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TILA-RESPA Integrated Disclosures

TRID

Presented By:

These materials are presented for informational purposes only and are not intended to constitute legal advise

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The Consumer Financial Protection Bureau (CFPB) issued the TILA-RESPA Integrated Disclosure final rule in November of 2013. The rule implements provisions under the Dodd Frank Wall Street Reform and Consumer Protection Act.

Goals of the New Rule:1)Easier to use mortgage disclosure forms2)Improve consumer understanding3)Aid in comparison shopping4)Prevent surprises at the closing table

A Little Background

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The Initial Truth-in Lending disclosure and RESPA Good Faith Estimate (GFE) have been combined into new the Loan Estimate.

The Final Truth-in-Lending disclosure and RESPA HUD-1 have been combined into the new Closing Disclosure.  

Under the New Rules

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These new disclosures apply to most closed end consumer mortgage loans.

Short term construction loans and loans with lots of 25 acres or more that were previously exempt from RESPA are now included.

Effective Date

The new Loan Estimate (LE) and Closing Disclosure (CD) will be required on applications received on or after October 3rd, 2015*.

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The borrower must be provided the LE no later than the third business day after the lender has received the borrower’s loan application.

The closing cannot take place no earlier than the seventh business day after the LE has been delivered to the borrower.

The Loan Estimate

• The LE provides a summary of key loan terms and estimates of loan and closing costs, even the cash needed to close.

• The LE is meant to be used as a tool for the borrower to shop for the best mortgage.

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Must be received by the borrower three business days before the closing documents are signed.

Provides detailed accounting of the loan transaction.

The Closing Disclosure

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The lender’s requirement to provide the LE is triggered upon receipt of six pieces of information. This information can be received orally or in writing.

•The Consumer’s Name

•The Consumer’s Income

•The Property Address (Even if contract has not been received)

•An Estimate of the Value of the Property

•The Mortgage Loan Amount Sought

•Consumer’s Social Security Number

New Application Definition

Six Elements

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Pre-Application Worksheets

Cash to Close

Prior to receiving an application (the six items) Lenders are still able to issue closing cost estimates or cash to close worksheets. Under certain conditions of course…

These estimates cannot look like the old GFE or new LE.

The costs must be meaningful, not grossly over disclosed or under disclosed.

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Pre-Approvals Going Forward

Issuing a pre-qualification based on oral information provided by the borrower and a credit report is still allowed.

Borrowers can also request pre-approval from the lender for the purpose of shopping for the right home.

To meet the requirements of the new rule, borrowers can voluntarily provide income/asset documentation needed for pre-approval. However, the lender cannot require documentation for the purposes of applying for credit until there is an application.

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Requiring Verifying Documentation

The new rule prohibits lenders from requiring the borrower to provide the sales contract, income or assets documents until there is a loan application.

Again, the borrower can request to be pre-approved and voluntarily provide documentation for the purposes of shopping for a home.

Lenders cannot require documentation for the purposes of applying for credit until there is an application

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Good Faith and Best Information

Lenders must use the best information available to deliver the most accurate LE possible. This means if the lender has received the sales contract, the information in the contract must be considered when completing the LE.

The Lender must disclose any additional inspections, seller credits, and accurate fees for the title agent listed.

While it’s not required to issue the LE, making that sales contact available to the Lender as soon as possible is key to an accurate LE.

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Changes to LE Fees

Just like with the current GFE, Lenders will be held to certain tolerances when it comes to adding or increasing certain fees.

The only exception would be a valid change of circumstance as defined by the rule.

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Fees Paid To• The Lender • The Broker• An Affiliate of the Lender or Broker

Fees Paid For • Lender Required 3rd Party Services the

Consumer Cannot Shop For Examples: Appraisal Credit Report Condo Cert

• Transfer Taxes

Fees That Cannot Increase

Zero Tolerance

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Fees that Cannot Increase by More than 10%

10% Tolerance

Fees Paid To•Lender required 3rd party services the consumer can shop for, but didn’t .

Fees Paid For •Recording Fees

Examples: SurveyorPest Inspection Company)

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Fees Paid For • Prepaid Interest• Property Insurance Premiums• Amounts Placed Into Escrows

Fees Paid To• Required 3rd Party Services the

Consumer Can Shop for and Did • Non-Required Third Party Services

Charges that Can Change

No Tolerance

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The Service Provider List

When issuing the LE, Lenders are required to provide a Service Provider list showing at least one local provider for the services the consumer can shop for.

Examples of services listed would be:•Title Company•Surveyor•Pest Inspection Company

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The Closing Disclosure

AKA-The “CD”

The Closing Disclosure (CD) must be received by the borrower no later than three business days before the signing of the loan documents.

Important Note: If there is a POA involved, the party acting as “attorney in fact” for the borrower(s) must also receive the CD three business days before the signing.

Business Days – Includes Saturdays but excludes Sundays and legal public holidays

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Creation and Delivery of the CD

At this point in the game, it’s safe to say that most lenders will take on the responsibility of creating and delivering the CD to the borrower.

The Lender is ultimately on the hook for the accuracy and timely delivery.

Creating the CD will still be a collaborative effort between the title agent and lender.

SWBC Mortgage’s Closing Department will collaborate with all parties to the transaction and will be responsible for creating and delivering the Borrower’s CD.

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The Seller Closing Disclosure

The CD for the seller will either be combined with the CD for the Borrower or a separate seller CD will be delivered at closing.

Who creates and delivers the Seller CD will vary based on lender.

There is no 3 day delivery requirement for the seller CD, it can be delivered the day of closing.

SWBC Mortgage’s Closing Department will collaborate with the closing agent who will then be responsible for creating and delivering the Seller’s CD.

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How to Count the Three Days

Again, the CD must be received by the borrower no later than three business days before the signing of the loan documents.

The three day count starts the day after receipt. Examples of confirming receipt include:

•Hand deliver – Copy of CD with signature and date must be retained

•Courier/FedEx with signed receipt showing delivery

•Via email or electronic delivery with an audit trail or tracking to confirm receipt

•Use the Mail Box Rule which allows for the presumption of receipt 3 business days after the CD is delivered, placed in the mail or emailed (6 business days total)

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How to Count the Three Days

• This chart assumes there are no federal holidays.

• All disclosures delivered via email must be sent in compliance with the E-Sign Act with prior consent received.

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Changes that Trigger a New Three Day Wait

Redisclosure of the CD and a new three-day waiting period is required if and only if:

• The APR increases by more than 1/8 % for fixed rate loans, or 1/4% for ARM loans. A decrease in the APR will not trigger a new 3 day wait if it is based on changes to the interest rate or other fees.

• The loan product changes (going from a fixed to an ARM)

• Addition of a prepayment penalty

All other changes allow for the delivery of the revised CD at closing.

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Changes that Could Cause Closing Delays

Try to avoid last minute changes to the sales contract like adjustments in sales price, or seller credits.

Changes that require the addition of new fees.

Changes that impact the closing date.

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Be Prepared

Again, avoid changes that could trigger a new three day wait.

• Think twice about scheduling closings on the same day the borrower must be out of their current home-give them a few days cushion. This will avoid the borrower having no place to live due to a legally delayed closing.

• For all parties involved, the goal should be to target loan approval and the last call for any changes by the borrower or seller at least a week prior to closing.

• Schedule earlier walk-throughs

• Because changes can and will happen, be prepared for the unexpected.

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Communication is the Key

Stay in communication with your Lender and Title Agent

Communicate changes as soon as they are known

Communicate expectations clearly

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Quick Overview of the Forms

The LE and CD

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Page 1 of the LE

Details about the loan transaction, the rate lock and expiration of the estimates

Terms of the transaction

Projected Payments Table

Estimated Taxes, Insurance and Assessments

Total costs imposed on the transaction and cash needed to bring to closing

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Page 2 of the LE

All charges paid to the creditor for originating the loan

Services for which shopping is not allowed

Services for which the borrower can shop for

Section appears if payment adjusts for reasons other than interest rate change

Taxes and Gov Fees

All prepaid amounts

Amounts placed into escrow

Other costs of which the creditor is aware

Calculating cash to close

Section appears if the interest rate will change after closing

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Page 3 of the LE

Comparison disclosures: 5 Year Payoff, APR, and Total Interest Percentage

ECOA required Appraisal Disclosure

Late Payment Disclosure

Creditor’s intent to service loan

Optional Signature lines

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Page 1 of the CD

Details about the loan transaction, the rate lock and expiration of the estimates

Terms of the transaction

Projected Payments Table

Estimated Taxes, Insurance and Assessments

Total costs imposed on the transaction and cash needed to bring to closing

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Page 2 of the CD

• Paid by Others Items• Borrower Paid Items • Seller Paid Items

Loan Costs: Origination Charges, including Broker Comp, Services Shopped for and Not Shopped For

Other Costs: Including Taxes & Gov Fees, Prepaids, Escrow Deposit and Other Charges

Sum of all Closing Costs, including specific and general lender credits or cures

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Page 3 of the CD

Calculating the Cash to Close

Summaries of Transaction

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Page 4 of the CD

Late Payment Disclosure

Escrow Account Information

Whether the Lender accepts partial payments

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Page 5 of the CD

Total of Payments and Total Interest Percentage Calculations

Liability After Foreclosure

Contact Information

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THANK YOU

Q & A