commentary ¶19(e)(4)(ii) states: “If, 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) (revised Loan Estimate) 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) (Closing Disclosure).”

Yes, with a valid changed circumstance under certain conditions and timing. Commentary ¶19(e)(4)(ii) states: “If, 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) (revised Loan Estimate) 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) (Closing Disclosure).”

No. A revised Loan Estimate cannot be provided on or after the date the Closing Disclosure has been delivered.

No. See the response to the previous question regarding valid changes of circumstance. The mortgage broker should elect not to place a creditor’s name or Loan ID on the Loan Estimate if the creditor is unknown or if they believe a change in creditor is a possibility.

No. Valid reasons for a revised Loan Estimate include:

  • (A) Changed circumstance affecting settlement charges
    • Example: Appraisal Fee to Affiliate
  • (B) Changed circumstance affecting eligibility
    • Example: Ineligible for Loan Program
  • (C) Revisions requested by consumer
    • Example: Power of Attorney
  • (D) Interest rate dependent charges
    • Example: Initial LE with no rate lock
  • (E) Expiration of initial Loan Estimate
    • Example: Intent to Proceed on Business Day 11
  • (F) Delayed settlement date on construction loan
    • Example: Settlement expected to occur more than 60 days after initial LE and statement provided on initial LE


Revised Loan Estimate – Revision/Redisclosure (Timing and Delivery)

It will depend upon the reasons for the changed circumstances. This type of issue should be discussed with your compliance experts or attorney. Generally speaking, there are allowances for unforeseen circumstances even under a zero variance category for a valid changed circumstance (e.g., information provided by the consumer is found to be inaccurate).

Commentary under ¶19(e)(3)(iv)(A)-1i states, “Assume a creditor provides a $200 estimated appraisal fee pursuant to §1026.19(e)(1)(i), which will be paid to an affiliated appraiser and therefore may not increase for purposes of determining good faith under §1026.19(e)(3)(i), except as provided in §1026.19(e)(3)(iv). The estimate was based on information provided by the consumer at application, which included information indicating that the subject property was a single-family dwelling. Upon arrival at the subject property, the appraiser discovers that the property is actually a single-family dwelling located on a farm. A different schedule of appraisal fees applies to residences located on farms. A changed circumstance has occurred (i.e., information provided by the consumer is found to be inaccurate after the disclosures required under §1026.19(e)(1)(i) were provided), which caused an increase in the cost of the appraisal. Therefore, if the creditor issues revised disclosures with the corrected appraisal fee, the actual appraisal fee of $400 paid at the real estate closing by the consumer will be compared to the revised appraisal fee of $400 to determine if the actual fee has increased above the estimated fee. However, if the creditor failed to provide revised disclosures, then the actual appraisal fee of $400 must be compared to the originally disclosed estimated appraisal fee of $200.”

A revised Loan Estimate would not be necessary unless there are changes to interest rate dependent charges. If a rate lock extension fee is being charged, then a revised Loan Estimate would be issued and the changed circumstance would be documented.

The revised disclosures may reflect increased charges only to the extent that the reason for revision, as identified in §1026.19(e)(3)(iv)(A) through (F), actually increased the particular charge.

The disclosure of ‘‘lender credits,’’ as identified in §1026.37(g)(6)(ii), is required by §1026.19(e)(1)(i). ‘‘Lender credits,’’ as identified in §1026.37(g)(6)(ii), represents the sum of non-specific lender credits and specific lender credits. Non-specific lender credits are generalized payments from the creditor to the consumer that do not pay for a particular fee on the disclosures provided pursuant to §1026.19(e)(1). Specific lender credits are specific payments, such as a credit, rebate, or reimbursement, from a creditor to the consumer to pay for a specific fee. Nonspecific lender credits and specific lender credits are negative charges to the consumer. The actual total amount of lender credits, whether specific or non-specific, provided by the creditor that is less than the estimated ‘‘lender credits’’ identified in §1026.37(g)(6)(ii) and disclosed pursuant to §1026.19(e) is an increased charge to the consumer for purposes of determining good faith under §1026.19(e)(3)(i).

For example, if the creditor discloses a $750 estimate for ‘‘lender credits’’ pursuant to §1026.19(e), but only $500 of lender credits is actually provided to the consumer, the creditor has not complied with §1026.19(e)(3)(i) because the actual amount of lender credits provided is less than the estimated ‘‘lender credits’’ disclosed pursuant to §1026.19(e), and is therefore, an increased charge to the consumer for purposes of determining good faith under §1026.19(e)(3)(i).

However, if the creditor discloses a $750 estimate for ‘‘lender credits’’ identified in §1026.37(g)(6)(ii) to cover the cost of a $750 appraisal fee, and the appraisal fee subsequently increases by $150, and the creditor increases the amount of the lender credit by $150 to pay for the increase, the credit is not being revised in a way that violates the requirements of §1026.19(e)(3)(i) because, although the credit increased from the amount disclosed, the amount paid by the consumer did not. However, 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. See also §1026.19(e)(3)(iv)(D) and Commentary ¶19(e)(3)(iv)(D)–1 for a discussion of lender credits in the context of interest rate dependent charges.

For purposes of conducting the good faith analysis required under §1026.19(e)(3)(i) for lender credits, the total amount of lender credits, whether specific or non-specific, actually provided to the consumer is compared to the amount of the ‘‘lender credits’’ identified in §1026.37(g)(6)(ii). The total amount of lender credits actually provided to the consumer is determined by aggregating the amount of the ‘‘lender credits’’ identified in §1026.38(h)(3) with the amounts paid by the creditor that are attributable to a specific loan cost or other cost, disclosed pursuant to §1026.38(f) and (g).

Yes. Within three business days of the date the interest rate is locked the creditor must provide a revised version of the disclosure to the consumer with the revised interest rate, the points disclosed, lender credits, and any other interest rate dependent charges and terms.

The revised disclosures may reflect increased charges only to the extent that the reason for revision, as identified in §1026.19(e)(3)(iv)(A) through (F), actually increased the particular charge. For example, if a consumer requests a rate lock extension then the revised disclosures may reflect a new rate lock extension fee, but the fee may be no more than the rate lock extension fee charged by the creditor in its usual course of business, and other charges unrelated to the rate lock extension may not change.

Example:

Assume a creditor sets the interest rate by executing a rate lock agreement with the consumer. If such an agreement exists when the original Loan Estimate is provided, then the actual points and lender credits are compared to the estimated points disclosed and lender credits included in the original disclosure for the purpose of determining good faith pursuant to §1026.19(e)(3)(i). If the consumer enters into a rate lock agreement with the creditor after the initial Loan Estimate were provided, then the regulation requires the creditor to provide, within three business days from the date that the consumer and the creditor enters into a rate lock agreement, a revised version of the disclosure reflecting the revised interest rate, the points disclosed, lender credits, and any other interest rate dependent charges and terms. Provided that the revised version of the disclosure reflects any revised points disclosed and lender credits, the actual points and lender credits are compared to the revised points and lender credits for the purpose of determining good faith.

An initial or revised Loan Estimate must be provided in good faith. If a creditor uses a revised Loan Estimate for the purpose of determining good, Regulation Z says the creditor must provide a revised version of the Loan Estimate within three business days of receiving information sufficient to establish a changed circumstance, not a portion of the revised Loan Estimate. A Loan Estimate is in good faith if it is consistent with §1026.17(c)(2)(i). §1026.17(c)(2)(i) provides that if any information necessary for an accurate disclosure is unknown to the creditor then 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.

No. A change to an origination fee paid to the creditor or mortgage broker falls within the zero tolerance category, since it disclosed as a dollar amount and is not an interest rate dependent charge.

There are a number of items to address with such a question. Let’s take the issues one at a time:

1. The final Loan Estimate must be received by the consumer no later than four business days prior to consummation, and cannot be provided on or after the date the Closing Disclosure is received.

2. Lender Credits would have to be determined prior to the loan consummation, due to the fact that the Closing Disclosure, which must be received by the consumer a minimum of three business days prior to closing, must reflect the actual terms of the credit transaction. Therefore, applying a Lender Credit at the time of loan closing would not be recommended. Commentary 17(c)(1)-19 additionally states in part, “if the creditor is legally obligated to provide the premium or rebate to the consumer as part of the credit transaction, the disclosures should reflect its value in the manner and at the time the creditor is obligated to provide it.”

3. When an interest rate is locked between the consumer and the creditor, a revised Loan Estimate must be provided within three business days from the date of rate locking. If there are revisions to interest rate dependent charges (meaning: the revised interest rate, the points disclosed pursuant to §1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms), this must be reflected on the revised Loan Estimate. That being said, there is no prohibition on increasing or adding a Lender Credit upon delivery of the Closing Disclosure (rather than the Loan Estimate).

4. Increasing (or in this case adding) a Lender Credit is allowable under Regulation Z which states in part, “For example, if the creditor discloses a $750 estimate for ‘‘lender credits’’ pursuant to §1026.19(e), but only $500 of lender credits is actually provided to the consumer, the creditor has not complied with §1026.19(e)(3)(i) because the actual amount of lender credits provided is less than the estimated ‘‘lender credits’’ disclosed pursuant to §1026.19(e), and is therefore, an increased charge to the consumer for purposes of determining good faith under §1026.19(e)(3)(i). However, if the creditor discloses a $750 estimate for ‘‘lender credits’’ identified in §1026.37(g)(6)(ii) to cover the cost of a $750 appraisal fee, and the appraisal fee subsequently increases by $150, and the creditor increases the amount of the lender credit by $150 to pay for the increase, the credit is not being revised in a way that violates the requirements of §1026.19(e)(3)(i) because, although the credit increased from the amount disclosed, the amount paid by the consumer did not. However, 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.”

5. In disclosing Lender Credit’s in “good faith,” Regulation Z additionally states, “For purposes of conducting the good faith analysis required under §1026.19(e)(3)(i) for lender credits, the total amount of lender credits, whether specific or non-specific, actually provided to the consumer is compared to the amount of the ‘‘lender credits’’ identified in §1026.37(g)(6)(ii). The total amount of lender credits actually provided to the consumer is determined by aggregating the amount of the ‘‘lender credits’’ identified in §1026.38(h)(3) with the amounts paid by the creditor that are attributable to a specific loan cost or other cost, disclosed pursuant to §1026.38(f) and (g).”

6. If a Lender Credit is used to offset an excess limitation on a fees, Commentary ¶38(h)(3)-2 states that if a Lender Credit is used to offset fees in violation of stated limitations they, “are disclosed pursuant to §1026.38(h)(3), along with a statement that such amount was paid to offset an excess charge, with funds other than closing funds.” Additionally, Commentary ¶38(h)(3)-1 identifies that an excess amount and any credit to the consumer, “requires a statement that an increase in closing costs exceeds legal limits by the dollar amount of the excess and a statement directing the consumer to the disclosure of lender credits….”

The rule only identifies requirements regarding a revised Loan Estimate for fee increases exceeding the variances provided in the rule. However, a consumer’s decision to select his or her own service provider constitutes a changed circumstance, which allows a creditor at that point to re-run the fee analysis. A lender has three business days to redisclose the Loan Estimate if other 10% category fees have increased since initially disclosed in order to use the remaining increased 10% category fees in the good faith fee analysis.

In this scenario you would disclose both fees being revised which caused the aggregate 10% variance increase in the revised Loan Estimate.

No. If a Loan Estimate is initially issued with a locked interest rate and there is no subsequent change of circumstance prior to delivery of the Closing Disclosure the Regulation does not require issuing a final revised Loan Estimate. If the interest rate is not locked when the initial Loan Estimate is delivered then a revised Loan Estimate is required.

Yes. When the rate is locked a creditor must provide a revised version of the Loan Estimate within 3 business days after the locking of the interest rate.

The creditor must provide a revised Loan Estimate no later than 3 business days after the date the rate is locked. There is no differentiation in the rule for initial rate locking versus any subsequent rate locking.

A consumer must receive a final revised Loan Estimate not later than 4 [specific] business days prior to consummation. A creditor cannot provide a revised Loan Estimate on or after the date the Closing Disclosure is delivered or mailed.

Creditors must provide the Closing Disclosure which reflects the actual terms of the transaction. Loan Estimate is required to provide the consumer with an estimate of the costs. If there is no changed circumstance subsequent to providing the initial Loan Estimate, the Regulation does not require the delivery of an additional “final” or “revised” Loan Estimate.

When the rate is locked a creditor must provide a revised version of the Loan Estimate within 3 business days after the locking of the interest rate.

A revised Loan Estimate must be provided within 3 business days of receiving information sufficient to establish a changed circumstance. When the rate is locked a creditor must provide a revised version of the Loan Estimate within 3 business days after the locking of the interest rate.

If the Creditor's Loan ID number is not reasonably available to the mortgage broker it may be left blank. CFPB staff has said this is consistent with official commentary, which states the creditor's name can be left blank if unknown. However, logically, the creditor’s loan ID number would be available at the time of issuance of the Closing Disclosure.

In this scenario, the Loan Estimate with the change in creditor could not be used, since a transaction can only have one Loan ID. In order to issue a compliant Loan Estimate with a new Loan ID number it would need to be a separate loan transaction (a new loan file). It is highly recommended that if the creditor is unknown at the time of delivery of the Loan Estimate by a mortgage broker, or the possibility exists in which a creditor may change during the loan process, the Loan ID should be left blank. The preamble to the rule (see citation below) states in part, “In order to ensure that a particular transaction retains the same loan identification number throughout the loan application process, the Bureau is revising proposed comment 37(a)(12)–1 to clarify that where a creditor issues a revised Loan Estimate for a transaction, the loan identification number must remain the same as on the initial Loan Estimate.” However, it is allowable to add a versioning number to identify the sequence of revised Loan Estimates provided. Regulation Z indicates, “If a creditor uses the same loan identification number on several revised Loan Estimates to the consumer, but adds after such number a hyphen and a number to denote the number of revised Loan Estimates in sequence, the creditor must disclose the loan identification number before such hyphen on the Closing Disclosure to identify the transaction as the same for which the initial and revised Loan Estimates were provided.

Yes. Commentary ¶19(e)(3)(iv)(D) states that when interest rate is not locked when the Loan Estimate is provided, a valid reason for revision exists when the interest rate is subsequently locked. No later than three business days after the date the interest rate is locked the creditor is required to provide a revised version of the Loan Estimate reflecting the revised interest rate, the points disclosed, lender credits, and any other interest rate dependent charges and terms. It does not differentiate when the interest rate is higher or lower.



Closing Disclosure – General Information

The rule allows for one or separate disclosures regarding loans with multiple advances for financing the construction of a dwelling. The policy on such disclosures should be established by your legal counsel or compliance experts for your organization.

Regulation Z only addresses the Loan ID number relative to the Loan Estimate and Closing Disclosure. It does not address Loan ID numbers for purposes of investor purchasing, servicing, etc., once the Closing Disclosure has been delivered.

Whether or not settlement agents and attorneys obtain a software program to generate the disclosures is completely up to them. If they are generating the disclosure and delivering them to the consumer then they are doing so on the creditor’s behalf. The creditor is responsible for compliance when delivering the disclosures and the content contained within them.

It depends on whether or not the transaction is rescindable. Commentary ¶17(d)-2, 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. In rescindable transactions, however, separate disclosures must be given to each consumer who has the right to rescind under §1026.23, although the disclosures required under §1026.19(b) need only be provided to the consumer who expresses an interest in a variable rate loan program. 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. In rescindable transactions, the disclosures required by §1026.19(f) must be given separately to each consumer who has the right to rescind under §1026.23. In transactions that are not rescindable, the disclosures required by §1026.19(f) may be provided to any consumer with primary liability on the obligation.”

This is subject to state law. You will need to rely on guidance from your legal counsel or compliance experts to determine the consummation date for purposes of each state in which you do business.

See also the previous question and response in this FAQ.

This will vary by state for those limited states that may address consummation date. There are many states where this date is not clearly defined (when the consumer becomes obligated on the loan). You will need to rely on guidance from your legal counsel or compliance experts to determine the consummation date for purposes of each state in which you do business. That being said, the general consensus of settlement agents and title companies is that in lieu of clarification by every state the consummation date will be the date of the signing of the Note or credit agreement.

It is recommended that in this case you (or an agent on your behalf, such as the settlement agent or title company) ascertain the actual recording fees when the documents are submitted for recording, in lieu of waiting until the document is actually recorded.

Yes, in the case of a bona fide personal financial emergency. It is recommended you use caution in applying this waiver in particular if you sell loans on the secondary market, since it is a rare occurrence for such a waiver to be acceptable to investors.

Just to clarify, the Closing Disclosure must be received by the appropriate consumers a minimum of three specific business days prior to the loan closing (also don’t forget the seven specific business day waiting period from delivery of the initial Loan Estimate). There is an allowance for waiving this requirement for a bona fide personal financial emergency only. It is recommended you use caution in applying this waiver in particular if you sell loans on the secondary market, since it is a rare occurrence for such a waiver to be acceptable to investors.

Assuming the question is posed by a mortgage broker, then yes, it is acceptable to leave the Loan ID field blank if the creditor is unknown when the mortgage broker delivers the Loan Estimate. This is not the case when a Loan Estimate is issued by the creditor. The Closing Disclosure in all cases must have a Loan ID.

The HUD-1 and TIL Statement would only be used for transactions exempt from the rule. In terms of the Note and Mortgage there are cases, particularly regarding security instruments (Mortgage, Deed of Trust), where these instruments reference provisions under RESPA or TILA that may not be applicable under the new rule. You will need to analyze the instruments (as well as state specific disclosures) for such references (including references to the Good Faith Estimate, Truth in Lending Statement, and HUD-1) for necessary revisions to these documents, as well as working with your document providers regarding any necessary revisions to the documents for your organization. Many states have not made revisions either via the legislative process or via regulatory revision by the state agencies. You will need to work with your legal counsel or compliance experts to determine how these documents and disclosures should be modified for your purposes.



Closing Disclosure – Timing and Consumer Receipt

There is no requirement for the Closing Disclosure to be executed (signed) by the consumer under the rule, but you should ascertain whether or not this may be required by a specific loan program or investor in order to insure or purchase the loan. The use of signature lines for documenting receipt of the Closing Disclosure is at the option of the creditor.

There is not enough detailed information to adequately answer this question. It is recommended you follow the rule requirements with regard to timing of delivery of the Closing Disclosure and subsequent timing and requirements for any revisions to the Closing Disclosure in this scenario.

There is no requirement for the Closing Disclosure to be executed (signed) by the consumer under the rule, but you should ascertain whether or not this may be required by a specific loan program or investor in order to insure or purchase the loan. The use of signature lines for documenting receipt of the Closing Disclosure is at the option of the creditor.

For purposes under this rule, the closing date and consummation date are the same. However, there are allowances under the rule for documenting receipt versus reliance on the mailbox rule (received three business days after mailing). If you are planning on closing the loan based on this allowance and moving up the closing date, you will need to remember to adjust the date of consummation which can be provided at the loan closing.

This does not include the day of closing (consummation). The Closing Disclosure must be received by the appropriate consumers a minimum of three specific business days prior to the loan closing.

It depends. The Closing Disclosure must be received by the appropriate consumers a minimum of three specific business days prior to the loan closing, and if there is a change to: 1) the APR, violating tolerances applied to the APR; 2) the addition of a prepayment penalty; or, 3) a change in loan product, the three specific business day waiting period starts again. If not for one of these three reasons the revised Closing Disclosure may be provided at the loan closing. There is an allowance for waiving this requirement for a bona fide personal financial emergency only. It is recommended you use caution in applying this waiver in particular if you sell loans on the secondary market, since it is a rare occurrence for such a waiver to be acceptable to investors.

The Closing Disclosure must be received by the consumer no later than three specific business days before consummation. If the Creditor or Settlement Agent does not provide in person, then the consumer is considered to have received the Closing Disclosure three specific business days after it is placed in the mail.

The creditor shall ensure that the consumer receives the disclosure no later than three specific business days before consummation. If the Creditor or Settlement Agent does not provide in person, then the consumer is considered to have received the Closing Disclosure three specific business days after it is placed in the mail.



Closing Disclosure – Details of Disclosure Completion

The signature line is optional and intended for the consumer(s) on the transaction to acknowledge receipt for the benefit of the creditor. There is no requirement for a signature by the seller. You should seek legal counsel or your in-house compliance expert’s opinion before making such an alteration on a Closing Disclosure, if desired to have it or if such a request comes from a potential loan investor or specific type of program.

For purposes of compliance with the Closing Disclosure, the columns regarding contacts must remain. However, where no such person is participating in the transaction, the column is left blank. In the event there is more than one of each person required for a column (e.g., two sellers' real estate brokers splitting a commission), the space in the contact information table may be altered to accommodate the information for such persons. If the space does not accommodate the addition of such information, an additional table may be provided on a separate page, with an appropriate reference to the additional table.

or the Closing Disclosure with a seller, the Contact Information table must contain the following sub-headers with their own columns:

  • Lender
  • Mortgage Broker
  • Real Estate Broker (B)
  • Real Estate Broker (S)
  • Settlement Agent

For the Closing Disclosure without a seller, the Contact Information table must contain the following sub-headers with their own columns:
  • Lender
  • Mortgage Broker
  • Settlement Agent

Comment 1 of ¶38(p)(3)–1 provides the following example: “If the creditor forecloses on the property and the proceeds of the foreclosure sale are less than the unpaid balance on the loan, whether the consumer has continued or additional responsibility for the loan balance after foreclosure, and the conditions under which liability occurs, will vary by State” (this may also be referenced as a “deficiency judgment”). “If the applicable State law affords any type of protection, other than a statute of limitations that only limits the timeframe in which a creditor may seek redress, §1026.38(p)(3) requires a statement that State law may protect the consumer from liability for the unpaid balance.”

Since this varies based on state law, you will need to determine which box to check in consultation with your legal counsel or compliance expert.

Section §1026.37(m)(4) requires a disclosure if charges are added to an individual delinquent installment by a creditor that otherwise considers the transaction ongoing on its original terms. Late payment charges do not include: (i) the right of acceleration; (ii) fees imposed for actual collection costs, such as repossession charges or attorney’s fees; (iii) referral and extension charges; or (iv) the continued accrual of simple interest at the contract rate after the payment due date. However, an increase in the interest rate on account of a late payment by the consumer is a late payment charge to the extent of the increase.

Many State laws authorize the calculation of late charges as either a percentage of the delinquent payment amount or a specified dollar amount, and permit the imposition of the lesser or greater of the two calculations. The language provided in the disclosure may reflect the requirements and alternatives allowed under State law.

Many State laws authorize the calculation of late charges as either a percentage of the delinquent payment amount or a specified dollar amount, and permit the imposition of the lesser or greater of the two calculations. The language provided in the disclosure may reflect the requirements and alternatives allowed under State law.

It replaces page 1 of the HUD-1, however, settlement agents may need to develop other documents to disburse funds.

Section §1026.38(t)(5)(iv)(A), permits the deletion of unused lines from the disclosures required by §1026.38(f)(1) through (3) and (g)(1) through (4), if necessary, to allow the addition of lines to other sections that require them for the required disclosures. This provision permits creditors and settlement agents to use the space gained from deleting unused lines for additional lines to accommodate all of the costs that are required to be itemized. For example, if the only origination charge required by §1026.38(f)(1) is points, the remaining seven lines illustrated on form H-25 of appendix H to this part may be deleted and added to the disclosure required by §1026.38(g)(4), if seven lines in addition to those provided on form H-25 are necessary to accommodate such disclosure.

Yes. It would be reflected in the Projected Payments Table Estimated Escrow row, if applicable. It also would be reflected in the Estimated Taxes, Insurance & Assessments section. Section §1026.37(c)(4)(ii) defines what insurance is to be included, which are charges listed under section §1026.43(b)(8). This includes "premiums or other charges for insurance against loss of or damage to property, or against liability arising out of the ownership or use of property, written in connection with a credit transaction".

Yes, the Closing Disclosure must disclose charges “paid by or imposed on the consumer”.

It depends on whether the seller credit is a specific credit or a general credit. Commentary ¶38(i)(7)(ii) states, “the ‘‘Final’’ amount of ‘‘Seller Credits’’ reflects any change, following the delivery of the Loan Estimate, in the amount of funds given by the seller to the consumer for generalized (i.e., lump sum) credits for closing costs or for allowances for items purchased separately (e.g., if the seller is a builder). Seller credits are distinguished from payments by the seller for items attributable to periods of time prior to consummation, which are among the ‘‘Adjustments and Other Credits’’ separately disclosed pursuant to §1026.38(i)(8).”

Additionally, Commentary ¶38(j)(2)(v) indicates, “When the consumer receives a generalized credit from the seller for closing costs or where the seller (typically a builder) is making an allowance to the consumer for items to purchase separately, the amount of the credit must be disclosed. However, if the seller credit is attributable to a specific loan cost or other cost listed in the Closing Cost Details tables, pursuant to §1026.38(f) or (g), that amount should be reflected in the seller-paid column in the Closing Cost Details tables under §1026.38(f) or (g). Any other obligations of the seller to be paid directly to the consumer, such as for issues identified at a walk-through of the property prior to closing, are disclosed under §1026.38(j)(2)(v).”

1026.38(f), (g), and (h) require under the Closing Disclosure heading “Closing Cost Details” a disclosure of whether a charge was borrower-paid at or before closing, seller-paid at or before closing, or paid by others. The creditor may obtain information regarding these, for example: verbally from the consumer, from a review of the purchase and sale contract, or from information obtained from a real estate agent in the transaction.

It depends on the type of payment:

Services Did Not Shop For

  • Fee charged at consummation and is not a prepayment of future premiums over a specific future time period or a payment into an escrow account. Government funding fees include VA Funding Fee, USDA guarantee fee, or any other fee paid to a government entity as part of a governmental loan program, that is paid at consummation.
Services Did Shop For
  • Could apply if creditor allowed consumer to shop for conventional MI; provided fee is charged at consummation; is not a prepayment of future premiums over a specific future time period; is not a payment into an escrow account.
Prepaids
  • Fee is prepayment of future premiums over a specific future time period. “Mortgage insurance or any functional equivalent” means amounts identified in 12 CFR §1026.4(b)(5).
Initial Escrow Payment at Closing
  • Fee is a payment into an escrow account.

This information would be found on page 3 of the Closing Disclosure. The reconciliation of taxes would be in sections “L” & “N”.

The amount of charges that are “paid by others” includes the creditor, but is not exclusive to the creditor. It could include other entities such as an employer or real estate agent, etc.

Charges that are designated as paid by others under § 1026.38(f) and (g) may include the letter “L” in parentheses, i.e. “(L)” to the left of the amount in the column to designate those charges paid by the creditor pursuant to the legal obligation between the creditor and consumer.

For purposes of §1026.19(e), a fee is not considered ‘‘paid to’’ a person if the person does not retain the fee. For example, if a consumer pays the creditor transfer taxes and recording fees at the real estate closing and the creditor subsequently uses those funds to pay the county that imposed these charges, then the transfer taxes and recording fees are not “paid to” the creditor.

Similarly, if a consumer pays the creditor an appraisal fee in advance of the real estate closing and the creditor subsequently uses those funds to pay another party for an appraisal, then the appraisal fee is not “‘paid to” the creditor for the purposes of §1026.19(e).

A fee is also not considered “paid to” a person, for purposes of §1026.19(e), if the person retains the fee as reimbursement for an amount it has already paid to another party. If a creditor pays for an appraisal in advance of the real estate closing and the consumer pays the creditor an appraisal fee at the real estate closing, then the fee is not “paid to” the creditor for the purposes of §1026.19(e), even though the creditor retains the fee, because the payment is a reimbursement for an amount already paid.

A prepayment penalty amount may be disclosed under the heading “Loan Terms”. Section 1026.37(b)(7)(i) requires disclosure of the maximum amount of the prepayment penalty that may be imposed under the terms of the legal obligation. The creditor must determine the maximum of each amount used in calculating the prepayment penalty. For example, if a transaction is fully amortizing and the prepayment penalty is 2% of the loan balance at the time of prepayment, the prepayment penalty amount should be determined by using the highest loan balance possible during the period in which the penalty may be imposed. If more than one type of prepayment penalty applies, the creditor must aggregate the maximum amount of each type of prepayment penalty in the maximum penalty disclosed.

Assuming the Creditor's Loan ID# is not reasonably available to the mortgage broker it may be left blank. CFPB staff has said this is consistent with official commentary, which states the creditor's name can be left blank if unknown.

If the Loan Estimate is delivered to the consumer by a mortgage broker, and at the time of delivery the creditor is unknown, the Loan ID may be left blank. However, if the Loan Estimate is initially delivered by the creditor, or if the Loan Estimate is revised either by rate locking or a valid changed circumstance, then since the creditor is the issuing party it should contain a Loan ID.

The Closing Disclosure must contain the Loan ID when delivered because it’s required to be disclosed by the creditor, or the settlement agent, on behalf of the creditor. Therefore, if the mortgage broker delivers the Loan Estimate and there are no subsequent valid revisions to the Loan Estimate they issue (including the fact that the rate is locked at the time of initial delivery), then technically yes, you could have a Loan Estimate with no Loan ID and only add the Loan ID at the time of delivery of the Closing Disclosure.

The Loan ID# must be the same Loan ID# on both the Loan Estimate and Closing Disclosure. There is an allowance granted for adding versioning such as by use of a hyphen and numbering sequence for multiple revised disclosures.

The Loan ID is assigned by the creditor and is used to identify the transaction. The File ID is assigned by the settlement agent and used for identification purposes.

A number that may be used by the creditor, consumer, and other parties to identify the transaction.

The number assigned to the transaction by the settlement agent for identification purposes.

The entity who is actually conducting the loan closing.

The name of the entity that employs the settlement agent. The name of the individual conducting the closing is not required.

Conversely, in the event the transaction involves more than one of each such person (e.g., two sellers’ real estate brokers splitting a commission), the space in the contact information table provided on form H-25 of appendix H to this part may be altered to accommodate the information for such persons, provided that the information required by §1026.38(o),(p),(q),(r) and (s) is disclosed on the same page as illustrated by form H-25. If the space provided on form H-25 does not accommodate the addition of such information, an additional table to accommodate the information may be provided on a separate page, with an appropriate reference to the additional table. A creditor or settlement agent may also omit a column on the table that is inapplicable or, if necessary, replace an inapplicable column with the contact information for the additional person.

The name of the settlement agent company conducting the closing.

The closing and disbursement dates would need to be coordinated between the creditor and the settlement agent; however, the creditor continues to remain responsible for the Closing Disclosure compliance with Regulation Z.

Commentary ¶19(f)(1)(i)-2iii states, “Because the creditor remains responsible under §1026.19(f)(1)(v) for ensuring that the Closing Disclosure is provided in accordance with §1026.19(f), the creditor is expected to maintain communication with the settlement agent to ensure that the settlement agent is acting in place of the creditor. See comment 19(f)(1)(v)–3 for guidance on a creditor’s responsibilities where a settlement agent provides disclosures.”

The date the amounts disclosed pursuant to §1026.38(j)(3)(iii) and (k)(3)(iii) are expected to be paid in a purchase transaction under §1026.37(a)(9)(i) to the consumer and seller, respectively, as applicable, or the date the amounts disclosed pursuant to §1026.38(j)(2)(iii) or (t)(5)(vii)(B) are expected to be paid to the consumer or a third party in a transaction that is not a purchase transaction under §1026.37(a)(9)(i).

There is no indication, at this time, of future rulemaking or guidance intended to provide a federal consummation date, other than the definition under Regulation Z. The definition of “consummation date” is governed by applicable state law.

In the model forms, it most likely is an example of a revised Closing Disclosure provided at the closing table, where the revisions are not material (no change in APR, Product Description, or addition of prepayment penalty).

Closing Date = Consummation which is defined §1026.2(a)(13). Consummation means the time that a consumer becomes contractually obligated on a credit transaction (state law governs when a consumer becomes obligated).

The date of consummation.

Consummation means the time a consumer becomes contractually obligated on a credit transaction.

State law governs when the consumer becomes obligated. When a contractual obligation is created on the consumer’s part is a matter to be determined under applicable law; Regulation Z does not make this determination. A contractual commitment agreement, for example, that under applicable law binds the consumer to the credit terms would be consummation.

Consummation, however, does not occur merely because the consumer has made some financial investment in the transaction (for example, by paying a nonrefundable fee) unless, of course, applicable law holds otherwise).

Date issued. The date the disclosures required by this section are delivered to the consumer, labeled “Date Issued.” Typically, that’s going to be the date either the form is being given in person to the consumer or the day the disclosure is being placed in the mail.

The date the Closing Disclosure is delivered to the consumer. Commentary ¶38(a)(3)(i)-1 says for general guidance on identifying the date issued for the Closing Disclosure, see the commentary to §1026.37(a)(4). Commentary ¶37(a)(4)-1 says it’s the date the creditor mails or delivers the Loan Estimate to the consumer. The creditor’s method of delivery does not affect the date issued.



Closing Disclosure – Variances versus Loan Estimate

occurring after consummation. If, during the 30-day period following consummation, an event in connection with the settlement of the transaction occurs that causes the disclosures required under paragraph (f)(1)(i) of this section to become inaccurate, and such inaccuracy results in a change to an amount actually paid by the consumer from that amount disclosed under paragraph (f)(1)(i) of this section, 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.

Changes due to clerical errors. A creditor does not violate paragraph (f)(1)(i) of this section if the disclosures provided under paragraph (f)(1)(i) contain non-numeric clerical errors, provided the creditor delivers or places in the mail corrected disclosures no later than 60 days after consummation.

Refunds related to the good faith analysis. If amounts paid by the consumer exceed the amounts specified under paragraph (e)(3)(i) or (ii) of this section, the creditor complies with paragraph (e)(1)(i) of this section if the creditor refunds the excess to the consumer no later than 60 days after consummation, and the creditor complies with paragraph (f)(1)(i) of this section if the creditor delivers or places in the mail corrected disclosures that reflect such refund no later than 60 days after consummation.

Inaccurate APR is defined under Regulation Z (§1026.18 & §1026.22) and depends on whether the loan is a “regular” (.125%) or "irregular" (.25%) transaction.

Refund of fees paid in excess of actual amount may be shown on the closing disclosure as lender credit. In addition, a statement regarding the differences with a reference to the variation compared to the Loan Estimate must be prominently displayed identifying the section in which the consumer can identify this difference.

If amounts paid by the consumer exceed the amounts specified in the loan estimate, the creditor complies with the good faith estimate requirements if the creditor refunds the excess to the consumer no later than 60 days after consummation, and the creditor complies with the closing disclosure requirements if the creditor delivers or places in the mail corrected disclosures that reflect such refund no later than 60 days after consummation.

To conduct the good faith analysis required under §1026.19(e)(3)(i) and (ii) the creditor should use unrounded numbers to compare the actual charge paid by or imposed on the consumer for a settlement service with the estimated cost of the service. It’s recommended that you develop a method for performing these calculations either by customizing a solution using your Loan Origination System (LOS) or in a manner separate from the LOS.

See response to previous question regarding when the APR becomes inaccurate. You should additionally seek legal counsel or your compliance expert’s policy guidance regarding this scenario, as well as consult with any investor policies if you sell loans in the secondary market.

Fees can decrease for all categories except for Lender Credits.

When an interest rate is locked between the consumer and the creditor, a revised Loan Estimate must be provided within three business days from the date of rate locking. If there are revisions to interest rate dependent charges (meaning: the revised interest rate, the points disclosed pursuant to §1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms), this must be reflected on the revised Loan Estimate. That being said, there is no prohibition on increasing or adding a Lender Credit upon delivery of the Closing Disclosure (rather than the Loan Estimate). See next response also.

Increasing (or in this case adding) a Lender Credit is allowable under Regulation Z which states in part, “For example, if the creditor discloses a $750 estimate for "lender credits" pursuant to §1026.19(e), but only $500 of lender credits is actually provided to the consumer, the creditor has not complied with §1026.19(e)(3)(i) because the actual amount of lender credits provided is less than the estimated "lender credits" disclosed pursuant to §1026.19(e), and is therefore, an increased charge to the consumer for purposes of determining good faith under §1026.19(e)(3)(i). However, if the creditor discloses a $750 estimate for "lender credits" identified in §1026.37(g)(6)(ii) to cover the cost of a $750 appraisal fee, and the appraisal fee subsequently increases by $150, and the creditor increases the amount of the lender credit by $150 to pay for the increase, the credit is not being revised in a way that violates the requirements of §1026.19(e)(3)(i) because, although the credit increased from the amount disclosed, the amount paid by the consumer did not. However, 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.” In disclosing Lender Credit’s in “good faith” Regulation Z additionally states, “For purposes of conducting the good faith analysis required under §1026.19(e)(3)(i) for lender credits, the total amount of lender credits, whether specific or non-specific, actually provided to the consumer is compared to the amount of the "lender credits" identified in §1026.37(g)(6)(ii). The total amount of lender credits actually provided to the consumer is determined by aggregating the amount of the "lender credits" identified in §1026.38(h)(3) with the amounts paid by the creditor that are attributable to a specific loan cost or other cost, disclosed pursuant to §1026.38(f) and (g).”

If a Lender Credit is used to offset an excess limitation on a fees, Commentary ¶38(h)(3)-2 states that if a Lender Credit is used to offset fees in violation of stated limitations they “are disclosed pursuant to §1026.38(h)(3), along with a statement that such amount was paid to offset an excess charge, with funds other than closing funds.” Additionally, Commentary ¶38(h)(3)-1 identifies that an excess amount and any credit to the consumer, “requires a statement that an increase in closing costs exceeds legal limits by the dollar amount of the excess and a statement directing the consumer to the disclosure of lender credits….”

If the APR becomes "inaccurate" under section §1026.22 of Regulation Z (“regular” (.125%) or "irregular" (.25%) transaction), then the three business day waiting period applies.

Yes. APR tolerances are not changing under this rule.

Under certain circumstances. The creditor shall not provide a revised Loan Estimate on or after the date on which the creditor provides the Closing Disclosure. The consumer must receive a revised Loan Estimate not later than four business days prior to consummation. If the revised Loan Estimate is not provided to the consumer in person, then the consumer is considered to have received the revised Loan Estimate three business days after the creditor delivers or places such version in the mail. If, however, there are less than four business days to consummation, creditors are in compliance if the revised disclosures are reflected in the Closing Disclosure. See below for illustrative examples:

  1. If the creditor is scheduled to meet with the consumer and provides the Closing Disclosure on Wednesday and the APR becomes inaccurate on Tuesday, then the creditor is in compliance by providing the Closing Disclosure reflecting the revised APR on Wednesday. However, the creditor is not in compliance if both a revised Loan Estimate reflecting the revised APR and the Closing Disclosure are provided on Wednesday.
  2. If the creditor is scheduled to email the Closing Disclosure to the consumer on Wednesday and the consumer requests a change to the loan that would result in a revised Loan Estimate on Tuesday, then the creditor is in compliance by providing the Closing Disclosure reflecting the consumer-requested changes on Wednesday. However, the creditor is not in compliance if both the revised Loan Estimate and also the Closing Disclosure are provided on Wednesday.

No, we have no information on the potential of such an event at this time.

Regulation Z states:

“As a general rule, the annual percentage rate shall be considered accurate if it is not more than 1/8 of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.

In an irregular transaction, the annual percentage rate shall be considered accurate if it is not more than ¼ of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.

For purposes of paragraph (a)(3) of this section, an irregular transaction is one that includes one or more of the following features: multiple advances, irregular payment periods, or irregular payment amounts (other than an irregular first period or an irregular first or final payment).

Mortgage loans. If the annual percentage rate disclosed in a transaction secured by real property or a dwelling varies from the actual rate determined in accordance with paragraph (a)(1) of this section, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, the disclosed annual percentage rate shall also be considered accurate if:

The rate results from the disclosed finance charge; and the disclosed finance charge would be considered accurate under §1026.18(d)(1) or §1026.38(o)(2), as applicable; or for purposes of rescission, if the disclosed finance charge would be considered accurate under §1026.23(g) or (h), whichever applies.”

Yes. A creditor shall retain evidence of compliance with the requirements of §1026.19(e) and (f) for three years after the later of the date of consummation, the date disclosures are required to be made, or the date the action is required to be taken. A creditor shall retain each completed Closing Disclosure, and all documents related to such disclosure, for five years after consummation. The creditor must retain evidence that it performed the required actions, as well as made the required disclosures. This includes, for example, evidence that the creditor properly differentiated between affiliated and independent third-party settlement service providers for determining good faith under §1026.19(e)(3).

Section 1026.19(e)(3)(ii) provides that if the creditor requires a service in connection with transaction and permits the consumer to shop for that service, but the consumer either does not select a settlement service provider or chooses a settlement service provider identified by the creditor on the list, then good faith is determined pursuant to §1026.19(e)(3)(ii) (10% category), instead of §1026.19(e)(3)(i) (0% category). For example, if a creditor discloses an estimated fee for an unaffiliated settlement agent and permits the consumer to shop for that service, but the consumer either does not choose a provider or chooses a provider identified by the creditor on the written list provided pursuant to §1026.19(e)(1)(vi)(C), then the estimated settlement agent fee is included with the fees that may, in aggregate, increase by no more than 10% for the purposes of §1026.19(e)(3)(ii). If, however, the consumer chooses a provider that is not on the written list, then good faith is determined according to §1026.19(e)(3)(iii). If, however, the creditor identifies on the written list providers services for which the consumer is not permitted to shop, that service would remain in the 0% tolerance category.

Yes, there are some variance differences effective on 10/3/15 for applicable loans under the new rule. Here are the new variances:

Variance Categories

  • Zero % Variance Category
    • Fees paid to creditor or mortgage broker
    • Fees paid to affiliate of creditor or mortgage broker
    • Fees paid for services for which consumer not permitted to shop
    • Transfer Taxes
    • Lender Credits
  • 10% Variance Category (Aggregate Variance)
    • Recording Fees
    • Fees paid for 3rd-party services consumer permitted to shop for
  • Charges that Can Change
    • Prepaid interest
    • Property insurance premiums
    • Amounts placed into escrow
    • Fees paid to 3rd-party service providers selected by consumer not on list provided by creditor
    • Fees paid for 3rd-party services not required by creditor. These fees may be paid to affiliates.

To conduct the good faith analysis required under §1026.19(e)(3)(i) and (ii), the creditor should use unrounded numbers to compare the actual charge paid by or imposed on the consumer for a settlement service with the estimated cost of the service. It’s recommended that you develop a method for performing these calculations either by customizing a solution using your Loan Origination System (LOS) or in a manner separate from the LOS.



Revised Closing Disclosure – Revision/Redisclosure (Timing and Delivery)

Events after consummation

  • An event in connection with settlement occurs within 30 calendar days following consummation causing the Closing Disclosure to become inaccurate.
  • A change to amount paid by consumer from amount disclosed.
  • A creditor must deliver or place in mail corrected Closing Disclosure not later than 30 days after receiving information sufficient to establish event occurred.
Non-numeric clerical errors
  • Deliver or place in mail corrected Closing Disclosure no later than 60 calendar days after consummation
Refunds related to good faith analysis (Variance Exceeded)
  • Creditor refunds excess no later than 60 calendar days after consummation
  • Creditor delivers or places in mail corrected Closing Disclosure reflecting refund no later than 60 calendar days after consummation

Revisions to the TIP is not an item which requires re-disclosure prior to consummation, so if the TIP requires revision it may be provided prior to or at the time of consummation.

It depends on whether you have established a valid changed circumstance and done so within the time frame allowed for a revised Closing Disclosure (see comments below).

In order to reestablish a baseline for fees by use of the Closing Disclosure versus the last compliant Loan Estimate issued, Commentary ¶19(e)(4)(11)-1 states:

“Revised disclosures may not be delivered at the same time as the Closing Disclosure. Section 1026.19(e)(4)(ii) prohibits a creditor from providing a revised version of the disclosures required under §1026.19(e)(1)(i) on or after the date on which the creditor provides the disclosures required under §1026.19(f)(1)(i). Section 1026.19(e)(4)(ii) also requires that the consumer must receive a revised version of the disclosures required under §1026.19(e)(1)(i) no later than four business days prior to consummation, and provides that if the revised version of the disclosures are not provided to the consumer in person, the consumer is considered to have received the revised version of the disclosures three business days after the creditor delivers or places in the mail the revised version of the disclosures. See also comments 19(e)(1)(iv)–1 and –2. If, 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). See below for illustrative examples:

  1. If the creditor is scheduled to meet with the consumer and provide the disclosures required by §1026.19(f)(1)(i) on Wednesday, and the APR becomes inaccurate on Tuesday, the creditor complies with the requirements of §1026.19(e)(4) by providing the disclosures required under §1026.19(f)(1)(i) reflecting the revised APR on Wednesday. However, the creditor does not comply with the requirements of §1026.19(e)(4) if it provided both a revised version of the disclosures required under §1026.19(e)(1)(i) reflecting the revised APR on Wednesday, and also provides the disclosures required under §1026.19(f)(1)(i) on Wednesday.
  2. If the creditor is scheduled to email the disclosures required under §1026.19(f)(1)(i) to the consumer on Wednesday, and the consumer requests a change to the loan that would result in revised disclosures pursuant to §1026.19(e)(3)(iv)(C) on Tuesday, the creditor complies with the requirements of §1026.19(e)(4) by providing the disclosures required under §1026.19(f)(1)(i) reflecting the consumer-requested changes on Wednesday. However, the creditor does not comply if it provides both the revised version of the disclosures required under §1026.19(e)(1)(i) reflecting consumer requested changes, and also the disclosures required under §1026.19(f)(1)(i) on Wednesday.”

No. A revised Loan Estimate cannot be provided on or after the date the Closing Disclosure has been provided.

1026.19(f)(2)(i) states that except for a redisclosure based upon an inaccurate APR, the addition of prepayment penalty, or a loan product change, “the creditor shall provide corrected disclosures reflecting any changed terms to the consumer so that the consumer receives the corrected disclosures at or before consummation.”

In this case, if known prior to consummation, a revised Closing Disclosure would be required at or before consummation. If discovered after consummation since it affects the amount actually paid by the consumer, the creditor must deliver or place in the mail the corrected disclosure within 30 days after receiving the information.

The three items are: 1) the APR becomes inaccurate (violates tolerances); 2) the addition of prepayment penalty; and, 3) a loan product change. These three items require redisclosure and a new waiting period of three business days prior to the loan closing.

For additional information requested regarding a loan product change, Commentary ¶19(f)(2)(ii)-1ii, states:

“Assume consummation is scheduled for Thursday, June 11 and the disclosures provided under §1026.19(f)(1)(i) disclose a product required to be disclosed as a ‘‘Fixed Rate’’ that contains no features that may change the periodic payment.

  1. On Thursday, June 11, the loan product required to be disclosed changes to a ‘‘5/1 Adjustable Rate.’’ The creditor is required to provide corrected disclosures and delay consummation until the consumer has received the corrected disclosures provided under §1026.19(f)(1)(i) reflecting the change in the product disclosure, and any other changed terms, at least three business days before consummation. If, after the corrected disclosures in this example are provided, the loan product subsequently changes before consummation to a ‘‘3/1 Adjustable Rate,’’ the creditor is required to provide additional corrected disclosures and again delay consummation until the consumer has received the corrected disclosures provided under §1026.19(f)(1)(i) reflecting the change in the product disclosure, and any other changed terms, at least three business days before consummation.
  2. On Thursday, June 11, the loan product required to be disclosed has changed to a ‘‘Fixed Rate’’ with a ‘‘Negative Amortization’’ feature. The creditor is required to provide corrected disclosures and delay consummation until the consumer has received the corrected disclosures provided under §1026.19(f)(1)(i) reflecting the change in the product disclosure, and any other changed terms, at least three business days before consummation.”

The requirement for the additional three business-day waiting period once the Closing Disclosure has been delivered applies under three specific scenarios: 1) an inaccurate APR, which violates the established tolerances; 2) the addition of a prepayment penalty; or, 3) a change in the loan product. For other revisions known prior to consummation the revised Closing Disclosure may be given prior to or at the loan closing (consummation).

A revised Closing Disclosure may be delivered at or before consummation reflecting any changed terms, unless:

  • The disclosed APR becomes inaccurate.
  • The Loan Product changes – prior Closing Disclosure becomes inaccurate.
  • A Prepayment penalty is added.
THEN, a corrected Closing Disclosure must be received three specific Business Days before consummation.

A change from a 30 year fixed rate loan to a 15 year fixed rate loan is not a change to the loan product and would not require an additional three-day waiting period by itself. If the change from 30 years to 15 years causes the APR to become inaccurate, redisclosure and an additional three-day waiting period would be required.



Other Disclosure Effects (Other than LE or CD)

Yes, both booklets will continue to be required as applicable to the appropriate transaction. For purposes of the Loan Estimate and Closing Disclosures, the Settlement Cost Booklet has been promulgated under the title “Your Home Loan Toolkit” for use with applications received on and after 10/3/2015.

No. We have not yet heard anything from any of the states on this specific issue, but notifications will go out by ICE Mortgage Technology (AllRegs), as well as updates to our provided content, if and when we receive any updated information regarding movement by states in coordinating state law and regulations in keeping with the new provisions under the rule. You will need to pay attention to each state in which you do business for such conflicts (e.g., the state of Washington has eliminated specific disclosure forms currently required upon the effective date of the rule).

The language regarding the consumer’s right to receive a copy of the appraisal is included in the Loan Estimate, and there is no requirement for this to be a separate disclosure. However, the separate Notice of Right to Copy of Appraisal disclosure still applies to those transactions in first lien position that are exempt from use of the Loan Estimate & Closing Disclosure. Regarding disclosure of the waiver of receipt of a copy of the appraisal, if elected to issue to a consumer it would be separate from this disclosure.

Yes, this separate initial disclosure was eliminated for all loans other than reverse mortgages upon the effective date of the rule (10/3/2015).

The Appraisal statement “may” be omitted if it does not apply. So, when it is not required it can remain and does not have to be removed, however, if desired, it may be removed if it does not apply.



Miscellaneous

The National Association of Realtors, as well as other industry advocacy groups and service providers such as ICE Mortgage Technology have been providing available training in written form, webinars and classroom-based courses from publication of the rule to the current date. In addition, the CFPB has provided a number of resources to the industry in preparation for the effective date of the rule. It is recommended that in corresponding with realtors you establish realistic time frames with those service providers.



Disclaimer: The following information is intended for general information purposes with the goal of assisting ICE Mortgage Technology’s customers in complying with the new KBYO regulations. This information is provided as a courtesy to ICE Mortgage Technology’s customers and ICE Mortgage Technology makes no representation or warranty regarding the accuracy of the information set forth herein, and you may not rely on this information to ensure your company’s compliance with the KBYO regulations. This FAQ should not be construed as legal advice or opinion on any specific facts or circumstances, including the application of the KBYO regulations. You are advised to consult your own compliance staff or attorney regarding your specific residential mortgage lending questions or situation to ensure your compliance with all applicable laws and regulations.