Tag Archives: closing disclosure

The Top 10 Things Real Estate Agents Need to Know About TRID/Know Before You Owe

Real Estate Agents need to review and become familiar with the Closing Disclosure in order to answer buyer and seller questions

By Jeff Sorg, OnlineEd Blog

canstockphoto14866114un-known(December 23, 2015) – Every real estate agent should get familiar with the TILA-RESPA integrated disclosure forms. These new Loan Estimate and Closing Disclosure forms are required for most mortgage loan applications. While it is the job of the lender or settlement agent to complete the forms, these are the top ten things real estate agents should know about the TILA-RESPA Integrated Disclosures:

  1. A closing statement form called the Closing Disclosure (CD) is used for most mortgage loan applications. In most cases, the lender, not the settlement agent, will prepare and deliver the CD.
  2. The CD must be delivered to the consumer at least three business days before the scheduled closing date.
  3. The settlement agent should send settlement information to the lender 10 to 14 days before the closing date for the lender to prepare of the CD and meet its delivery requirements. Real estate agents should also communicate all buyer paid charges to the settlement agent 14 days before the closing date.
  4. The settlement agent will need to include on the CD the real estate agent’s company license number and the agent’s real estate license number. Consider including these numbers as part of your email signatures and on your letterheads.
  5. The CD sent to the consumer will not include the seller’s side of the transaction. The settlement agent will be responsible for completing and delivering the seller’s side of the CD.
  6. If the real estate agent wants a copy of the CD it will need to be obtained from the consumer; the settlement agent is not allowed to send a copy of the CD to the real estate agent.
  7. Changes to the CD after delivery to the consumer might trigger a new three-day waiting period, if changes cause the Annual Percentage Rate to be inaccurate, the buyer changes loan products or a prepayment penalty is added to the loan. Under the Equal Credit Opportunity Act (ECOA), changes and adjustments affecting property value might also trigger additional disclosure and review periods.
  8. In some circumstances, the CD will refer to Owner’s Title Insurance as “optional.” The consumer should be advised to obtain appropriate advice for from their title insurance agent for the protections given to them by purchasing owner’s title insurance.
  9. TRID rules may affect the sale agreement terms that real estate agents negotiate for either the buyer or seller. For example, a closing 30 days out may no longer be realistic. The best advice is to communicate with the lender and the closing agent to determine a realistic time frame for closing every transaction.
  10. A system should be in place to communicate changes to the sale agreement after it is signed and sent to the lender. Buyers should also be advised to respond immediately to lender requests.

###

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

 All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

TILA – RESPA Integrated Disclosure – Part 5 of 5: Special Information Booklet

Special Information Booklet

 (Part 5 of 5)

booklet1(Jeff Sorg, OnlineEd) – A creditor must provide the special information booklet, specifically the RESPA Settlement Costs Booklet, to the consumer who applies for a consumer credit transaction secured by real property no later than three business days after receiving the consumer’s loan application. The booklet does not have to be given to a consumer who applies for a refinance, subordinate lien, or reverse mortgage loan.

The Consumer Financial Protection Bureau has issued an updated version of the Special Information Booklet that incorporates the new Loan Estimate and Closing Disclosure. The new guide is titled “Your Home Loan Toolkit: A Step-by-step Guide.” The CFPB has made this guide available as a PDF download, or it can be ordered from the U.S. Government Printing Office (GPO):

The updated Special Information Booklet will be used starting October 3, 2015.

(Part 1. Part 2. Part 3. Part 4. Part 5)

###

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

  This article was published on July 17, 2015. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

 

TILA – RESPA Integrated Disclosure – Part 3 of 5: The Closing Disclosure Form

The New Closing Disclosure Form

(Part 3 of 5)

(Jeff Sorg, OnlineEd) – The Closing Disclosure integrates and replaces the final Truth-in-Lending disclosures and the RESPA HUD-1. In general, the Closing Disclosure sets forth the actual terms and costs of the transaction. The Closing Disclosure must be in writing and contain all of the information required. In many ways, the new Closing Disclosure presents most of the same information as existing disclosures, but in a brand new format.

A creditor is responsible for ensuring that the consumer receives the Closing Disclosure no later than three business days before consummation.

If delivery of the Closing Disclosure is by mail, the “mailbox rule” will apply. This rule means you have to add three days to account for mail delivery time to the three days required prior to consummation. The Closing Disclosure would need to be placed in the mail six business days prior to consummation. For purposes of counting days, Saturday is counted as a business day under the mailbox rule.

Remember, consummation is not the same thing as closing or settlement. Consummation occurs when the consumer becomes contractually obligated to the creditor. The exact time when consummation occurs is based upon state law. Consummation generally occurs when the borrower signs the promissory note, the security instrument, such as a mortgage or trust deed, and any other legal documents required by the creditor. Consummation is NOT when the final steps in the settlement or closing process occur, such as recording and disbursement of funds.

In most cases, the settlement agent, on behalf of the creditor, provides the borrower with the Closing Disclosure. In transactions involving a seller, the settlement agent will also provide the seller with a Closing Disclosure.

Another issue is how revisions and corrections to the Closing Disclosure should to be dealt with. The general rule is that creditors must redisclose terms or costs on the Closing Disclosure if certain changes occur to the transaction that causes disclosure inaccuracies. There are three categories of changes that require a corrected Closing Disclosure containing all changed terms.

There are specific changes that can occur before consummation that require a new three-day waiting period. In this case, consummation may need to be postponed to comply with the three-day rule to. Changes that require a new three-day waiting period are usually triggered by the following:

  1. The disclosed APR becomes inaccurate. However, there is a 10% tolerance allowed before a new waiting period is required.
  2. The loan product changes.
  3. A prepayment penalty is added.

Any changes not triggered by one of the three specified events do not require a new three-business day waiting period, but do require a revised Closing Disclosure be provided the consumer no later than consummation.

Sometimes, an event will occur after settlement that causes the Closing Disclosure to become inaccurate, resulting in a change to the amount the borrower or seller paid that is different from what was disclosed. An example would be a when the actual recording fee differs from the estimated amount.

Another event that triggers a revised Closing Disclosure relates to documenting refunds for tolerance violations. In other words, the amount charged exceeded the legal tolerance limits. A revised Closing Disclosure is also to be used to correct non-numerical clerical errors. An error is considered clerical if it does not affect a numerical disclosure and does not affect timing or delivery requirements.

In these instances, a revised Closing Disclosure must be delivered or placed in the mail to the consumer no later than 30 days after receiving sufficient information to determine that changes to the Closing Disclosure is required.

In all cases, the consumer has the right to inspect a revised Closing Disclosure during the business day before consummation.

 

(Part 1. Part 2. Part 3. Part 4. Part 5)

###

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

  This article was published on July 17, 2015. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

The New TILA-RESPA Integrated Disclosure – Part 1of 5: Summary and Background

The Consumer Financial Protection Bureau is requiring the use of a new TILA-RESPA integrated disclosure as of October 3, 2015

(Part 1 of 5)

(Jeff Sorg, OnlineEd) – The Consumer Financial Protection Bureau (CFPB) is requiring the use of a new TILA-RESPA integrated disclosure as of October 3, 2015.

In 2012, the Dodd-Frank Wall Street Reform and Consumer Protection Act directed the newly created CFPB to integrate the mortgage loan disclosures required under the Truth In Lending Act (Regulation Z), known as TILA  and the Real Estate Settlement Procedures Act (Regulation X), known at RESPA. The TILA and RESPA loan disclosures have been used for the past 30 years. These disclosures continue to create confusion for borrowers because of their overlapping and inconsistencies.

The new integrated disclosure forms, which cannot be put into use until October 3, 2015, provide one set of disclosures for all borrowers seeking closed-end consumer mortgages. These integrated forms combine the now existing four disclosure forms into one set of two disclosures.

  • The first new form, known as the Loan Estimate Disclosure, is a three-page form. In this form, the Truth In Lending (TIL) disclosure form, and the RESPA Good Faith Estimate (GFE), are combined into one disclosure form designed to help consumers understand the key features, costs, and risk associated with the mortgage loan. This Loan Estimate Disclosure form must be delivered to the consumer within three business days from loan application.
  • The second of the new forms is a five-page disclosure known as the Closing Disclosure. This form replaces the TILA and RESPA HUD-1 disclosures. It is designed to provide disclosures to help consumers understand the costs of the loan transaction. The Closing Disclosure should be delivered to consumers at least three business days prior to completing the loan.

These new forms will give consumers clear language information regarding a loan and include information such as interest rate, monthly payments, and all of the costs necessary to close the loan. In designing these forms, the CFPB had the goal of presenting information to consumers in a way to help the consumer decide if they can afford the loan. The forms also make comparing different loan products, including the cost of various loans over time, easier and less confusing.

Beyond understanding the content of the new forms, there is a business problem that arises from these changes. With the faster and more accurate delivery requirement of the charges between the Loan Estimate Disclosure and Closing Disclosure forms, constant and reliable communication will become key between lenders and title agents. During the new process, mortgage loan originators will have to:

  • Verify accuracy of the Loan Estimate at time of application;
  • Using the stricter RESPA tolerance guidelines, and on the final Closing Disclosure form, reconcile fees between the lender and title closing production systems;
  • Overcome challenges with the new requirement in order to support intelligent data standards. For instance, if a lender is not using the same system as the document provider for the initial Loan Estimate form or the final Closing Disclosure, it will not be easy for the mortgage loan originator to reconcile data, documents, and calculations in order to be compliant; and
  • the mortgage loan originator will want to provide an audit trail to prove compliance with the regulations that he or she must follow.

What this means is that lenders will need to recognize it is important that data and documents are shared and synced between the lender’s system and the title production systems, and that they are easily and quickly accessible. To achieve this, new electronic processes may be necessary to replace any leftover, traditional paper processes.

With the delivery deadlines and tolerance requirements, the lender is also on the hook for greater accuracy of the GFE/TIL at time of application.

A technology solution to be able to facilitate the electronic sharing and collaboration of data and documents is now critical. On top of that, loan originators will need to keep the process electronic in order to provide evidence and the proof of compliance around receipt of delivery, acceptance, and execution of documents, which the CFPB will eventually audit.

Be warned that mortgage lenders who do not comply with the new disclosure requirements will be subject to CFPB penalties. Theses penalties for violations of disclosure rules can be severe. The general penalties for violations include:

  • First Tier – Up to $5,000 per day for each day the violation or failure to pay continues
  • Second Tier – Up to $25,000 for each day that a person continues to recklessly engage in a violation of a federal consumer financial law
  • Third Tier – Up to $1,000,000 per day for each day that any person knowingly violates a federal consumer financial law

Under the provisions of Truth in Lending law, private lawsuits against the mortgage lender may also be brought.

The TILA-RESPA integrated rule applies to most closed-end mortgages and consumer credit transactions secured by real property. The rule does not apply to the following:

  • Home Equity Lines of Credit (HELOCs); and
  • Reverse Mortgages.
  • Chattel-dwelling loans, such as loans secured by a mobile home or by dwellings not attached to real property. These loans will continue to use the current disclosure forms required by TILA and RESPA.
  • Individuals or entities that make five or fewer mortgages in a calendar year, as they are not deemed a creditor under the rule.
  • Certain no-interest loans secured by subordinate liens made for the purpose of down payment home buyer assistance or a similar program, property rehabilitation, energy efficiency, or foreclosure avoidance prevention.

Under the previous TILA-RESPA integrated rule, certain loans were subject to TILA, but not RESPA. Under the updated TILA-RESPA integrated rule, the following loans are also subject to the disclosure rules:

  • Construction-only loans; and
  • Loans secured by vacant land or by 25 or more acres.

Unlike many of the CFPB mortgage rules, the final TILA-RESPA integrated rule does not include an exception for small creditors.

(Part 1. Part 2. Part 3. Part 4. Part 5)

###

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

  This article was published on July 17, 2015. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

New Mortgage Disclosure Final Rule Released

November 22, 2013 – At a field hearing in Boston on Wednesday, November 20, 2013, Richard Cordray of the CFPB took the opportunity to unveil the new “Know Before You Owe” forms, which will replace their better known “good-faith estimate” predecessors.  The final rule issued on Wednesday will require lenders to replace the oft-confusing good faith estimate with the easier-to-use form by August of 2015.
 

Loan Estimate Preview

Follow the links below for an early look at sample versions of these forms.

Loan Estimate | Closing Disclosure


 

The 3-page Loan Estimate replaces both the early Truth in Lending statement and the current Good Faith Estimate, while the 5-page Closing Disclosure replaces the final Truth in Lending statement and the HUD-1 settlement statement.
 
The CFPB explains each form:

The loan estimate: This form will be provided to consumers within three business days after they submit a loan application. It replaces the early Truth in Lending statement and Good Faith Estimate and provides a summary of the key loan terms and estimated loan and closing costs. Consumers can use this form to compare the costs and features of different loans.

The closing disclosure: Consumers will get this form three business days before closing on a loan. It replaces the final Truth in Lending statement and the HUD-1 settlement statement and provides a detailed accounting of the transaction

Spanish language versions: The CFPB is also including Spanish-language versions of the forms in the final rule, which it tested with Spanish-speaking consumers.  These Spanish-language versions will provide important benefits to industry in communication with Spanish-speaking consumers.

Compliance actually gets a little simpler this time around, since the industry will no longer have to administer compliance with two different sets of regulatory requirements.  Paperwork is cut in half, meaning long-term savings and less redundant work for the lender.

The two forms are nearly identical in layout, making it much easier to compare information in the estimate and the closing disclosure.  This will make shopping for loans a much simpler process for the consumer, showing up to a 42 percent improvement in comparing loans.  An extensive study showed statistical improvement of 29 percent in participants who used the new forms being better prepared to ask questions about a sample loan.  Specifically, consumers were better able to identify:

  • Risk Factors like prepayment penalties, balloon payments, or an increase in the loan balance in a negative amortization loan.
  • Short-term and long-term costs .
  • Monthly payments

While many of the CFPB’s final rules have been met with a decidedly mixed reception, this looks to be an improvement for both mortgage lenders and consumers.  Keep checking back from more compliance news from OnlineEd.