Know Before You Owe (KBYO or TRID)

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.

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.

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.

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.

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.

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.

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.

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.

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.”

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.

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).

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.

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

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….”

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.

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.

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.