September 12-15, 2016 Dallas, TX

Transcription

1 September 12-15, 2016 Dallas, TX

2 New name. Same people. Same service. As you may remember, TriNovus and the TriComply solution were acquired by Temenos in Now, in an effort to increase our capabilities and better serve our customers, we have re-aligned all of Temenos products and services under a series of product families. As part of this strategy, TriComply has been renamed Temenos and has joined the Risk & Compliance product family. Executive Director Compliance Services TriComply is not going away, we are simply changing what it s called! What does this mean for TriComply members? For now, you will continue to access TriComply exactly how you always have, though it will be rebranded as Temenos. However, we plan to upgrade the system URLs and will keep you informed of those changes. You can always visit temenos.com and click Product Login in the top right hand corner of the page. has been redesigned and will have a new look-and-feel featuring updated Temenos branding. Though gradual, our communications, manuals, policies, webinars, training and various other resources will begin to reflect Temenos branding. What you will NOT see change is the TriComply Team or the excellent service you have come to expect from us. Again, TriComply is not going away, we are only changing names! TriNovus and Temenos Together Temenos is the only company in the industry completely specialized in financial software. As part of this rebrand, you will also notice a difference in how we refer to all of our solutions including core processing, analytics & reporting, risk & compliance, front office and financial crimes mitigation, etc. As one of our valued customers, I appreciate your continued support. On behalf of the entire TriComply team, we look forward to continuing to serve you for many years to come through Temenos. Please don't hesitate to contact us by calling or at complianceservices@temenos.com. Sincerely, Bart Hall

3 2016 Temenos KnowledgeShare Speakers - Dallas Leah M. Hamilton is the Chief Compliance Officer for Temenos and has 20 years of experience in the financial services industry. She also serves as the Director of Compliance Education and Training as well as the Editor-in-Chief of the Temenos Financial Compliance Journal. Known for her engaging approach to teaching regulatory compliance as a nationally recognized speaker on Compliance Lending, Deposits, Compliance Management and BSA/AML matters, Leah provides candor and an in-touch approach while equipping attendees with tools and valuable insight. As a compliance expert, Leah has served as the lead compliance consultant and advisor on consent order remediation engagements and management responses to examiner concerns. She has served as a TRID expert for the ABA and trained more than 1,000 lenders on TRID. She received her Juris Doctorate from Northern Illinois University College of Law and her Bachelor of Arts in General Studies degree from the University of Texas at Dallas where she majored in law and minored in business management. Leah also serves as a faculty member for the Southwest Graduate School of Banking at Southern Methodist University in Dallas. Cindy Prince is a Senior Compliance Advisor with the Temenos Compliance Advisory team. Cindy brings almost 25 years of banking experience to the Temenos team, which includes 12 years of experience as a Compliance Officer. Her career has also focused on risk management, training and audit, and she also held the position of Internal Auditor for 7 years at a small community bank. Cindy is a RESPA, TRID and HMDA guru. As the lead developer of Temenos The New HMDA Workshop, she created over 300 FAQs on the 2018 HMDA rules! Cindy received her Certified Regulatory Compliance Manager (CRCM) designation in Greg Sawyers is the Managing Director for our Advisory Services team. With over a decade of experience working in the banking industry, Greg has spent the majority of his career working in compliance and BSA. His work history includes time spent at both small and large financial institutions giving him a wide range of knowledge pertinent to all community banks. Prior to his arrival at Temenos, Greg was the Chief Compliance Officer and Chief Risk Officer for Educational Services of America where he worked within the student loan industry. In addition, Greg was the Chief Risk Officer and Senior Compliance Officer for its subsidiary, SouthEast Bank. Greg graduated from East Tennessee State University with a Bachelor's of Science degree. He has furthered his education in the field of compliance by attaining the designations of Certified Regulatory Compliance Manager (CRCM), Certified Anti-Money Laundering Specialist (CAMS), and Certified Community Bank Compliance Officer (CCBCO).

4 2016 Temenos KnowledgeShare Agenda - Dallas Day 1: Deposits, Compliance Management and BSA/AML Introduction 9:00 9:15 Deposit Stew 9:15 10:15 Break 10:15 10:30 UDAAP and Deposits 10:30 11:30 Managing Complaints 11:30 12:15 Lunch 12:15 1:30 Compliance Management Essentials 1:30 2:15 Financial Crime: A new look 2:15 3:00 Break 3:30 3:45 Cybersecurity: Not just an IT issue 3:45 4:30 Day 2: BSA/AML and Lending Key BSA/AML and Lending Examiner Trends 9:00 9:30 Customer Due Diligence: Really getting to know your customer 9:30 10:15 Break 10:15 10:30 Building a Robust BSA/AML Compliance Risk Assessment 10:30 11:15 Protecting our Service members: The Military Lending Act 11:15 11:45 Lunch 11:45 1:00 RESPA Section 8: Are you sure your Marketing Service Agreement is compliant? 1:00 1:45 Regulation O: Insider lending 1:45 2:30 Break 2:30 2:45 Flood Escrows 2:45 3:15 HMDA vs. Regulation B: What s the difference? 3:15 4:00 Day 3: HMDA Workshop Breaks will be provided throughout session HMDA: Haven or Havoc Presentation 9:00 12:00 Lunch 12:00 1:15 HMDA: Haven or Havoc Workshop 1:15 4:00 Day 4: Lending TRID & the Construction Loan 9:00 10:00 30 min Break / Check-out 10:00 10:30 TRID Monitoring 10:30 11:15 TRID: Calculating Cash to Close 11:15 12:15 Lunch 12:15 1:15 TRID Bucket Challenge 1:15 2:30

5 2016 Temenos KnowledgeShare Topics DESCRIPTIONS Day 1 Deposits and Compliance Management DEPOSIT STEW Where new regulations are still pending and issues still arising under existing rules, this session will be filled with deposit issues and examiner trends with remittance transfers, opt-in/opt-outs, FCRA and disclosure errors. UD(A)AP AND DEPOSITS We will look at both UDAP and UDAAP, including current examiner trends. Then, we will take a fresh look at the basics of promoting your deposit products but focus on the best practice for additional disclosures the ones not specified in the rules, which can be the ones that hurt the most. MANAGING COMPLAINTS: AN EFFECTIVE COMPLAINT MANAGEMENT PROGRAM When Mr. or Mrs. Jones had an issue, you took care of it; end of story. But, with today s vast technology and apps along with the CFPB s taunt of Complain Here, institutions must have a strong Complaint Management Program to ensure an effective response process. We will look at key components of an effective complaint management program, including distinguishing complaint vs. inquiry vs. error resolution. COMPLIANCE MANAGEMENT ESSENTIALS Join us as we review the requirements for a compliance management program, regulatory change management control and order of rule precedence. With the volume of regulatory changes, it is essential to re-assess your compliance management program to ensure it is commensurate with your size, offerings, etc. FINANCIAL CRIME: A NEW LOOK Structuring and kiting were easy to identify when compared to the innovative evolution of today s financial crimes. The proliferation of hacking, identity theft, human trafficking and terrorist financing, to name but a few, gives rise to red flags for new crimes and new criminals that institutions need to consider. Join us as we explore new considerations for your BSA/AML program to fight financial crime. CYBERSECURITY: NOT JUST AN IT ISSUE No matter where we look these days, cybersecurity is a leading topic in the financial services industry. Despite its title, cybersecurity is not just about technology. Chances are a breach in your institution s technology may very well impact a number of compliance and BSA areas. We will explore the impact cybersecurity issues have on compliance and BSA, such as privacy, unauthorized transactions and more. Day 2 - BSA and Lending KEY BSA/AML AND LENDING EXAMINER TRENDS Join us to gain insight on the latest examiner trends, consent orders, feedback and insight in the BSA/AML areas as well as Lending.

6 2016 Temenos KnowledgeShare Topics DESCRIPTIONS CUSTOMER DUE DILIGENCE: REALLY GETTING TO KNOW YOUR CUSTOMER When was the last time you reexamined your customer due diligence and enhanced due diligence policies and procedures? Have you considered the anticipated customer due diligence proposals? Getting to know your customer is a critical component of any BSA/AML program. One key challenge BSA officers face is the That s too personal; I m not going to ask the customer that syndrome. This session will highlight key considerations of CDD that both deposit and lending staff need to know to ensure compliance with BSA/AML rules and your institution s policy. BUILDING A ROBUST BSA/AML COMPLIANCE RISK ASSESSMENT BSA/AML scrutiny is on the rise and with good reason. Failure to thoroughly identify the institution s BSA/AML risk could leave one open to unwittingly participating in financing terrorism, money laundering or other criminal activity. A meaningful risk assessment is a key tool to identify, prioritize and ultimately manage the institution s risk. There are numerous elements to consider when creating a risk assessment. Join this session to look at key considerations for a robust BSA/AML compliance risk assessment. PROTECTING OUR SERVICE MEMBERS: THE MILITARY LENDING ACT In recent years, we have seen the crackdown on unfair, deceptive and abusive acts and practices inflicted on our brave men and women. The regulatory agencies and state actions send a clear message to the lending industry: Federal and State agencies will be vigilant about holding financial institutions accountable for providing the protections our service members and veterans have earned through their selfless service to our nation. And actions speak louder than words. The Military Lending Act will close many of the loopholes that allowed such unscrupulous lenders to skirt the rules but unfortunately impact all lenders. Join us as we look at what is required to ensure compliance this October 2016 with the new MLA rules. RESPA SECTION 8: ARE YOU SURE YOUR MARKETING SERVICES AGREEMENT IS COMPLIANT? When it comes to mitigating risk, most institutions go above and beyond to avoid a RESPA Section 8 violation. Depending on the structure and the practices that follow a marketing service agreement, your institution could be exposed to substantial risks of violating the prohibition on kickbacks and referrals. We will examine the CFPB s Bulletin on RESPA Section 8 as well as the key consent order making lenders reconsider their partnerships and preferred providers. REGULATION O: INSIDER LENDING Lending to insiders can be a challenge from definitions to dollar amounts, and examiners have a critical eye when it comes to insider abuse. During this session, we will break down the definitions, which apply when, dollar limits and more.

7 2016 Temenos KnowledgeShare Topics DESCRIPTIONS FLOOD ESCROWS The new flood escrow requirements have many exceptions and exemptions. However, qualifying for certain exemptions is not a once and done; ongoing monitoring is required. We will review the new escrow requirements, what you need to be doing to ensure compliance and what happens if you no longer meet an exemption. HMDA VS. REGULATION B: WHAT S THE DIFFERENCE? Between withdrawn, denied, incomplete and completing GMI, the grey lines between Regulation B (ECOA) and C (HMDA) are often confusing. Join us as we explore the differences and define those lines. Day 3 The New HMDA Workshop HMDA: HAVEN OR HAVOC A WORKSHOP TO GET YOU READY FOR THE NEW HMDA Join Leah Hamilton, Chief Compliance Officer, and Cindy Prince, Senior Compliance Advisor, from Temenos as they take you through the soon to be new world of HMDA. The duo will step you through the rule, educate on how to calculate race and ethnicity, and provide insights on how to get ready now to minimize current and potential new errors. Temenos has developed several tools and materials to take you from Where do I start? to I am on my way. In addition, the team will provide insight on your action plan, not just for HMDA but also for Fair Lending. Day 4 - Lending TRID & THE CONSTRUCTION LOAN You have a construction/perm loan with a one-time close; a regulation that is not so friendly to accommodate. What should you do? We will step through completing the LE and the CD for a one-time construction loan during the session and provide a completed example for you to follow along and take back for reference. TRID MONITORING You have been so caught up in making sure the disclosures were coming out right that you have not had a chance to really go back and monitor or audit your TRID processes and disclosures. We will help you identify key areas to be monitoring to ensure compliance and document potential civil exposure. TRID: CALCULATING CASH TO CLOSE The regulation requires specific math calculations that are impractical for real-world loans. We will explore the alternative ways to completing the cash to close section on the Loan Estimate and Closing Disclosure to ensure your numbers are disclosed correctly. TRID BUCKET CHALLENGE What fees go where and when and oops there may be a cure to go with that the pangs of TRID still abound. Join us as we look at key scenarios to review which fees are subject to which tolerance buckets and when.

8 8/29/2016 TRID and the Construction Loan 2016 Temenos USA. All rights reserved. 1 What you will learn TRID construction loans What is a construction loan Closing options Disclosure options Purpose Value Product Payments Estimated taxes, insurance and assessments Construction fees 2 1

9 8/29/2016 What are your options You can run You can Hide Or you can simply cry 3 But the reality is Here to stay 4 2

10 8/29/2016 Construction loans What is a construction loan 12 CFR (a)(9)(iii) If credit is not for A purchase (acquisition of property) or refinance (replace an existing obligation) and Credit will be used to finance the initial construction of a dwelling on the property identified that secures or will secure the transaction Then, it is a construction loan Commentary Creditor extends credit to finance Only the cost of initial construction Not renovations to existing dwellings Transactions where a multiple advance loan may be permanently financed by the same creditor 5 Options Closings One closing Construction-to-perm loan Single disclosure Single, combined disclosure One-time close Two closings Separate construction loan and permanent loan Applications One application or two In-house vs. secondary market Department vs. separate legal entity Disclosure timing Be very careful here if leverage same application, both sets of disclosures are triggered at time (6) items received 6 3

11 8/29/2016 Applications and construction loans Application means the submission of a consumer's financial information for the purposes of obtaining an extension of credit Consists of the submission of the consumer's name, consumer's income, consumer's social security number to obtain a credit report, property address, estimate of the value of the property, and mortgage loan amount sought Refraining from obtaining or learning estimated value of property Construction plans Be very careful here what has the consumer requested? Open-end, no limit to build my dream home? 7 Options Disclosures One set or two One-time close Do you mean construction-to-perm loan? Do you mean only one closing but with two sets of documents? Two separate closings One to start construction One when construction is complete 8 4

12 8/29/2016 Options Construction statement In transactions involving new construction If creditor reasonably expects that settlement will occur more than 60 days after the Loan Estimate disclosures are provided, creditor may revise Loan Estimate provided that creditor Clearly and conspicuously states on the Loan Estimate that at any time prior to 60 days before consummation, the creditor may issue revised disclosures If construction statement not included on initial Loan Estimate, creditor may not issue revised disclosures, unless valid changed circumstance Construction statement is not required Option if want to be able to revise Loan Estimate based on > 60 day settlement Business decision Be sure policy (and practice) reflects decision Construction Loans You may receive a revised Loan Estimate at any time prior to 60 days before consummation. 9 Purpose Waterfall methodology If loan is not A purchase or A refinance Call it Construction (and if it is not one of those, call it Home Equity ) 10 5

13 8/29/2016 Purpose Construction-to-perm loan Call it Purchase if acquisition of property securing or that will secure the loan Two closings Construction phase Acquisition of the property = Purchase Already own property and funds used to build dwelling = Construction Permanent loan phase Refinance Watch out for HMDA A home purchase loan includes both a combined construction/permanent loan and the permanent financing that replaces a construction-only loan. It does not include a construction-only loan, which is considered temporary financing under Regulation C and is not reported 11 Property value How do you get an appraisal before an application? Sales Price LE, CD The contract sales price of the Property for Purchase transactions Prop. Value LE The estimated value of the Property for no seller involved transactions For Purchase transactions, Sales Price label must be displayed For non-purchase transactions, Prop. Value label must be displayed If creditor has an appraisal or evaluation that includes the estimated value of the Property it will rely on in its credit decisioning, it is the appraised value If the estimated includes the value of personal property, include the personal property value if it is comingled and cannot be distinguished; if it can be distinguished, it is only the value of the real property Appraised Prop. Value CD The appraised value of the property when there is no seller and creditor has obtained an appraisal For non-purchase transactions If creditor has an appraisal or evaluation that includes the estimated value of the Property it will rely on in its credit decisioning, it is the appraised value Estimated Prop. Value CD The estimated value of the property when there is no seller and creditor has not obtained an appraisal May use estimate provided by the consumer at application, or if it has performed its own estimate of the property value by the time the disclosure is provided to the consumer, disclose that estimate provided that it was the estimate the creditor used to determine approval of the credit transaction 12 6

14 8/29/2016 Product There are (2) required pieces of information that must be used to complete the Product field -- in a required order: The duration of any introductory rate or payment period and the first adjustment period, as applicable, immediately followed by a product description of the loan features; and The duration of any introductory rate or payment period and the first adjustment period, as applicable, of the product type Example 12 mo. Interest only, 3/1 Adjustable rate If the transaction has more than one payment feature and/or interest rate, only the first one of each is selected from the specified orders 13 Product First applicable payment feature, preceded by duration Negative amortization If the principal balance may increase due to the addition of accrued interest to the principal balance Interest only If one or more regular periodic payments may be applied only to interest accrued and not to the loan principal Step payment If scheduled variations in regular periodic payment amounts occur that are not caused by changes to the interest rate during the loan term Balloon payment If the terms of the legal obligation include a balloon payment Seasonal payment First applicable description of the interest rate, preceded by any applicable adjustment period Adjustable rate If the interest rate may increase after consummation, but the rates that will apply or the periods for which they will apply are not known at consummation Step rate If the interest rate will change after consummation, and the rates that will apply and the periods for which they will apply are known at consummation Fixed rate If the loan product is not an Adjustable Rate or a Step Rate If the terms of the legal obligation expressly provide that regular periodic payments are not scheduled between specified unit-periods on a regular basis 14 7

15 8/29/2016 Product Construction-to-perm Same Product, same rates 5% Fixed rate, 5% Fixed Rate Same Product, different rates 6% Fixed rate, 4% fixed rate Step rate (know) Adjustable rate (do not know) Different Product, same initial rates Fixed rate, Adjustable rate 4%, 5/1 ARM with initial rate at 4% 15 Advances For construction only, creditor may calculate applicable amounts, such as payments, as either A single advance of all funds or Multiple advance loan Calculation based on 50% initial advance 16 8

16 8/29/2016 Initial Payments Appendix D Two options Part I - Construction Period Disclosed Separately Part II - Construction and Permanent Financing Disclosed As One Transaction Initial payment calculation The initial periodic payment amount that will be due under the legal terms of the obligation Initial Payment calculation under Appendix D Part I.A.1 and Part II.A.1 Interest only on amounts advanced Part I.B.1 and Part II.A.2 Interest on entire commitment amount Loan amount $100,000 Loan amount $100,000 Interest rate 5% Interest rate 5% Term 12 mos Term 12 mos 1/2 x $100,000 $50,000 $50,000 x.05 $2,500 $100,000 x.05 $5,000 $2,500 / 12 $ $5,000 / 12 $ Initial payment $ Initial payment $ Projected Payments Construction-to-perm Appendix D Part II.C.2 C. The creditor shall disclose the repayment schedule as follows: 2. For loans under paragraph A.2 of part II and loans under paragraph A.1 of part II that are subject to (e) and (f), including any payments of interest only that are made during the construction period Projected payments table must reflect the interest-only payments during construction phase in first column, followed by appropriate column(s) reflecting amortizing payments for permanent phase 18 9

17 8/29/2016 Projected Payments What is the Product? 19 Projected Payments Two separate closings The initial periodic payment amount that will be due under the legal terms of the obligation Construction Permanent 20 10

18 8/29/2016 Estimated Taxes, Insurance and Assessments Construction phase Taxes Insurance Estimated property taxes and homeowner's insurance shall reflect: The taxable assessed value of the real property securing the transaction after consummation, including the value of any improvements on the property or to be constructed on the property, if known, whether or not such construction will be financed from the proceeds of the transaction, for property taxes; and The replacement costs of the property during the initial year after the transaction, for 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 21 Estimated Taxes, Insurance and Assessments Construction phase Insurance Builder s risk insurance Borrower paid Assessments Escrow Construction phase Permanent phase 22 11

19 8/29/2016 Construction fees Inspection and draw fees Unknown Information is considered unknown if it is not reasonably available to the creditor Must act in good faith, exercise due diligence Date specific vs. general timeframe 23 The simpler things When you look at the variances between a regular loan and a construction loan, where is the real heartburn? Often, it is the software vendor System cannot accommodate It s an upgrade that we will have to pay for Step back and look at each section What is the same, what is different For example, what is the conceptual difference between a 5/1 ARM with interest only payments for the first 5 years and amortizing over the next 25 and a construction loan fixed for the first year, interest only and then amortizes over the next 29 years with a 5/1 ARM? Deep breathe! 24 12

20 8/29/2016 Half empty or half full 25 Questions? 2016 Temenos USA. All rights reserved

21 TRID & the Construction Loan: Handout

22 Construction Loan Loan Estimate 123 SE Jamess St Anytown, ST Loan Estimate DATE ISSUED 01/07/2016 APPLICANTS Tom Construction 123 Anywhere Street Anytown, ST PROPERTY 7000 Ridge Rd Bedford, NH03110 Est. Prop. Value $450,000 Save this Loan Estimate to compare with your Closing Disclosure. LOAN TERM 30 years PURPOSE Purchase ce PRODUCT 6 mo. Interest Only, Fixed Rate LOAN TYPE x Conventional FHA VA LOAN ID # RATE LOCK x NO YES, until Before closing, your interest rate, points, and lender credits can change unless you lock the interest rate. All other estimated closing costs expire on 01/22/2016 at 5:00 p.m. MST Loan Terms Can this amount increase after closing? Loan Amount $417,000 NO Interest Rate 4.50% NO Monthly Principal & Interest See Projected Payments below for your Estimated Total Monthly Payment Prepayment Penalty Balloon Payment 1, YES Does the loan have these features? NO NO Adjusts every starting in Goes as high as $2,310 in mo. 7 Includes only Interest and no principal until mo. 7 See AP tbable on page 2 for details Projected Payments Payment Calculation Years 1 $1,564 min Principal & Interest Only Interest Mortgage Insurance Estimated Escrow Amount can increase over time $2,130 max $250 $225 Estimated Total Monthly Payment $1,564 - $2,605 Years 2-9 $2, $246 + $225 $2,601 Years $2, $225 $2,355 Estimated Taxes, Insurance & Assessments Amount can increase over time $225 a month This estimate includes In escrow? x Property Taxes YES x Homeowner s Insurance YES Other: See Section G on page 2 for escrowed property costs. You must pay for other property costs separately. Costs at Closing Estimated Closing Costs 12,441Includes $8,620 in Loan Costs + $3,821 in Other Costs $0 i n Lender Credits. See page 2 for details. Estimated Cash to Close $12,441 Includes Closing Costs. See Calculating Cash to Close on page 2 for details. LOAN ESTIMATE Visit for general information and tools. PAGE 1 OF 3 LOAN ID #

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24 Additional Information About This Loan Temenos Institution LENDER NMLS/ LICENSE ID LOAN OFFICER Joe Smith NMLS/ LICENSE ID PHONE Construction LoanEstimate MORTGAGE BROKER NMLS/ LICENSE ID LOAN OFFICER NMLS/ LICENSE ID PHONE Comparisons In 5 Years Annual Percentage Rate (APR) Total Interest Percentage (TIP) Use these measures to compare this loan with other loans. $148,279 Total you will have paid in principal, interest, mortgage insurance, and loan costs. $33,815 Principal you will have paid off % Your costs over the loan term expressed as a rate. This is not your interest rate % The total amount of interest that you will pay over the loan term as a percentage of your loan amount. Other Considerations Appraisal Assumption We may order an appraisal to determine the property s value and charge you for this appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your own cost. If you sell or transfer this property to another person, we will allow, under certain conditions, this person to assume this loan on the original terms. x will not allow assumption of this loan on the original terms. Homeowner s Insurance Late Payment Loan Acceptance Refinance Servicing This loan requires homeowner s insurance on the property, which you may obtain from a company of your choice that we find acceptable. If your payment is more than 15 days late, we will charge a late fee of 5% of the monthly principal. and interest payment. You do not have to accept this loan because you have received this form or signed a loan application. Refinancing this loan will depend on your future financial situation, the property value, and market conditions. You may not be able to refinance this loan. We intend to service your loan. If so, you will make your payments to us. x to transfer servicing of your loan. LOAN ESTIMATE PAGE 3 OF 3 LOAN ID #

25 8/29/2016 TRID Monitoring 2016 Temenos USA. All rights reserved. 1 What you will learn Regulatory requirement for compliance monitoring Monitoring vs. audit Transaction testing Summarize results Corrective action plan Don t reinvent the wheel First things first Breaking it down Leveraging exam manuals Setting up worksheets While you are there 2 1

26 8/29/2016 Regulatory Requirement for CMS 3 Reporting Compliance Identification Audit Risk Assessment Monitoring Policies & Procedures Training 3 Compliance Monitoring 4 A proactive approach to identify procedural or training weaknesses in an effort to avoid regulatory violations A compliance officer included in the planning, development, and implementation of business propositions increases the likelihood of success of its compliance monitoring function 4 2

27 8/29/2016 Compliance Monitoring 5 An effective monitoring system includes regularly scheduled reviews of: disclosures and calculations for various product offerings; document filing and retention procedures; posted notices, marketing literature, and advertising; various state usury and consumer protection laws and regulations; third-party service provider operations; and internal compliance communication systems that provide updates and revisions of the applicable laws and regulations to management and staff. 5 Monitor vs. Audit 6 An independent review and examination of records and activities to assess the adequacy of system controls, to ensure compliance with established policies and operational procedures and to recommend necessary changes in controls, policies or processes. Key Words: Independent Review/Examination Records Activities Compliance 6 3

28 8/29/2016 Compliance Audit 7 The scope and frequency of an audit should consider such factors as: expertise and experience of various institution personnel; organization and staffing of the compliance function; volume of transactions; complexity of products offered; number and type of consumer complaints received; number and type of branches; acquisition or opening of additional branch(es); size of the institution; organizational structure of the institution; outsourcing of functions to third-party service providers, including a review of agreements signed or made between the institution and vendors; degree to which policies and procedures are defined and detailed in writing; and magnitude/frequency of changes to any of the above 7 Compliance Monitoring 8 Changes to regulations or changes in an institution s business operations, products, or services should trigger a review of established compliance procedures Modifications that are necessary should be made expeditiously to minimize compliance risk Applicable personnel in all affected operating units should be advised of the changes Monitoring also includes reviews at the transaction level during the normal, daily activities of employees in every operating unit of the institution For example, verification of an annual percentage rate, or a second review of a loan application, before the transaction is completed Monitoring at this level helps establish management and staff accountability and identifies potential problems in a timely manner 8 4

29 8/29/2016 Compliance Monitoring 9 Compliance officers should monitor employee performance to ensure that they are following an institution s established internal compliance policies and procedures Frequency and volume of employee turnover should be factored into the schedule for reviews Critical after problems have been noted during past audits or examinations, regulation changes, new products are introduced, mergers occur, or when additional branch locations are opened Compliance monitoring does not have to be performed by the compliance officer Engage operational staff Third party providers 9 Compliance Monitoring 10 What do I do? How do I do it? When do I do it? Identify rules/regulations subject to compliance requirements Use risk based approach Use your exam manuals Identify which regulations require more frequent reviews Identify staff available to assist in monitoring process Develop templates (or buy) Develop schedule over the course of the year Block off your/staff calendar to ensure time is allocated for timely completion Select a period of time (quarterly, annual, monthly, etc.) Identify volume of transactions for the area to be reviewed that occurred during the period Gather reports, policies, procedures, staff to interview Review materials and interview Make notes of any positives and exceptions 10 5

30 8/29/2016 Compliance Monitoring 11 Transaction Testing Identify # of transactions occurred in the reporting period Use random sampling tool Select your pool of transactions to test You want to be random to avoid slanting your results If you know of problem transactions, you may include 11 Transaction testing

31 8/29/2016 Transaction testing Distinguish originated vs. non-originated Identify sample for when TRID should not have been used Applications prior to October 3, 2015 (unless revived withdrawn or cancelled) Mobile home only loans post October 3, 2015 Be sure to include verification that land was not taken in the deal Commercial loans where collateral code identifies possible consumer residential loan 13 Transaction testing 14 Complete transaction testing If errors or exceptions noted Print supporting documentation for your work paper binder and leverage for training opportunities Cross reference error back to examination manual or regulation to cite specific violation or technical exception Be sure to include violations of institution policy and procedures May not be a regulatory violation, but you will be criticized by examiners! 14 7

32 8/29/2016 Summarize results 15 Summarize your results Identify any isolated issues Identify any systemic issues Do you need to expand your transaction testing to validate isolated vs. systemic Risk rate the issues Identify potential monetary penalties Make recommendations for changes and improvements How to fix Urgency Training 15 Corrective action plan 16 Create the Corrective Action Plan What is the action item required? Who s action item is it? Compliance responsibilities Operations responsibilities When does it need to be resolved? Write your monitoring report Report resolution progress to management and Board Follow-up until all items resolved Assignment to someone to complete is not a resolution! 16 8

33 Where to start 8/29/ Where to start 18 Examination manuals Look at what your examiner is expected to look for Great resource for creating checklists Look at other agency s manuals Handouts 18 9

34 8/29/2016 Organization How do you want to break down the review? By disclosure (LE/CD/COC/WTP) By page (1, 2, 3, etc.) By category/grouping (General, Loan Terms, Payment Schedule) By nuances (formatting, rounding, etc.) Do you just want to follow along the exam manual? If you purchased a program, be sure to edit it for your institution s policies and procedures Do you want to include the citation? While you are there, are there additional items for which you can monitor? Affiliated business arrangement ARM disclosure Closed-End Credit Disclosure Forms For transactions under (e) and (f) Loan Estimate Page 1 General information Loan terms Projected Payments Costs at Closing Website Disclosure 19 Where to start 20 Identify how you want to capture data Consider grouping general information data used throughout How many files per worksheet Establish a legend 20 10

35 Leveraging the Exam Manual 8/29/2016 Key considerations Timing Accuracy Completeness Revised disclosures Valid changed circumstances Documentation Re-setting the fees Tolerance cures Timely

36 Leveraging the Exam Manual Or you can re-word, summarize based on your needs 8/29/ Loan Estimate The following section applies to all applications for closed-end credit to be secured by real property (except reverse mortgages subject to 12 CFR ) Was the Loan Estimate of charges for settlement services, if required, provided within three business days after an application was received or prepared? 12 CFR (e)(1)(iii) Does the Loan Estimate appear in a similar form as in Appendix H to Regulation Z? 12 CFR (o)(3)(ii) Model Form H-24 Was the Notice of Intent to proceed with the transaction obtained prior to imposing a fee on the consumer other than a reasonable credit report fee in connection with the transaction? 12 CFR (e)(2)(i)(A) Was a Loan Estimate of charges for settlement services provided within three business days after an application is received and delivered within 7 business days of consummation? 12 CFR (e)(1)(iii) Does the Loan Estimate appear in a similar form as in Appendix H to Regulation Z? 12 CFR (o)(3)(ii) Model Form H-24 Does the purpose of the loan stated on page correct? 12 CFR (a) Are all dates (loan term, introductory period of product) disclosed in accordance with the formatting requirements of the rule? 12 CFR (a) Does the LE contain all general information in connection with the transaction at the top of the disclosure labeled General Information? 12 CFR (a) Is the Notice of Intent to Proceed in file, dated same as LE and signed? 12 CFR (e)(2) Was the Notice of Intent to proceed with the transaction obtained prior to imposing a fee on the consumer other than a reasonable credit report fee in connection with the transaction? 12 CFR (e)(2)(i)(A) Is the Projected Payments table on page 1 properly disclosed? 12 CFR (c) 24 12

37 8/29/2016 One more consideration Lookback project Still early enough Regulator reprieve will not last forever Identify any errors that may pass muster with regulators But leave you with civil liability exposure Report to the Board 25 Questions? 2016 Temenos USA. All rights reserved

38 TRID Monitoring: Handout

39 V. Lending TILA From the FDIC Compliance Manual as of November 2015 Closed-End Credit Disclosure Forms Review Procedures Closed-end consumer credit transactions secured by real property, other than a reverse mortgage subject to 12 CFR , are subject to the disclosure, timing, and other requirements under the TILA-RESPA Integrated Disclosure rule (TILA-RESPA or TRID). Thus, for most closed-end mortgages, including construction-only loans and loans secured by vacant land or by 25 or more acres, creditors must provide the Loan Estimate and the Closing Disclosure. There is a partial exemption in 12 CFR (h) from the requirement to provide the Loan Estimate and Closing Disclosure if the loan is (i) a subordinate lien; (ii) a loan for home buyer assistance, such as down payments or closing costs, rehabilitation loans, energy efficiency assistance, or foreclosure prevention; (iii) a loan that does not require the payment of interest; (iv) a loan for which repayment that is forgiven, deferred for 20 years, or deferred until the property is sold or is no longer the consumer s principal dwelling; and (v) a loan where the total costs of the transaction are less than one percent of the loan and include fees only for recording, application, and housing counseling. For those transactions, creditors must provide other applicable TILA disclosures. NOTE: a creditor may not use the TILA-RESPA Integrated Disclosure forms instead of the GFE, HUD-1, and Truth in Lending forms for transactions that continue to be covered by the remaining disclosure requirements of TILA or RESPA (e.g., reverse mortgages) or before the effective date of the TILA- RESPA Integrated Disclosure Rule (October 3, 2015). (12 CFR (e), (f)). Closed-End Credit Disclosure Forms For transactions under 12 CFR (e) and (f) I. For a closed-end credit transaction subject to 12 CFR (e) and (f), determine whether the creditor provides disclosures required under 12 CFR (Loan Estimate) and 12 CFR (Closing Disclosure). (12 CFR (e) and 12 CFR (f)) II. For loans subject to 12 CFR (e), determine whether the creditor provides the good faith disclosures in the form required by 12 CFR and conforming to the Loan Estimate in appendix H (12 CFR (e), 12 CFR (o)). III. For loans subject to 12 CFR (f), determine whether the creditor provides the Closing Disclosure in the form required by 12 CFR and conforming to the Closing V 1.80 FDIC Compliance Manual November 2015

40 V. Lending TILA Disclosure attached at appendix H (12 CFR (f), 12 CFR (t)). NOTE: Use of the Loan Estimate and Closing Disclosure is mandatory for RESPA- covered transactions. For transactions not covered by RESPA, the Loan Estimate and Closing Disclosure may be considered a model form. Loan Estimate 12 CFR (a) (Page 1 of the Loan Estimate) I. Loan Estimate. Determine whether the disclosures required for the Loan Estimate are accurately completed and include the following disclosures on the first page (12 CFR (a)). Disclosures are detailed below according to the designations made on the Loan Estimate form: The statement: Save this Loan Estimate to compare with your Closing Disclosure (12 CFR (a)(2)); Name and address of creditor. (12 CFR (a)(3)); Date Issued. (12 CFR (a)(4)); Applicants. (12 CFR (a)(5)); Property. The property address, including zip code (12 CFR (a)(6)); Sales Price/ Prop. Value (estimated value where there is no seller). (12 CFR (a)(7)); Loan Term. Stated in years, months, or both, as applicable (12 CFR (a)(8)); Purpose. Loan purpose, categorized as Purchase, Refinance, or Construction. All other loan purposes must be categorized as Home Equity Loan (12 CFR (a)(9)); Product. Product type, including the type of interest rate categorized as Adjustable Rate, Step Rate, or Fixed Rate. This disclosure must be preceded by the type of feature that may change the consumer s periodic payment, such as Negative Amortization, Interest Only, Step Payment, Balloon Payment, or Seasonal Payment, with the duration of any introductory rate or payment period and the first adjustment period if applicable (12 CFR (a)(10)(i)-(iii)); Loan Type. Categorized as Conventional, FHA, VA, or Other (12 CFR (a)(11)); Loan ID #. (12 CFR (a)(12)); and Rate Lock. A statement of whether the disclosed rate is locked for a specific period. If so, the date and time (including time zone) that the lock will expire, along with an accompanying statement that the interest rate, any FDIC Compliance Manual November 2015 points, and any lender credits may change unless the interest rate has been locked (12 CFR (a)(13)). Loan Terms 12 CFR (b) (Page 1 of the Loan Estimate) I. Loan Terms. Determine whether, under the heading Loan Terms, all disclosures are completed and accurate (12 CFR (b)): Loan Amount. (12 CFR (b)(1)); Interest Rate. (12 CFR (b)(2)); Principal and Interest. The applicable unit period (i.e., biweekly, monthly, yearly) must precede the label Principal and Interest (12 CFR (b)(3)); Prepayment Penalty. A statement of whether the loan contains a prepayment penalty, an affirmative or negative response to the question, the maximum amount of the prepayment penalty that may be imposed, and the date on which the penalty may no longer be applied. (12 CFR (b)(4), 12 CFR (b)(7)(i)) If the date is disclosed (for an affirmative response), determine whether it is disclosed as the year in which the event occurs, counting from the date of consummation (12 CFR (b)(8)(iii); Balloon Payment. A statement of whether the loan contains a balloon payment, an affirmative or negative response to the question, the maximum amount of the balloon payment, and the due date of such payment. (12 CFR (b)(5), 12 CFR (b)(7)(ii)) If the date is disclosed (for an affirmative response), determine whether it is disclosed as the year in which the event occurs, counting from the due date of the initial periodic payment (12 CFR (b)(8)(ii)); and Whether the loan amount, interest rate, or monthly principal and interest can increase after closing (12 CFR (b)(6)) and, if so, the information required by 12 CFR (b)(6)(i)-(iii) and 12 CFR (b)(8)(i)- (ii). Projected Payments 12 CFR (c) (Page 1 of the Loan Estimate) 1. Projected Payments. Determine whether, under the heading Projected Payments (12 CFR (c))): a. All required fields in the table are completed, follow the formatting and statement requirements, are accurate, and itemize the periodic payments or range of payments together with an itemized estimate of taxes, insurance, assessments, and payments to be made with escrow account funds (12 CFR (c)(1) (5)); V 1.81

41 V. Lending TILA b. Each separate periodic payment or range of payments is itemized as follows (12 CFR (c)(2)): i. Principal and Interest. The amount payable for principal and interest, including the term only interest if the payment or range of payments includes any interest only payment (12 CFR (c)(2)(i)); ii. A. Adjustable Rate Loans. The maximum principal and interest payment must be determined by assuming that the interest rate in effect throughout the loan term is the maximum possible interest rate. The minimum amounts must be determined by assuming that the interest rate in effect throughout the loan term is the minimum possible interest rate (12 CFR (c)(2)(i)(A)); B. Adjustable Rate and Negative Amortization Loans. The maximum principal and interest amounts (after the loan term period for which the loan principal balance may increase) must be determined by assuming the maximum principal amount permitted under the terms of the legal obligation at the end of the loan term period. The minimum amounts must be determined by assuming that the interest rate in effect throughout the loan term is the minimum possible interest rate (12 CFR 12 CFR (c)(2)(i)(B)); Mortgage Insurance. The maximum amount payable for mortgage insurance premiums corresponding to the principal and interest payment disclosed (12 CFR (c)(2)(ii)); iii. Escrow. The amount payable into an escrow account to pay some or all of the charges described in 12 CFR (c)(2)(iii). If estimates are used for property taxes and homeowner s insurance, they must reflect (12 CFR (c)(5)): A. The taxable assessed value of the real property securing the transaction after consummation, including the value of any improvements on the property or to be constructed on the property if known. The disclosure must be made whether or not such construction will be financed from the proceeds of the transaction for property taxes (12 CFR (c)(5)(i)); and B. The replacement costs of the property during the initial year after the transaction, defined as premiums or other charges for insurance against loss of or damage to property, or against liability arising out of ownership or use of property (12 CFR (c)(5)(ii)); iv. Total Monthly Payment. The total periodic payment, calculated as the sums disclosed as the Principal and Interest, Mortgage Insurance, and Escrow. (12 CFR (c)(2)(iv)); NOTE: The headings noted for the Projected Payments table must be listed under the master heading Payment Calculation (12 CFR (c)(3)(i)). a. If the amount of a periodic monthly payment may change, additional, separate periodic payments or range of payments have been disclosed. Events requiring additional disclosure(s) include: (i) the change of the periodic principal and interest payment or range of such payments, (ii) a scheduled balloon payment, (iii) the automatic termination of mortgage insurance, or (iv) the anniversary of the due date of the initial periodic payment or range of payments immediately following the occurrence of a change in the principal and interest payment or range of such payments (12 CFR (c)(1)(i)); b. The creditor has met the following in disclosing a range of payments (12 CFR (c)(1)(iii)): i. The creditor has disclosed both the minimum and maximum amount for both the principal and interest payment and the total periodic payment (12 CFR (c)(1)(iii)); ii. The creditor has accurately disclosed a range of payments where multiple events are combined into a single range of payments in order to meet the requirement that only four disclosures may be made (12 CFR (c)(1)(iii)(A)); iii. The creditor has accurately disclosed a range of payments where multiple events occur during a single year or an event occurs during the same year as the initial periodic payment or range of payments. If the event occurs during the same year as the initial periodic payment or range of payments, the creditor has disclosed the range that would apply during the year in which the events will occur (12 CFR (c)(1)(iii)(B)); iv. The creditor has accurately disclosed a range of payments if the periodic principal and interest payment may adjust based on index rates at the time an interest rate adjustment may occur (12 CFR (c)(1)(iii)(C)); c. The creditor has not disclosed more than four separate periodic payments or ranges of payments. (12 CFR (c)(1)( ii)): V 1.82 FDIC Compliance Manual November 2015

42 V. Lending TILA i. If additional separate periodic payments or range of payments disclosures are required after the third separate periodic payment or range of payment disclosure, and the transaction does not involve a balloon payment, determine whether the creditor has disclosed the additional separate periodic payment or range of payments as a single fourth range of payments disclosure. (12 CFR (c)(1)(ii)); ii. If additional separate periodic payments or range of payments disclosures are required and the transaction involves a final balloon payment, determine whether the creditor has disclosed the additional separate periodic payment or range of payments as a single range of payments after the second separate periodic payment disclosure. Disclosure of the final balloon payment must appear as the final disclosure, under the heading Final Payment. (12 CFR (c)(1)(ii)(A), 12 CFR (c)(3)(iii)); and iii. The automatic termination of mortgage insurance requires disclosure of an additional separate periodic payment or range of payments only if the total number of separate periodic payments or ranges of payments does not exceed three (12 CFR (c)(1)(ii)(B)); iv. Each separate periodic payment or range of payments must be disclosed under a subheading stating the years of the loan during which that payment or range of payments will apply. The years must be disclosed in sequence of whole years from the due date of the initial periodic payment (12 CFR (c)(3)(ii)); NOTE: See the Narrative for further discussion of requirements related to the Projected Payments table. d. Taxes, Insurance, and Assessments. Determine whether the creditor accurately discloses (12 CFR (c)(4)): i. The sum of all mortgage-related obligations, expressed as a monthly amount, even if no escrow account for the payment of some or any of such charges will be established (12 CFR (c)(4)(ii)); NOTE: Mortgage-related obligations, as used here, takes the definition used in 12 CFR (b)(8); however, it does not include amounts identified in 12 CFR (b)(5). Amounts that must be disclosed as Taxes, Insurance & Assessment include premiums or other charges for credit life, accident, health, or loss-of-income insurance; premiums or other charges for insurance against loss of or damage to property, or against liability arising out of the ownership or use of FDIC Compliance Manual November 2015 property; or premiums or charges paid for debt cancellation or debt suspension coverage. (12 CFR (b)(8)) ii. A statement that the mortgage-related obligations disclosed can increase over time (12 CFR (c)(4)(iii)). If estimates are used for property taxes and homeowner s insurance, they must reflect (12 CFR (c)(5)): A. The taxable assessed value of the real property securing the transaction after consummation, including the value of any improvements on the property or to be constructed on the property if known. The disclosure must be made whether or not such construction will be financed from the proceeds of the transaction for property taxes (12 CFR (c)(5)(i)); and B. The replacement costs of the property during the initial year after the transaction for premiums or other charges for insurance against loss of or damage to property, or against liability arising out of ownership or use of property (12 CFR (c)(5)(ii)); iii. A statement of whether the mortgage-related obligations include payments for property taxes; 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; or as otherwise identified by 12 CFR (b)(8). The creditor must disclose whether the amounts will be paid by the creditor using escrow account funds. (12 CFR (c)(4)(iv)); iv. A statement that the consumer must pay separately any mortgage-related obligations that are not paid by the creditor using escrow account funds (12 CFR (c)(4)(v)); v. A reference to the escrow account information contained on page 2 of the Loan Estimate, captioned Initial Escrow Payment at Closing (12 CFR (c)(4)(vi)). Costs at Closing 12 CFR (d) (Page 1 of the Loan Estimate) 1. Costs at Closing. Determine whether, under the heading Costs at Closing the creditor discloses the Estimated Closing Costs (including Loan Costs and Other Costs, less Lender Credits) and the Estimated Cash to Close (including Closing Costs), based upon the calculations required by 12 CFR (f), (g), and (h) (and found on page 2 of the Loan Estimate). (12 CFR (d)(1)) V 1.83

43 V. Lending TILA 2. Optional Alternative Table for Transactions without a Seller. Determine whether, for transactions that do not involve a seller, the creditor chose to use the alternative Cash to Close table. If so, determine whether the amount is calculated in accordance with 12 CFR (h)(2)(iv) (Calculating Cash to Close), includes a statement of whether the disclosed estimated amount is due from or to the consumer; and includes a statement referring the consumer to the alternative Calculating Cash to Close table pursuant to 12 CFR (h)(2) and the model form found in appendix H-24(G). (12 CFR (d)(2)) NOTE: See the Narrative for further discussion of requirements related to the Costs at Closing table. Website Disclosure 12 CFR (e) (Page 1 of the Loan Estimate) 1. Website Reference. Determine whether the creditor discloses that the consumer may obtain general information and tools on the Bureau s website and has included a link to the site specified in 12 CFR (e). (12 CFR (e)) Closing Cost Details: Loan Costs 12 CFR (f) (Page 2 of the Loan Estimate) 1. Loan Costs. Determine on page 2 whether, under the heading Loan Costs, the creditor makes the following disclosures (12 CFR (f)): a. Origination charges. Accurately itemized to reflect each amount and a subtotal of all amounts that the consumer will pay to each creditor and loan originator for originating and extending the credit. Determine whether the points paid to the creditor to reduce the interest rate are itemized separately, as both a percentage of the amount of credit extended and a dollar amount, and using the label % of Loan Amount (Points). Determine whether points paid is the first item listed. If points to reduce the interest rate are not paid, this disclosure must be left blank (12 CFR (f)(1)); b. Services You Cannot Shop For. An accurate itemization, limited to 13 items, of each amount and subtotal of all amounts that the consumer will pay for settlement services that the consumer cannot shop for and that are provided by persons other than the creditor or mortgage broker. Determine whether the terms related to title insurance include Title as an introductory description (12 CFR )(f)(2); c. Services You Can Shop For. An accurate itemization, limited to 14 items, of each amount and subtotal of all amounts that the consumer will pay for settlement services that the consumer can shop for and that are provided by persons other than the creditor or mortgage broker. Determine whether the terms related to title insurance include Title as an introductory description (12 CFR )(f)(3)); d. Total Loan Costs. An accurate sum of the subtotals required to be disclosed under 12 CFR (f) as Origination Charges, Services You Cannot Shop For and Services You Can Shop For (12 CFR (f)(4)); and e. Other than as noted in item 1.a. above, determine that items are ordered alphabetically by label under the applicable subheading. If there are more than the maximum allowable number of line items, determine that the remaining charges are disclosed in the aggregate in the last line as Additional Charges. (12 CFR (f)(5) and (f)(6)) Closing Cost Details: Other Costs 12 CFR (g) (Page 2 of the Loan Estimate) 1. Other Costs. Determine whether the creditor makes the following disclosures (12 CFR (g)): a. Taxes and Other Government Fees. Accurately itemized to reflect amounts to be paid to state and local governments for taxes and other government fees, including subtotals for recording fees and other taxes. A separate line must be included for transfer taxes paid by the consumer. If not charged to the consumer, these fields must be left blank ((12 CFR (g)(1)); b. Prepaids. Accurately itemized to reflect amounts to be paid by the consumer in advance of the first scheduled payment and the subtotals of all such amounts. The disclosures must follow the required order and include the number of months and the total dollar amount to be paid at consummation for homeowner s insurance and mortgage insurance premiums; the prepaid interest to be paid at consummation, based on daily interest, number of days, interest rate, and the total to be collected; the number of months for which property taxes are to be paid; and the amount the consumer will pay at consummation. If any of these items are not charged to the consumer, the field must be left blank. A maximum of three additional items may be disclosed (including applicable time period covered by the payment at consummation and total to be paid) as Prepaids (12 CFR (g)(2)); c. Initial Escrow Payment at Closing. Accurately itemized to reflect the amounts that the consumer will be expected to place into an escrow account at consummation to be applied to recurring periodic charges and subtotals of all amounts. The disclosure must provide the amount escrowed each month, the number of months of escrow, and the total amount to be paid into the escrow account by the consumer at consummation. Homeowner s insurance premiums, mortgage insurance premiums, and property taxes must V 1.84 FDIC Compliance Manual November 2015

44 V. Lending TILA be separately subtotaled. If any of these items are not charged to the consumer, that field must be left blank. A maximum of five additional items may be disclosed as part of Initial Escrow Payment at Closing (12 CFR (g)(3)); d. Other. An accurate itemization of costs that 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. Determine whether the creditor has used a descriptive label for each such amount and provided the subtotal of all such amounts. Determine whether the terms related to title insurance include Title as an introductory description and whether the parenthetical description (optional) is used at the end of the label for items disclosing any premiums paid for separate insurance, warranty, guarantee, or event-coverage products. A maximum of five items may be disclosed as Other (12 CFR (g)(4)); e. Total Other Costs. An accurate sum of the subtotals for Taxes and Other Government Fees, Prepaids, Initial Escrow Payment at Closing, and Other disclosed pursuant to 12 CFR (g)(1) through (4) (12 CFR (g)(5)); f. Total Closing Costs. Accurate component amounts and sum of the following (12 CFR (g)(6)): i. D+I. A sum of the Total Loan Costs and Total Other Costs (12 CFR (g)(6)(i)); and ii. Lender Credits. The amount of any lender credits, disclosed as a negative number. If no such amount is disclosed, this line must be left blank (12 CFR (g)(6)(ii)); NOTE: The disclosure of lender credits, as identified in 12 CFR (g)(6)(ii), is required by 12 CFR12 CFR (e)(1)(i). Lender credits, as identified in 12 CFR (g)(6)(ii), represent the sum of nonspecific 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 12 CFR (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. Non-specific lender credits and specific lender credits are negative charges to the consumer. (Comment 19(e)(3)(i)-5)). g. Determine that items follow the alphabetical ordering and addenda restrictions of 12 CFR (g)(7) and (g)(8). Closing Cost Details: Calculating Cash to Close 12 CFR (h) (Page 2 of the Loan Estimate) 1. Calculating Cash to Close. Determine whether, under the heading Calculating Cash to Close, the creditor has accurately disclosed the total amount of cash or other funds that must be provided by the consumer at consummation, itemized into the following component amounts: (12 CFR (h)(1)) a. Total Closing Costs. The amount must be disclosed as a positive number (12 CFR (h)(1)(i)); b. Closing Costs Financed (Paid from your Loan Amount). The amount of any closing costs to be paid out of loan proceeds, disclosed as a negative number (12 CFR (h)(1)(ii)); c. Downpayment/Funds from Borrower. Disclosed: i. for a purchase transaction, as the amount of the difference between the purchase price of the property and the principal amount of the loan, as a positive number; ii. for all other transactions, as the estimated funds from the consumer determined in calculating Funds for Borrower under 12 CFR (h)(1)(v) (12 CFR (h)(1)(iii)); d. Deposit. Disclosed: i. for a purchase transaction, as the amount that is paid to the seller or held in trust or escrow by an attorney or other party under the terms of the agreement for the sale of the property, as a negative number; ii. for all other transactions, disclosed as $0 (12 CFR (h)(1)(iv)); e. Funds for Borrower. Disclosed as the amount of funds for the consumer, determined by subtracting the principal amount of the credit extended (excluding any amount disclosed as closing costs to be financed pursuant to 12 CFR (h)(1)(ii)) from the total amount of all existing debt being satisfied in the transaction (except to the extent the satisfaction of such existing debt is disclosed as Other Costs under 12 CFR (g)) (12 CFR (h)(1)(v)): FDIC Compliance Manual November 2015 V 1.85

45 V. Lending TILA i. If the calculation yields a positive number, that amount is disclosed under the heading Down Payment/Funds from Borrower, (12 CFR (h)(1)(iii)(B)) and $0 is disclosed under the heading Funds for Borrower, under 12 CFR (h)(1)(v) (12 CFR (h)(1)(v)(A)); ii. If the calculation yields a negative amount, the creditor discloses that amount as a negative number under the heading Funds for Borrower, (12 CFR (h)(1)(v)) and as $0 under the heading Down Payment/Funds from Borrower under 12 CFR (h)(1)(iii)(B)) (12 CFR (h)(1)(v)(B)); iii. If the calculation yields 0, then $0 is disclosed under both headings under 12 CFR (h)(1)(iii)(B) and (h)(1)(v) (12 CFR (h)(1)(v)(C)); f. Seller Credits. Determined by totaling the amount the seller will pay for Total Loan Costs under 12 CFR (f)(4) and Total Other Costs under 12 CFR (g)(5)), to the extent known. This must be disclosed as a negative number (12 CFR (h)(1)(vi)); g. Adjustments and Other Credits. Determined by combining the Total Loan Costs (determined under 12 CFR (f)) and Total Other Costs (determined under 12 CFR (g)) that are paid by persons other than the loan originator, creditor, consumer, or seller, together with any other amounts that are required to be paid by the consumer at closing pursuant to a purchase and sale contract. Must be disclosed as a negative number (12 CFR (h)(1)(vii)); and h. Estimated Cash to Close. The sum of the amounts of the components required for Calculating Cash to Close disclosed as under 12 CFR (h)(1)(i) through (vii) (12 CFR (h)(1)(viii)). Closing Cost Details: Alternative Calculating Cash to Close Table for Transactions without a Seller 12 CFR (h)(2) (Page 2 of the Loan Estimate) 1. Alternative Calculating Cash to Close Table for Transactions Without a Seller. If the transaction does not involve a seller and the creditor has chosen to provide the optional Alternative Calculating Cash to Close table modeled in appendix H-24(G), determine whether the creditor accurately discloses the total amount of cash or other funds that must be provided by the consumer as consummation, itemized into the following component amounts (12 CFR (h)(2)): a. Loan Amount. (12 CFR (h)(2)(i)); b. Total Closing Costs. Disclosed as a negative number (12 CFR (h)(2)(ii)); c. Total Payoffs and Payments. Disclosed as the total amount of payoffs and payments to be made to third parties that are not otherwise disclosed, as a negative number (12 CFR (h)(2)(iii)); d. Cash to Close. Disclosed as the amount of cash or other funds due from or to the consumer and a statement of whether the disclosed estimated amount is due from or to the consumer. The amount must be calculated as the sum of the amounts disclosed under Loan Amount, Total Closing Costs, and Total Payoffs and Payments. (12 CFR (h)(2)(iv)); e. Closing Costs Financed (Paid from your Loan Amount). Disclosed as the sum of the amounts under Loan Amount, and Total Payoffs and Payments. The sum is disclosed only to the extent it is greater than 0, and it is less than or equal to the amount disclosed under Total Closing Costs. (12 CFR (h)(2)(v)) NOTE: If a creditor chooses to provide the optional Alternative Calculating Cash to Close table for transactions without a seller, the alternative table must also be used in the Closing Disclosure. Closing Cost Details: Adjustable Payment (AP) Table 12 CFR (i) (Page 2 of the Loan Estimate) 1. Adjustable Payment (AP) Table. For loans where the periodic principal and interest payment may change after consummation based on a factor other than an interest rate adjustment, or for seasonal payment products as described in 12 CFR (a)(10)(ii)(E), determine whether the creditor discloses a separate table under the master headings Closing Cost Details and Adjustable Payment (AP) Table that contains the following information and satisfies the following requirements: NOTE: The AP table is not to appear where it is inapplicable because the payments after consummation change for reasons other than an adjustment to the interest rate. a. Interest Only Payments. The disclosure states yes or no to the question of whether the transaction is an interest only product under 12 CFR (a)(10)(ii)(B) and, if the answer is yes, the disclosure states the period during which interest only periodic payments are scheduled (12 CFR (i)(1)); b. Optional Payments. The disclosure states yes or no to the question whether the terms of the legal obligation expressly provide that the consumer may elect to pay a specified periodic principal and interest payment in an amount other than the scheduled amount of the V 1.86 FDIC Compliance Manual November 2015

46 V. Lending TILA payment, and, if the answer is yes, the disclosure states the period during which the consumer may elect to make such payments (12 CFR (i)(2)); c. Step Payments. The disclosure states yes or no to the question whether the transaction is a step payment product under 12 CFR (a)(10)(ii)(C) and, if the answer is yes, the disclosure states the period during which the regular periodic payments are scheduled to increase (12 CFR (i)(3)); d. Seasonal Payments. The disclosure states yes or no to the question whether the transaction is a seasonal payment product under 12 CFR (a)(10)(ii)(E) and, if the answer is yes, the disclosure states the period during which periodic payments are not scheduled (12 CFR (i)(4)); e. Principal and Interest Payments. This label is immediately preceded by the applicable unit period, and the disclosures must contain the following information: i. The number of the payment of the first periodic principal and interest payment that may change under the terms of the legal obligation (counting from the first periodic payment due after consummation), and the amount or range of the periodic principal and interest payment for such payment, labeled First Change/Amount (12 CFR (i)(5)(i)); ii. The frequency of subsequent changes to the periodic principal and interest payment, labeled Subsequent Changes (12 CFR (i)(5)(ii)); and iii. The maximum periodic principal and interest payment that may occur during the term of the transaction, and the first periodic principal and interest payment that can reach such maximum, counting from the first periodic payment due after consummation, labeled Maximum Payment (12 CFR (i)(5)(iii)). Closing Cost Details: Adjustable Interest Rate (AIR) Table 12 CFR (j) (Page 2 of the Loan Estimate) 1. Adjustable Interest Rate (AIR) Table. If the interest rate may increase after consummation, determine whether the creditor discloses, as a separate table under the master headings Closing Cost Details and Adjustable Interest Rate (AIR) Table, the following information and satisfies the following requirements: (12 CFR (j)) NOTE: The AIR table is not to appear where it is inapplicable because the interest rate does not adjust after consummation. a. Index + Margin. Disclosed if the interest rate may adjust and the product type is not a Step Rate under 12 CFR (a)(10)(i)(B). The disclosure must show 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 (12 CFR (j)(1); b. Interest Rate Adjustments. If the product type is a Step Rate and not also an Adjustable Rate under 12 CFR (a)(10)(i)(A), the disclosure must show the maximum amount of any adjustments to the interest rate that are scheduled and predetermined (12 CFR (j)(2)); c. Initial Interest Rate. The disclosure must show the initial interest rate at consummation of the loan transaction (12 CFR (j)(3)); d. Minimum and Maximum Interest Rates. The disclosure must show the minimum and maximum interest rates for the loan, after any introductory period expires (12 CFR (j)(4); e. Change Frequency. The disclosure must show 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 the frequency of interest rate adjustments after the initial adjustment to the interest rate, labeled, Subsequent Changes (12 CFR (j); f. Limits on Interest Rate Changes. The disclosures must show the maximum possible change for the first adjustment of the interest rate after consummation, labeled First Change; and the maximum possible change for subsequent adjustments of the interest rate after consummation, labeled Subsequent Changes. (12 CFR (j) Additional Information About This Loan 12 CFR (k) (Page 3 of the Loan Estimate) 1. Additional Information About This Loan. Determine whether the creditor accurately discloses contact and NMLSR information as follows: a. Lender/Mortgage Broker. The name and NMLS ID/License ID for the creditor ( Lender ) and the mortgage broker, if any. If the creditor or mortgage broker has not been assigned an NMLSR ID, the license number or other unique identifier issued to the creditor or mortgage broker by the applicable jurisdiction or regulating body must be disclosed, with the abbreviation for the state of the applicable jurisdiction or regulatory body stated before the word License in the label, if any (12 CFR (k)(1)); FDIC Compliance Manual November 2015 V 1.87

47 V. Lending TILA b. Loan Officer. The name and NMLSR ID of the individual loan officer of the creditor and the mortgage broker, if any, who is the primary contact for the consumer. If 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, with the abbreviation for the state of the applicable jurisdiction or regulatory body stated before the word License in the label, if any (12 CFR (k)(2)); and c. /Phone (respectively). The address and telephone number of the loan officer. (12 CFR (k)(3)) Additional Information About This Loan: Comparisons 12 CFR (l) (Page 3 of the Loan Estimate) 1. Comparisons. Determine whether the creditor accurately discloses the following information for comparison purposes and includes the statement Use these measures to compare this loan with other loans (12 CFR (l): a. In 5 years (12 CFR (l)(l)); i. The total principal, interest, mortgage insurance, and loan costs scheduled to be paid through the end of the 60th month after the due date of the first periodic payment, expressed as a dollar amount, along with the statement Total you will have paid in principal, interest, mortgage insurance, and loan costs; and ii. The principal scheduled to be paid through the end of the 60th month after the due date of the first periodic payment, expressed as a dollar amount, along with the statement Principal you will have paid off; b. Annual Percentage Rate (APR). Expressed as a percentage, and the statement Your costs over the loan term expressed as a rate. This is not your interest rate. (12 CFR (l)(2)); and c. Total Interest Percentage (TIP). The total amount of interest that the consumer will pay over the life of the loan, expressed as a percentage of the amount of credit extended and the statement The total amount of interest that you will pay over the loan term as a percentage of your loan amount (12 CFR (l)(3). Additional Information About This Loan: Other Considerations 12 CFR (m) (Page 3 of the Loan Estimate) 1. Other Considerations. Determine whether the creditor accurately discloses the following (12 CFR (m): a. Appraisal. For transactions subject to 15 U.S.C. 1639h or 1691(e), as implemented in this part or Regulation B, 12 CFR part 1002, respectively, a statement, labeled Appraisal that explains (12 CFR (m)(1)): i. The creditor may order an appraisal to determine the value of the property identified in 12 CFR (a)(6) and may charge the consumer for that appraisal; ii. The creditor will promptly provide the consumer a copy of any appraisal, even if the transaction is not consummated; and iii. The consumer may choose to pay for an additional appraisal of the property for the consumer's use; b. Assumption. A statement of whether a subsequent purchaser of the property may be permitted to assume the remaining loan obligation on its original terms (12 CFR (m)(2); c. Homeowner's Insurance. At the option of the creditor, a statement that homeowner's insurance is required on the property and that the consumer may choose the insurance provider (12 CFR (m)(3); d. Late Payment. A statement detailing any charge that may be imposed for a late payment, stated as a dollar amount or percentage charge of the late payment amount, and the number of days that a payment must be late to trigger the late payment fee (12 CFR (m)(4); e. Refinance. The following statement: Refinancing this loan will depend on your future financial situation, the property value, and market conditions. You may not be able to refinance this loan. (12 CFR (m)(5)); f. Servicing. A statement of whether the creditor intends to service the loan or transfer the loan to another servicer (12 CFR (m)(6)); g. Liability after Foreclosure. If the purpose of the credit transaction is to refinance an extension of credit as described in 12 CFR (a)(9)(ii), a brief statement that certain state law protections against liability for any deficiency after foreclosure may be lost, the potential consequences of the loss of such protections, and a statement that the consumer should consult an attorney for additional information (12 CFR (m)(7)); and h. Construction Loans. In a transaction that involves a new construction, if the creditor reasonably expects settlement will occur more than 60 days after the Loan Estimate is issued and wishes to retain the option to provide a revised disclosure, a clear and conspicuous statement that a revised disclosure may be issued any V 1.88 FDIC Compliance Manual November 2015

48 V. Lending TILA time prior to 60 days before consummation. (12 CFR (m)(8)) Additional Information About This Loan: Confirm Receipt 12 CFR (n) (Page 3 of the Loan Estimate) ii. The dollar amounts for Projected Payments or range of payments required by 12 CFR (c)(1)(iii) (i.e., minimum and maximum amounts of principal and interest for projected periodic payments or range of payments); 1. Confirm Receipt. If the creditor choses to provide a signature statement, determine whether the creditor accurately provides the following: By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or received this form. If the creditor does not include a line for the consumer's signature, the creditor discloses the following statement (labeled Loan Acceptance ): You do not have to accept this loan because you have received this form or signed a loan application. (12 CFR (n)) Form of Disclosures 12 CFR (o) 1. Form of disclosures. 35 Determine whether the creditor made the disclosures required by 12 CFR clearly and conspicuously in writing, in a form that the consumer may keep, with disclosures grouped together and segregated from everything else, containing only the information required by 12 CFR (a) through (n), made in the same order, and positioned relative to the master headings, headings, subheadings, labels, and similar designations in the same manner, as shown in form H-24, set forth in appendix H (12 CFR (o)(1) and (2): a. Form H-24 required. Determine whether, for a transaction subject to 12 CFR (e) that is a federally related mortgage loan, as defined in Regulation X, 12 CFR , the creditor uses form H-24, set forth in appendix H (12 CFR (o)(3)(i)); or b. Substantially similar disclosures. Determine whether the creditor makes the disclosures with headings, content, and format substantially similar to form H-24, set forth in appendix H for any other transaction subject to 12 CFR and (12 CFR (o)(3)(ii)) c. Rounding - nearest dollar. Determine whether the creditor accurately rounds the following figures to the nearest whole dollar disclosed pursuant to 12 CFR (12 CFR (o)(4)(i)(A)): i. The dollar amounts for Loan Terms required by 12 CFR (b)(6)-(7), (i.e., adjustments after consummation and details about prepayment penalty and balloon payments); 35 Limited changes to the disclosure forms are permitted, including substitution of monthly with the applicable unit period, making disclosures in languages other than English, and the creditor s logo in the space allotted for the identification of the creditor. (12 CFR (o)(5)). FDIC Compliance Manual November 2015 iii. The dollar amounts for Mortgage Insurance required to be disclosed by 12 CFR (c)(2)(ii) (i.e., itemization of maximum amount of mortgage insurance premiums); iv. The dollar amounts for Escrow required to be disclosed by 12 CFR (c)(2)(iii); v. The dollar amounts for Taxes, Insurance, and Assessments required to be disclosed by 12 CFR (c)(4)(ii); vi. The dollar amounts for Loan Costs required to be disclosed by 12 CFR (f) (i.e., Origination Charges, Services You Cannot Shop For, Services You Can Shop For, and Total Loan Costs); vii. The dollar amounts for Other Costs required by 12 CFR (g) (i.e., Taxes and Other Government Fees, Prepaids, Initial Escrow Payment at Closing, Other, Total Other Costs, and Total Closing Costs) except as noted for percentages; viii. The dollar amounts for Calculating Cash to Close required to be disclosed by 12 CFR (h); ix. The dollar amounts for the Adjustable Payment (AP) Table required to be disclosed by 12 CFR (i); and x. The dollar amounts for Comparisons required to be disclosed by 12 CFR (l). d. No rounding - dollars. Determine that the creditor did not round the following: (12 CFR (o)(4)(i)(A)) i. The per diem amount required by 12 CFR (g)(2)(iii) (prepaid interest paid per day); and ii. The figures disclosed pursuant to 12 CFR (g)(3)(i)-(iii) (initial escrow payment at closing for homeowner s insurance, mortgage insurance, and property taxes) and 12 CFR (g)(3)(v) (additional escrow items). e. Loan amount. Determine that the creditor did not round the loan amount disclosed pursuant to 12 CFR (b)(1) and truncated whole numbers at the decimal point. (12 CFR (o)(4)(i)(B)) V 1.89

49 V. Lending TILA f. Total periodic payment. Determine that the creditor accurately rounds the total periodic payment disclosed pursuant to 12 CFR (c)(2)(iv), if any of the component amounts of the figures disclosed pursuant to 12 CFR (o)(4)(i)(A) are rounded to the nearest whole dollar. (12 CFR (o)(4)(i)(C)) g. Percentages. Determine that the creditor does not round the following percentage amounts and discloses them using up to the required number of decimal places (12 CFR (o)(4)(ii)): i. Three decimal places. The Annual Percentage Rate (APR) disclosed pursuant to 12 CFR (l)(2) is disclosed up to three decimal places, and if the amount is a whole number, the amount is truncated at the decimal point. ii. Two to three decimal places. The following percentages are disclosed up to two or three decimal places, and if the amount is a whole number, the amount is truncated at the decimal point for: A. Interest rate and adjustments after consummation, disclosed pursuant to 12 CFR (b)(2) and (6); B. Points as a percentage of the loan amount, disclosed pursuant to 12 CFR (f)(1)(i); C. Percentage of prepaid interest to be paid per day, disclosed pursuant to 12 CFR (g)(2)(iii); D. Index + Margin, Initial Interest Rate, Minimum/Maximum Interest Rate, and Limits on Interest Rate Changes (as disclosed on the Adjustable Interest Rate (AIR) Table), disclosed pursuant to 12 CFR (j); and E. Total interest percentage, disclosed pursuant to 12 CFR (l)(3).(12 CFR (o)(4)(ii)). Closing Disclosure 12 CFR (a) 1. Determine whether the disclosures required for the Closing Disclosure are accurately completed and include the following disclosures: a. Form purpose with the statement: This form is a statement of final loan terms and closing costs. Compare this document with your Loan Estimate. (12 CFR (a)(2)) Closing Information 12 CFR (a)(3) (Page 1 of the Closing Disclosure) 1. Closing Information. Determine whether all fields required by 12 CFR (a)(3) are complete and accurate: a. Date Issued. Indicating the date disclosures are delivered (12 CFR (a)(3)(i)); b. Closing Date. (12 CFR (a)(3)(ii)); c. Disbursement Date. (12 CFR (a)(3)(iii)); d. Settlement Agent. (12 CFR (a)(3)(iv)); e. File #. Disclosing the identification number assigned to the transaction by the settlement agent (12 CFR (a)(3)(v)); f. Property. The address or location of the property as disclosed in the Loan Estimate (12 CFR (a)(3)(vi)); and g. Sale Price/Appraised Prop. Value. For transactions where there is a seller, the sale price, and where there is no seller, the appraised property value (12 CFR (a)(3)(vii)(A)-(B)). If the creditor disclosed an estimated value, the creditor must use the label Estimated Prop. Value. (Comment 38.(a)(3)(vii)-1) Transaction Information 12 CFR (a)(4) (Page 1 of the Closing Disclosure) 1. Transaction information. Determine whether all fields required by 12 CFR (a)(4) are complete and accurate: a. Borrower. The consumer s name and mailing address (12 CFR (a)(4)(i)); b. Seller. Where applicable, the seller s name and mailing address (12 CFR (a)(4)(ii)); c. Lender. The name of the creditor making the disclosure (12 CFR (a)(4)(iii)). Loan Information 12 CFR (a)(5) (Page 1 of the Closing Disclosure) 1. Loan Information. Determine whether all fields required by 12 CFR (5) are complete and accurate: a. Loan Term. (12 CFR (a)(5)(i)); b. Purpose. (12 CFR (a)(5)(ii)); c. Product. (12 CFR (a)(5)(iii)); d. Loan Type. (12 CFR (a)(5)(iv)); V 1.90 FDIC Compliance Manual November 2015

50 V. Lending TILA e. Loan ID #. (12 CFR (a)(5)(v)); and f. MIC #. The case number for any mortgage insurance policy, if required by the creditor (12 CFR (a)(5)(vi)). Loan Terms 12 CFR (b) (Page 1 of the Closing Disclosure) 1. Loan Terms. Determine whether the creditor discloses, in a separate table labeled Loan Terms, the information required to be disclosed on the Loan Estimate under 12 CFR (b) reflecting the terms of the legal obligation at consummation (12 CFR (b)). Projected Payments 12 CFR (c) (Page 1 of the Closing Disclosure) 1. Projected Payments. Determine whether the creditor discloses, in a separate table labeled Projected Payments, the projected payments or range of payments (in the same manner as required on the Loan Estimate under 12 CFR (c)(1) through (4)(v)) reflecting the terms of the legal obligation at consummation. Determine whether the creditor referred to the Escrow Account disclosure required by 12 CFR (l)(7) and calculated the estimated escrow payments (12 CFR (c)(1)-(2)): a. For transactions subject to RESPA, under the escrow account analysis described in Regulation X, 12 CFR (12 CFR (c)(1)(i)); and b. For transactions not subject to RESPA, either calculated under the escrow account analysis described in Regulation X, 12 CFR , or in the manner set forth in 12 CFR (c)(5), (12 CFR (c)(1)(ii)). Costs at Closing 12 CFR (d) (Page 1 of the Closing Disclosure) 1. Costs at Closing. Determine whether the creditor discloses: a. Closing Costs. Disclosed as the sum of the dollar amounts disclosed on page 2 of the Closing Disclosure, pursuant to 12 CFR12 CFR (f)(4) (Loan Costs), 12 CFR (g)(5) (Other Costs), and 12 CFR (h)(3) (Lender Credits), together with a statement referring the consumer to the disclosures on page 2 (12 CFR (d)(i)(A)-(E)); b. Cash to Close. Disclosed as the sum of the dollar amounts calculated in accordance with the Calculating Cash to Close table (12 CFR (i)(9)(ii)), together with a statement referring the consumer to the disclosures on page 2 (12 CFR (d)(ii)(A) (B)); or FDIC Compliance Manual November 2015 c. Cash to Close (Alternative for transactions without a seller). Disclosed as the amount calculated according to 12 CFR (e)(5)(ii), together with a statement of whether the amount is due from or to the consumer and a reference to the Alternative Calculating Cash to Close table required pursuant to 12 CFR (e), (12 CFR (d)(2)(i) (iii)). Closing Cost Details: Loan Costs 12 CFR (f) (Page 2 of the Closing Disclosure) 1. Loan Costs. Determine whether the creditor disclosed all costs associated with the transaction, with columns stating whether the charge was borrower-paid at or before closing, seller-paid at or before closing, or paid by others, under the following subheadings: a. Origination Charges. Itemized amounts paid for charges disclosed on the Loan Estimate (12 CFR (f)(1)) and the total of Borrower-Paid amounts paid at or before closing; together with: i. The compensation paid by the creditor to a thirdparty loan originator, and ii. The name of the third-party loan originator receiving payment (12 CFR (f)(1)); b. Services Borrower Did Not Shop For. Itemized costs for each settlement service the creditor required but did not allow the consumer to shop for, with name of recipient, amount, and total costs designated Borrower- Paid at or before closing. Items listed in the Loan Estimate (12 CFR (f)(3)) are disclosed here if the consumer was provided a written list of settlement service providers under 12 CFR (e)(1)(vi)(C), and the consumer selected a settlement service provider from that written list (12 CFR (f)(2)); c. Services Borrower Did Shop For. Itemized costs for each service required by the creditor, that the consumer shopped for in accordance with 12 CFR (e)(1)(vi)(A), with the amount, the name of recipient, and the total costs designated as Borrower- Paid at or before closing. If these items were disclosed on the Loan Estimate pursuant to 12 CFR (f)(3), they are disclosed here if the consumer was provided a written list of settlement service providers and did not select a settlement service provider from that written list (12 CFR (f)(3)); d. Total Loan Costs (Borrower-Paid). The sum of the amounts disclosed under 12 CFR (f)(5) as Borrower-Paid for the origination charge, services the borrower did not shop for, and services the borrower did shop for (12 CFR (f)(4)); e. Loan Costs Subtotals. Calculation of the total borrower-paid costs at or before closing, showing each V 1.91

51 V. Lending TILA subtotal for the origination charge, services the borrower did not shop for, and services the borrower did shop for. (12 CFR (f)(5)) Closing Cost Details: Other Costs 12 CFR (g) (Page 2 of the Closing Disclosure) 1. Other Costs. Determine whether the creditor disclosed all costs associated with the transaction (other than those disclosed in the Loan Costs table) with columns stating whether the charge was borrower-paid at or before closing, seller-paid at or before closing or paid by others, including: a. Taxes and Other Government Fees. All taxes and government fees to be paid by the borrower at or before closing, including recording fees and transfer taxes, accurately itemized. Determine that the itemized transfer tax is accompanied by the name of the government entity assessing the transfer tax. (12 CFR (g)(1)(i)-(ii)) b. Prepaids. Accurately itemized prepaid charges described in the borrower s Loan Estimate as required by 12 CFR (g)(2); the name of the person ultimately receiving the prepaid payment or the government entity assessing the property tax charged; and the total of all amounts designated as Borrower- Paid at or before closing. (12 CFR (g)(2)) c. Initial Escrow Payment at Closing. Accurate itemizations of each escrow amount required at closing as described on the borrower s Loan Estimate pursuant to 12 CFR (g)(3) (e.g., homeowner s insurance, mortgage insurance, property taxes, etc.); applicable aggregate adjustments pursuant to 12 CFR (d)(2); and the total of all amounts designated as Borrower-Paid at or before closing. (12 CFR (g)(3)) d. Other. All charges, accurately itemized, for services required or related to the borrower s transaction that are in addition to the charges disclosed in the Loan Costs table (12 CFR (f)) and in the preceding 12 CFR of the Other Costs table (12 CFR (g)(1)-(3)), for services required or obtained in the real estate closing by the consumer, the seller, or other party and the name of the person ultimately receiving the payment; and the total of all such itemized amounts that are designated Borrower-Paid at or before closing, with the applicable designations for items that are optional or are components of title insurance services. (12 CFR (g)(4)(i)-(ii)) e. Total Other Costs (Borrower--Paid). Accurately totaled and disclosed sum of all amounts disclosed as Borrower-Paid. (12 CFR (g)(5)) f. Other Costs Subtotals. Accurately added individual subtotals in the Closing Cost Details Other Costs table disclosed under 12 CFR (g)(1)-(4) to produce the total. (12 CFR (g)(6)) Closing Cost Details: Total Closing Costs 12 CFR (h) (Page 2 of the Closing Disclosure) 1. Total Closing Costs (Borrower-Paid). Determine whether the creditor: a. Follows the description, labeling, and ordering requirements for this table; (12 CFR (h)(4)) and b. Accurately discloses the following closing costs totals: i. Total Closing Costs (Borrower-Paid). The sum of subtotals for Closing Costs (12 CFR (h)(2)) and Lender Credits (12 CFR (h)(3)) (i.e., the following two items in this list). (12 CFR (h)(1)) ii. Closing Costs Subtotals. Consisting of the sum of Loan Cost Subtotals (12 CFR (f)(5) and the Other Costs Subtotals (12 CFR (g)(6)), designated as Borrower-Paid at or before closing; and the sum of costs paid at and before closing by the seller or other parties (as disclosed pursuant to 12 CFR (f) and (g)). (12 CFR (h)(2)) iii. Lender Credits. For general credits from the creditor for closing costs (as described in 12 CFR (g)(6)(ii), shown as a negative number, and designated as Borrower-Paid at closing. (12 CFR (h)(3)) NOTE: Credits that are for specific charges should be reflected in the Paid by Others column in the Closing Cost Details table (with a notation of (L) for lender permitted) under 12 CFR (f) and (g). (12 CFR (h)(3); Comment 38(h)(3)-1) A. If a refund is provided pursuant to 12 CFR (f)(2)(v), determine whether the creditor has provided a statement explaining that the refund (the amount described in the Loan Estimate under 12 CFR (g)(6)(ii)) includes a credit for the amount that exceeds the limitations on increases in closing costs under 12 CFR (e)(3), and the amount of such credit. Calculating Cash to Close 12 CFR (i) (Page 3 of the Closing Disclosure) 1. Calculating Cash to Close. Determine whether the creditor, for each of the following items, accurately includes the amount from the Loan Estimate, compared to the amount disclosed in the Final column, and provides the necessary V 1.92 FDIC Compliance Manual November 2015

52 V. Lending TILA answer to the question Did This Change? (with items in the latter column disclosed more prominently than other disclosures) (12 CFR (i)(1)(i)-(iii)): a. Total Closing Costs. The Total Closing Costs on the Calculating Cash to Close table of the Loan Estimate disclosed under 12 CFR (h)(1)(i) compared to the final Total Closing Costs disclosed under 12 CFR (h)(1), and: i. If the amounts are different (unless due to rounding), the creditor has provided: (12 CFR (i)(1)(i)-(ii)) ii. A. A statement of that fact, and (12 CFR (i)(1)(iii)(A)(1)) B. If the difference in the Total Closing Costs is attributable to differences in itemized charges that are included in either or both subtotals, a statement that the consumer should see the Total Loan Costs (under 12 CFR (f)(4)) and Total Other Costs (under 12 CFR (g)(5)) subtotals (together with references to such disclosures), as applicable; and (12 CFR (i)(1)(A)(2)) C. If the increase exceeds the limitations on increases in closing costs under 12 CFR (e)(3), a statement that such increase exceeds the legal limits by the dollar amount of the excess, and if any refund is provided pursuant to 12 CFR (f)(2)(v), a statement directing the consumer to the disclosure required under 12 CFR (h)(3). The dollar amount must equal the sum total of all excesses of the limitations on increases in closing costs under 12 CFR (e)(3), taking into account the different methods of calculating excesses of the limitations on increases in closing costs under 12 CFR (e)(3)(i) and (ii). (12 CFR (i)(1)(iii)(A)(3)) If the amount disclosed under 12 CFR (i)(1)(ii) (i.e., amount in the Final column) is equal to the amount disclosed under 12 CFR (i)(1)(i) (i.e., amount copied over from the Loan Estimate), a statement of that fact. (12 CFR (i)(1)(iii)(B)) b. Closing Costs Paid Before Closing. Under the subheading Loan Estimate, the dollar amount $0, compared to the final amount of Total Closing Costs disclosed under 12 CFR (h)(2) and designated as Borrower-Paid before closing, stated as a negative number, and (12 CFR (i)(2)(i)-(iii)): i. If these amounts are different (unless the difference is due to rounding), the creditor has provided a statement of that fact, along with a statement that the consumer paid such amounts prior to consummation of the transaction (12 CFR (i)(2)(iii)(A)); or if the amount disclosed under 12 CFR (i)(2)(ii) (i.e., amount in the Final column) is equal to the amount disclosed under 12 CFR (i)(2)(i) (i.e., $0), a statement of that fact; (12 CFR (i)(2)(iii)(B)) c. Closing Costs Financed (Paid from your Loan Amount). Under the subheading Loan Estimate, the amount disclosed on Calculating Cash to Close table on the Loan Estimate under 12 CFR (h)(1)(ii), compared to the actual amount of the closing costs that are to be paid out of loan proceeds, if any, stated as a negative number (12 CFR (i)(3)(i)-(iii)); and i. If the amounts are different (unless the difference is due to rounding), a statement of that fact, along with a statement that the consumer included the closing costs in the loan amount, which increased the loan amount (12 CFR (i)(3)(iii)(A)); or ii. If the amount disclosed under 12 CFR (i)(3)(ii) (i.e., amount in the Final column) is equal to the amount disclosed pursuant to 12 CFR (i)(3)(i) (i.e., amount copied over from the Loan Estimate), a statement of that fact. (12 CFR (i)(3)(iii)(B)) d. Down Payment/Funds from Borrower. For purchase transactions, under the subheading Loan Estimate, the Down Payment/Funds from Buyer amount disclosed on the Calculating Cash to Close table on the Loan Estimate under 12 CFR (h)(1)(iii), compared to the difference between the purchase price of the property and the principal amount of the credit extended, stated as a positive number in the Final column. For transactions that are not purchases, the amount in the Final column is determined according to 12 CFR (i)(6)(iv), discussed below. (12 CFR (i)(4)(i)-(ii)) i. If the amount disclosed under 12 CFR (i)(4)(ii) (i.e., amount in the Final column) is different, unless due to rounding, from the amount disclosed under 12 CFR (i)(4)(i) (i.e., amount copied over from the Loan Estimate), a statement of that fact, along with a statement that the consumer increased or decreased this payment and can see further details in the Summaries of Transactions table (12 CFR (i)(4)(iii)(A)); or FDIC Compliance Manual November 2015 V 1.93

53 V. Lending TILA ii. If the amount disclosed under 12 CFR (i)(4)(ii) is equal to the amount disclosed under 12 CFR (i)(4)(i), a statement of that fact. (12 CFR (i)(4)(iii)(B)) e. Deposit. Under the subheading Loan Estimate, the Deposit amount disclosed on the Calculating Cash to Close table on the Loan Estimate under 12 CFR (h)(1)(iv), compared to the amount listed as Deposit on the Summaries of Transactions table on the Closing Document pursuant to 12 CFR (j)(2)(ii), stated as a negative number, (12 CFR (i)(5)(i)-(ii)) and estate closing disclosed on the Summaries of Transactions table pursuant to 12 CFR (j)(1)(v) (except to the extent the satisfaction of such existing debt is disclosed under 12 CFR (g)), and (12 CFR (i)(6)(iv)). i. If the calculation yields a positive number, it is disclosed as described above in the Final Down Payment/Funds from Borrower column under 12 CFR (i)(4)(ii)(B), and $0 is disclosed as described above in the Final Funds for Borrower column under 12 CFR (i)(6)(ii). (12 CFR (i)(6)(iv)(A)) i. If the amounts are different, unless due to rounding, a statement of that fact, along with a statement that the consumer increased or decreased this payment, as applicable, and that the consumer should see the details disclosed under 12 CFR (j)(2)(ii) (i.e., in Section L in the Summaries of Transactions table) (12 CFR (i)(5)(iii)(A)); or ii. If the calculation under 12 CFR (i)(6)(iv) yields a negative number, it is disclosed under 12 CFR (i)(6)(ii), as a negative number in the Final Funds for Borrower column described above, and $0 is disclosed as described above in the Final Down Payment/Funds from Borrower column under 12 CFR (i)(4)(ii)(B). (12 CFR (i)(6)(iv)(B)) ii. If the amount disclosed under 12 CFR (i)(5)(ii) (i.e., amount in the Final column) is equal to the amount disclosed 12 CFR (i)(5)(i) (i.e., amount copied over from the Loan Estimate), a statement of that fact. (12 CFR (i)(5)(iii)(B)) f. Funds for Borrower. Under the subheading Loan Estimate, the amount disclosed on the Calculating Cash to Close table on the Loan Estimate under 12 CFR (h)(1)(v), compared to the amount listed in the Final column calculated pursuant to 12 CFR (i)(6)(iv) (NOTE: see next item for calculation); (12 CFR (i)(6)(i)-(iii)), and i. If the amounts are different, unless due to rounding, a statement of that fact, along with a statement that the consumer's available funds from the loan amount have increased or decreased, as applicable (12 CFR (i)(6)(iii)(A)); or iii. If the calculation under 12 CFR (i)(6)(iv) yields $0, then $0 is disclosed in both the Final Down Payment/Funds from Borrower column under 12 CFR (i)(4)(ii)(B) and in the Final Funds for Borrower column described above under 12 CFR (i)(6)(ii). (12 CFR (i)(6)(iv)(C)) h. Seller Credits. Under the subheading Loan Estimate, the amount disclosed on the Calculating Cash to Close table on the Loan Estimate under 12 CFR (h)(1)(vi), compared to the amount listed pursuant to 12 CFR (j)(2)(v), stated as a negative number (12 CFR (i)(7)(i)-(ii)), and i. If the amounts are different, unless due to rounding, a statement of that fact, along with a statement that the consumer should see the details disclosed under 12 CFR (j)(2)(v) (i.e., in Section L in the Summaries of Transactions table) (12 CFR (i)(7)(iii)(A)), or ii. If the amount disclosed under 12 CFR (i)(6)(ii) (i.e., amount in the Final column) is equal to the amount disclosed 12 CFR (i)(6)(i) (i.e., amount copied over from the Loan Estimate), a statement of that fact. (12 CFR (i)(6)(iii)(B)) ii. If the amount disclosed under 12 CFR (i)(7)(ii) (i.e., amount in the Final column) is equal to the amount disclosed 12 CFR (i)(7)(i) (i.e., amount copied over from the Loan Estimate), a statement of that fact. (12 CFR (i)(7)(iii)(B)) g. Funds for Borrower. Determine whether the creditor accurately calculates the Funds for Borrower for non-purchase transactions and the final Funds for Borrower by subtracting the principal amount of the credit extended (excluding any amount disclosed pursuant to 12 CFR (i)(3)(ii)) from the total amount of all existing debt being satisfied in the real i. Adjustments and Other Credits. Under the subheading Loan Estimate, the amount disclosed on the Calculating Cash to Close table on the Loan Estimate under 12 CFR (h)(1)(vii), compared to the amount listed pursuant to 12 CFR (j)(1)(iii) and (v) through (x) (see exam procedures below on Itemization of Amounts Due From Borrower) reduced V 1.94 FDIC Compliance Manual November 2015

54 V. Lending TILA by the total of the amounts disclosed under 12 CFR (j)(2)(vi) through (xi) (see exam procedures below on Itemization of Amounts Already Paid By or On Behalf of Borrower). (12 CFR (i)(8)(i)-(ii)) i. If the amounts are different, unless due to rounding, statement of that fact, along with a statement that the consumer should see the details disclosed under 12 CFR (j)(1)(iii) and (v) through (x) and (j)(2)(vi) through (xi) (i.e., in Sections K and L in the Summaries of Transactions table) (12 CFR (i)(8)(iii)(A)); or ii. If the amount disclosed under 12 CFR (i)(8)(ii) (i.e., amount in the Final column) is equal to the amount disclosed 12 CFR (i)(8)(i) (i.e., amount copied over from the Loan Estimate), a statement of that fact. (12 CFR (i)(8)(iii)(B)) j. Cash to Close. Under the subheading Loan Estimate, the amount disclosed on the Calculating Cash to Close table on the Loan Estimate under 12 CFR (h)(1)(viii), compared to the amount listed pursuant to 12 CFR (i)(1) through (i)(8), and each disclosed more prominently than the other disclosures in this section. (12 CFR (i)(9)(i)-(ii)) Alternative Cash to Close Table for Transactions Without a Seller 12 CFR (e) (Page 3 of the Closing Disclosure) 1. Determine whether, for transactions without a seller, the creditor uses the alternative table in the Loan Estimate (12 CFR (h)(2)), and if so, determine whether the creditor provides, instead of the table described in 12 CFR (i), a separate table, Calculating Cash to Close, with the statement Use this table to see what has changed from your Loan Estimate. Determine whether the table includes: a. Loan Amount. Disclosed on the Loan Estimate under 12 CFR (b)(1) and the final loan amount disclosed under 12 CFR (b), disclosed more prominently than other disclosures in this section, with the question Did this change? If the amounts are different (unless due to rounding), a statement of that fact along with a statement of whether this amount increased or decreased. If there is no change, a statement of that fact. (12 CFR (e)(1)(i) (iii)) b. Total Closing Costs. Disclosed on the Loan Estimate under 12 CFR (h)(2)(ii) and the final Total Closing Costs disclosed under 12 CFR (h)(1), disclosed as a negative number and disclosed more prominently than other disclosures, with the question Did this change? If there is no change, a statement of that fact. (12 CFR (e)(2)) If the amounts are different (unless due to rounding): FDIC Compliance Manual November 2015 i. A statement of that fact. ii. If there is a change because of differences in itemized charges that are included in either or both subtotals, a statement that the consumer should look at the Total Loan Costs and Total Other Costs subtotals disclosed below, together with references to those disclosures (12 CFR (e)(2)(iii)(A)(2)); and iii. If the increase exceeds the legal limits for increases in closing costs under 12 CFR (e)(3); a statement of that fact, the dollar amount of the excess; and, if any refund is provided, a reference to the disclosure required for including the refund in a lender credit under 12 CFR (h)(3). (12 CFR (e)(2)(A)(3)) c. Closing Costs Paid before Closing. Disclosed under the subheading Loan Estimate, the amount of $0; and under the subheading Final, any amount designated as Borrower-Paid before closing under 12 CFR (h)(2), disclosed as a positive number. Determine whether these disclosures are disclosed more prominently than other disclosures, with the question Did This Change? If so (unless the difference is due to rounding), a statement of that fact. If there is no change, a statement of that fact. (12 CFR (e)(3)) i. If the amount disclosed under 12 CFR (e)(3)(ii) is different than the amount disclosed under 12 CFR (e)(3)(i), unless due to rounding, a statement of that fact along with a statement that the consumer paid such amounts prior to consummation (12 CFR (e)(3)(iii)(A)); or ii. If the amount disclosed under 12 CFR (e)(3)(ii) is equal to the amount disclosed under 12 CFR (e)(3)(i), a statement of that fact. (12 CFR (e)(3)(iii)(B)) d. Total Payoffs and Payments. Includes the total payoffs and payments disclosed on the Loan Estimate under 12 CFR (h)(2)(iii) and the final total amount of payoffs and payments made to third parties not otherwise disclosed under 12 CFR (t)(5)(vii)(B), to the extent known, disclosed as a negative number. Determine whether these disclosures are disclosed more prominently than other disclosures with the question Did This Change? If so (unless the difference is due to rounding), a statement of that fact. If there is no change, a statement of that fact. (12 CFR (e)(4)) i. If the amount disclosed under 12 CFR (e)(4)(ii) is different than the amount V 1.95

55 V. Lending TILA ii. disclosed under 12 CFR (e)(4)(i)(unless the difference is due to rounding), a statement that the consumer included the closing costs in the loan amount, which increased the loan amount, along with a reference to the Payoffs and Payments table that may be added pursuant to 12 CFR (t)(5)(viii)(B)) (12 CFR (e)(4)); or If the amount disclosed under 12 CFR (e)(4)(ii) is equal to the amount disclosed under 12 CFR (e)(4)(i), a statement of that fact. (12 CFR (e)(4)(iii)(B)) e. Cash to Close. The estimated Cash to Close disclosed on the Loan Estimate, along with the statement of whether the estimated amount is due from or to the consumer, and a disclosure of the final amount due from or to the consumer.(12 CFR (e)(5)(i) (ii) f. Closing Costs Financed (Paid from your Loan Amount). Disclosed as the sum of the amounts disclosed under 12 CFR (e)(1)(ii) and (e)(4)(ii) (i.e., the amounts in the Final Column of the Loan Amount and Total Payoffs and Payments). However, the amount is disclosed only to the extent that the sum is greater than zero and less than or equal to the sum disclosed under 12 CFR (h)(1) (Total Closing Costs) minus the sum disclosed under 12 CFR (h)(2) designated as Borrower-Paid before closing. (12 CFR (e)(6)) Summaries of Transactions: Borrower s Transaction 12 CFR (j) (Page 3 of the Closing Disclosure) Borrower s Transaction Itemization of Amounts Due from Borrower at Closing (Page 3 of the Closing Disclosure) 1. Due from Borrower at Closing. Determine whether the creditor accurately discloses the total amount due from the consumer at closing, calculated as the sum of items required to be disclosed by 12 CFR (j)(1)(ii) through (x) (i.e., the items described in this procedure), excluding items paid from funds other than closing funds as described in 12 CFR (j)(4)(i). Determine whether the creditor completes the summary of the borrower s transaction as follows: (12 CFR (j)(1)) a. Sale Price of Property. The amount of the contract sales price of the property being sold in a purchase real estate transaction, excluding the price of any tangible personal property if the consumer and seller have agreed to a separate price for such items (12 CFR (j)(1)(ii)); b. Sale Price of Any Personal Property Included in Sale. The amount of the sales price of any tangible personal property excluded from the contract sales price pursuant to 12 CFR (j)(1)(ii) (12 CFR (j)(1)(iii)); c. Closing Costs Paid at Closing. The total amount of closing costs disclosed that are designated Borrower- Paid at closing, calculated pursuant to 12 CFR (h)(2) and (h)(3) (see procedure above regarding Closing Costs Subtotals)(12 CFR (j)(1)(iv)); d. A description and the amount of any additional items that the seller has paid prior to the real estate closing, but reimbursed by the consumer at the real estate closing, and a description and the amount of any other items owed by the consumer at the real estate closing not otherwise disclosed pursuant to 12 CFR (f), (g), or (j) (12 CFR (j)(1)(v)); e. The description Adjustments for Items Paid by Seller in Advance (12 CFR (j)(1)(vi)); f. City/Town Taxes. The prorated amount of any prepaid taxes due from the consumer to reimburse the seller at the real estate closing, and the time period corresponding to that amount (12 CFR (j)(1)(vii)); g. County Taxes. The prorated amount of any prepaid taxes due from the consumer to reimburse the seller at the real estate closing, and the time period corresponding to that amount (12 CFR (j)(1)(viii)); h. Assessments. The prorated amount of any prepaid assessments due from the consumer to reimburse the seller at the real estate closing, and the time period corresponding to that amount (12 CFR (j)(1)(ix)); and i. A description and the amount of any additional items paid by the seller prior to the real estate closing that are due from the consumer at the real estate closing (12 CFR (j)(1)(x)). Borrower s Transaction Itemization of Amounts Paid Already By or On Behalf of Borrower at Closing (Page 3 of the Closing Disclosure) 1. Paid Already by or on Behalf of Borrower at Closing. Determine whether the creditor accurately discloses the sum of the amounts disclosed in 12 CFR (j)(2)(ii) through (xi) (i.e., the items described in this procedure), excluding items paid from funds other than closing funds as described in 12 CFR (j)(4)(i). Determine whether the creditor accurately completes the summary of borrower s transaction as follows (12 CFR (j)(2)(i)): V 1.96 FDIC Compliance Manual November 2015

56 V. Lending TILA a. Deposit. Any amount that is paid to the seller or held in trust or escrow by an attorney or other party under the terms of the agreement for the sale of the property (12 CFR (j)(2)(ii)); b. Loan Amount. The amount of the consumer's new loan amount or first user loan as disclosed pursuant to 12 CFR (b) (12 CFR (j)(2)(iii)); c. Existing Loan(s) Assumed or Taken Subject To. The amount of any existing loans that the consumer is assuming, or any loans subject to which the consumer is talking title to the property (12 CFR (j)(2)(iv)); d. Seller Credit. The total amount of money that the seller will provide at the real estate closing as a lump sum not otherwise itemized to pay for loan costs as determined by 12 CFR (f) and other costs as determined by 12 CFR (g) and any other obligations of the seller to be paid directly to the consumer (12 CFR (j)(2)(v)); e. Other Credits. A description and amount of other items paid by or on behalf of the consumer and not otherwise disclosed pursuant to 12 CFR (f), (g), (h), and (j)(2) (12 CFR (j)(2)(vi)); f. The description Adjustments for Items Unpaid by Seller (12 CFR (j)(2)(vii)); g. City/Town Taxes. The prorated amount of any unpaid taxes due from the seller to reimburse the consumer at the real estate closing, and the time period corresponding to that amount (12 CFR (j)(2)(viii)ix)); h. County Taxes. The prorated amount of any unpaid taxes due from the seller to reimburse the consumer at the real estate closing, and the time period corresponding to that amount (12 CFR (j)(2)(ix); i. Assessments. The prorated amount of any unpaid assessments due from the seller to reimburse the consumer at the real estate closing, and the time period corresponding that amount (12 CFR (j)(2)(x)); and j. A description and the amount of any additional items which have not yet been paid and which the consumer is expected to pay after the real estate closing, but which are attributable in part to a period of time prior to the real estate closing (12 CFR (j)(2)(xi)). FDIC Compliance Manual November 2015 Borrower s Transaction Calculation of Borrower s Transaction (Page 3 of the Closing Disclosure) 1. Calculation. Determine whether the creditor accurately discloses the total amount due from, and already paid by, the consumer at closing by the following calculation: (12 CFR (j)(3)) a. Total Due from Borrower at Closing. The amount disclosed in the Closing Disclosure, on the line captioned Due from Borrower at Closing (12 CFR (j)(3)(i)); b. Total Paid Already by or on Behalf of Borrower at Closing. The amount disclosed in the Closing Disclosure, on the line captioned Paid Already by or on Behalf of Borrower at Closing, if any, disclosed as a negative number (12 CFR (j)(3)(ii)); and c. Cash to Close. A statement that the disclosed amount is due from or to the consumer, and the amount due from or to the consumer at the real estate closing, calculated by the sum of the amounts disclosed as the Total Due from Borrower at Closing and Total Paid Already by or on Behalf of Borrower at Closing (12 CFR (j)(3)(iii)). 1. Paid Outside of Closing. Determine whether the creditor discloses other costs that are not paid out of closing costs but would otherwise be disclosed; describes the funds as Paid Outside of Closing or the abbreviation P.O.C., and includes the name of the party making the payment. (12 CFR (j)(4)(i)) NOTE: For purposes of 12 CFR (j), closing funds means funds collected and disbursed at real estate closing. (12 CFR (j)(4)(ii)) Summaries of Transactions: Seller s Transaction 12 CFR (k) (Page 3 of the Closing Disclosure) Seller s Transaction Itemization of Amounts Due to Seller at Closing (Page 3 of the Closing Disclosure) 1. Due to Seller at Closing. Determine whether the creditor accurately discloses the total amount due to the seller at the real estate closing, calculated as the sum of items required to be disclosed pursuant to 12 CFR (k)(1)(ii) through (ix) (i.e., the items in this procedure), excluding items paid from funds other than closing funds as described in 12 CFR (k)(4)(i). Determine whether the creditor accurately completes the summary of seller s transaction as follows (12 CFR )(k)(1)(i)): a. Sale Price of Property. The amount of the contract sales price of the property being sold, excluding the price of any tangible personal property if the consumer and seller have agreed to a separate price for such items (12 CFR (k)(1)(ii)); V 1.97

57 V. Lending TILA b. Sale Price of Any Personal Property Included in Sale. The amount of the sales price of any tangible personal property excluded from the contract sales price pursuant to 12 CFR (k)(1)(ii) (12 CFR (k)(1)(iii)); c. A description and the amount of other items paid to the seller by the consumer pursuant to the contract of sale or other agreement, such as charges that were not disclosed pursuant to 12 CFR on the Loan Estimate or items paid by the seller prior to the real estate closing but reimbursed by the consumer at the real estate closing (12 CFR (k)(1)(iv)); d. The description Adjustments for Items Paid by Seller in Advance (12 CFR (k)(1)(v)); e. City/Town Taxes. The prorated amount of any prepaid taxes due from the consumer to reimburse the seller at the real estate closing, and the time period corresponding to that amount (12 CFR (k)(1)(vi); f. County Taxes. The prorated amount of any prepaid taxes due from the consumer to reimburse the seller at the real estate closing, and the time period corresponding to that amount (12 CFR (k)(1)(vii)); g. Assessments. The prorated amount of any unpaid assessments due from the consumer to reimburse the seller at the real estate closing, and the time period corresponding that amount (12 CFR (k)(1)(viii)); and h. A description and the amount of additional items paid by the seller prior to the real estate closing that are reimbursed by the consumer at the real estate closing (12 CFR (k)(1)(ix)). Seller s Transaction Itemization of Amounts Due from Seller at Closing (Page 3 of the Closing Disclosure) 1. Due from Seller at Closing. Determine whether the creditor accurately discloses the sum of the amounts disclosed in 12 CFR (k)(2)(ii) through 12 CFR (k)(2)(xiii) (i.e., the items in this procedure), excluding items paid from funds other than closing funds described in 12 CFR (k)(4)(i). Determine whether the creditor accurately completes the summary of the seller s transaction as follows (12 CFR (k)(2)(i)): a. Excess Deposit. The amount of any excess deposit disbursed prior to closing, (12 CFR (k)(2)(ii)); b. Closing Costs Paid at Closing. The amount of closing costs designated Seller-Paid at closing and disclosed pursuant to 12 CFR (h)(2) (12 CFR (k)(2)(iii)); c. Existing Loan(s) Assumed or Taken Subject To. The amount of any existing loans assumed or taken subject to by the consumer (12 CFR (k)(2)(iv)); d. Payoff of First Mortgage Loan. The amount of a first lien loan secured by the property being sold that will be paid off at closing (12 CFR (k)(2)(v)); e. Payoff of Second Mortgage Loan. The amount of any loan secured by a second lien on the property that will be paid off as part of the real estate closing (12 CFR (k)(2)(vi)); f. Seller Credit. The total amount of seller funds to be provided at closing as a lump sum that has not otherwise been itemized to pay for loan costs as determined by 12 CFR (f) and other costs as determined by 12 CFR (g) and any other obligations of the seller to be paid directly to the consumer (12 CFR (k)(2)(vii); g. A description and amount of all other items paid to be paid by the seller at closing, including any lien-related payoffs, fees, or obligations (12 CFR (k)(2)(viii)); h. The description Adjustments for Items Unpaid by Seller (12 CFR (k)(2)(ix)); i. City/Town Taxes. The prorated amount of unpaid taxes due from the seller to reimburse the consumer at the real estate closing, and the time period corresponding to that amount (12 CFR (k)(2)(x); j. County Taxes. The prorated amount of any unpaid taxes due from the seller to the consumer at the real estate closing, and the time period corresponding to that amount (12 CFR (k)(2)(xi)); k. Assessments. The prorated amount of any unpaid assessments due from the seller to reimburse the consumer at the real estate closing, and the time period corresponding to that amount (12 CFR (k)(2)(xii)); and l. A description and the amount of any additional items which have not yet been paid and which the consumer is expected to pay after the real estate closing, but which are attributable in part to a period of time prior to the real estate closing (12 CFR (k)(2)(xiii)). Seller s Transaction Calculation of Seller s Transaction (Page 3 of the Closing Disclosure) 1. Calculation. Determine whether the creditor accurately discloses the total amount due to and from the seller at closing by the following calculation (12 CFR (k)(3)): V 1.98 FDIC Compliance Manual November 2015

58 V. Lending TILA a. Total Due to Seller Closing. The amount disclosed in the Closing Disclosure, on the line captioned Due from Seller at Closing (12 CFR (k)(3)(i)); b. Total Due from Seller at Closing. The amount disclosed in the Closing Disclosure on the line captioned Due from Seller at Closing, disclosed as a negative number (12 CFR (k)(3)(ii)); c. Cash. A statement that the disclosed amount is due from or to the seller and the amount due, calculated by the sum of the amounts disclosed as the Total Due to Seller at Closing and Total Due from Seller at Closing (12 CFR (k)(3)(iii)). Seller s Transaction Items Paid Outside of Closing Funds (Page 3 of Closing Disclosure) 1. Determine whether the creditor discloses other costs that are not paid out of closing funds but would otherwise be disclosed in the Summaries of Transactions: Seller s Transaction table; describing the funds as Paid Outside of Closing or the abbreviation P.O.C., and including the name of the party making the payment. (12 CFR (k)(4)(i)) NOTE: For purposes of 12 CFR (k), closing funds means funds collected and disbursed at real estate closing. (12 CFR (k)(4)(ii)) Payoffs and Payments Table for Transactions Without a Seller 12 CFR (t)(5)(vii)(B) (Page 3 of the Closing Disclosure) 1. Payoff and Payments. For transactions without a seller, determine whether a creditor, using an optional modified Closing Disclosure (as illustrated by form H-25(J) in appendix H), has provided alternative tables for Cash to Close, pursuant to 12 CFR (d)(2), and for Calculating Cash to Close pursuant to 12 CFR (e), and that the creditor itemizes the amounts of payments made at consummation to other parties from the credit extended to the consumer or funds provided by the consumer in connection with the transaction, including designees of the consumer, the payees, and a description of the purpose of such disbursements under the subheading To; and the total amount of such payments (12 CFR (t)(5)(vii)(B)). Additional Information About This Loan: Loan Disclosures 12 CFR (l) (Page 4 of the Closing Disclosure) 1. Loan Disclosures. Determine whether the creditor accurately provides the required disclosures (12 CFR (l)): a. Assumption. Whether the loan obligations may be assumed by a subsequent purchaser (12 CFR (l)(1)); FDIC Compliance Manual November 2015 b. Demand Feature. Whether the legal obligation includes a demand feature, and, if it does, a reference to the note or other loan contract for details (12 CFR (l)(2)); c. Late Payment. The dollar amount or percentage charge of any fee designated as a late payment (information required on the Loan Estimate by 12 CFR (m)(4)) and the number of days after which such a charge will be triggered (12 CFR (l)(3)); d. Negative Amortization (Increase in Loan Amount). Whether the regular period payments may cause the principal balance to increase, and: i. If the regular periodic payments do not cover all of the interest due, the creditor provides a statement that the borrower s principal balance will increase, such balance will likely become larger than the original loan amount, and increases in such balance lower the consumer s equity in the property; and ii. If the consumer may make regular periodic payments that do not cover all of the interest due, the creditor provides a statement that, if the consumer chooses a monthly payment option that does not cover all of the interest due, the principal balance may become larger than the original loan amount and the increases in the principal balance lower the consumer s equity in the property. (12 CFR (l)(4)(i)-(ii)) e. Partial Payments. Whether the creditor that accepts less than the full amount due has provided a statement that the lender, (using that label) may accept partial payments and apply such payments to the consumer's loan, and: i. If periodic payments that are less than the full amount due are accepted but not applied to a consumer's loan until the consumer pays the remainder of the full amount due, a statement that the lender may hold partial payments in a separate account until the consumer pays the remainder of the payment and then apply the full periodic payment to the consumer's loan; ii. If periodic payments that are less than the full amount due are not accepted, the lender does not accept any partial payments; and iii. A statement that, if the loan is sold, the new lender may have a different policy. (12 CFR (l)(5)(i)-(iv)) f. Security Interest. Whether the creditor states that the consumer is granting a security interest in the property V 1.99

59 V. Lending TILA securing the transaction, and that the borrower may lose the property if required payments are not made or otherwise fails to satisfy the requirements of the legal obligation. Determine that the creditor has included the property address and zip code (12 CFR (l)(6)); g. Escrow Account. Whether the creditor states whether it has established, will establish, or will not establish an escrow account for the consumer in connection with the loan transaction at or before consummation; i. Under the reference For now, A. Whether the creditor provides a statement that an escrow account may also be called an impound or trust account; whether the creditor has established or will establish, at or before consummation, an escrow account in connection with the transaction for the costs that will be paid using escrow account funds; that the creditor may be liable for penalties and interest if it fails to make a payment for any cost for which the escrow account is established; and that the consumer would have to pay such costs directly in the absence of the escrow account; (12 CFR (l)(7)(i) and (l)(7)(i)(a)).whether, if an escrow account is or will be established, the creditor accurately discloses the following items based upon the escrow analysis required under 12 CFR , in tabular form: 1) The total amount that the consumer will be required to pay into the account over the first year after consummation for the payment of the charges described in 12 CFR (c)(4)(ii) together with a descriptive name of each such charge calculated as the Monthly Escrow Payment multiplied by the number of periodic payments scheduled to be made to the escrow account during the first year after consummation. (12 CFR (l)(7)(i)(A)(1)) 2) The estimated amount for taxes, insurance, and assessments that the consumer is likely to pay during the first year after consummation, as described in 12 CFR (c)(4)(ii), that are known to the creditor and that will not be paid using escrow account funds, labeled Non-Escrowed Property Costs over Year 1, together with a descriptive name of each such charge and a statement that the consumer may have to pay other costs that are not listed. (12 CFR (l)(7)(i)(A)(2)) ii. 3) The total amount disclosed and a reference to the disclosure made on the Closing Disclosure under the heading Other Costs, Initial Escrow Payment at Closing, pursuant to 12 CFR (g)(3), and a statement that the payment is a cushion for the escrow account, labeled Initial Escrow Payment. (12 CFR (l)(7)(i)(A)(3)) 4) The amount the consumer will be required to pay into the escrow account with each periodic payment during the first year after consummation for payment of the charges described in the Loan Estimate pursuant to 12 CFR (c)(4)(ii), labeled Monthly Escrow Payment. (12 CFR (l)(7)(i)(A)(4)) No Escrow. If an escrow account will not be established for the consumer, determine whether there 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 itemizes the estimated total amount the consumer will pay directly for charges described in the Loan Estimate under 12 CFR (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; along with the amount of any fee the creditor imposes on the consumer for not establishing an escrow account in connection with the transaction, labeled Escrow Waiver Fee. (12 CFR (l)(7)(i)(B)) A. Under the reference In the future, determine whether the creditor has disclosed under the reference In the future: (12 CFR (l)(7)(ii)) 1) A statement that the consumer's property costs may change and that, as a result, the consumer's escrow payment may change; (12 CFR (l)(7)(ii)(A)) 2) A statement that the consumer may be able to cancel any escrow account that has been established but that the consumer is responsible for directly paying all V FDIC Compliance Manual November 2015

60 V. Lending TILA property costs in the absence of an escrow account; (12 CFR (l)(7)(ii)(B)) and 3) A description of the consequences if the consumer fails to pay property costs, including the actions that a state or local government may take if property taxes are not paid and the actions the creditor may take if the consumer does not pay some or all property costs, such as adding amounts to the loan balance, adding an escrow account to the loan, or purchasing a property insurance policy on the consumer's behalf that may be more expensive and provide fewer benefits than what the consumer could obtain directly. (12 CFR (l)(7)(ii)(C)) Additional Information About This Loan: Adjustable Payment (AP) Table 12 CFR (m) (Page 4 of the Closing Disclosure) 1. Adjustable Payment (AP) Table. Determine whether the creditor provides the AP disclosure required for the Loan Estimate under 12 CFR (i). (12 CFR (m)) Additional Information About This Loan: Adjustable Interest Rate (AIR) Table 12 CFR (n) (Page 4 of the Closing Disclosure) 1. Adjustable Interest Rate (AIR) Table. Determine whether the creditor provides the AIR disclosures required for the Loan Estimate by 12 CFR (j). (12 CFR (n)) Loan Calculations 12 CFR (o) (Page 5 of the Closing Disclosure) 1. Loan Calculations. Determine whether the creditor provides a separate table and accurately discloses the following information (12 CFR (o)): a. Total of Payments. Expressed as a dollar amount, and a statement that the disclosure is the total the consumer will have paid after making all payments of principal, interest, mortgage insurance, and loan costs, as scheduled (12 CFR (o)(1)); b. Finance Charge. Expressed as a dollar amount, and the statement The dollar amount the loan will cost you. The finance charge and other disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate) is accurately calculated if the amount disclosed as the finance charge: i. Is understated by no more than $100; or FDIC Compliance Manual November 2015 ii. Is greater than the amount required to be disclosed. (12 CFR (o)(2)) c. Amount Financed. Expressed as a dollar amount, and the following statement: The loan amount available after paying your up-front finance charge (12 CFR (o)(3)); d. Annual Percentage Rate (APR). Expressed as a percentage, with the following statement: Your costs over the loan term expressed as a rate. This is not your interest rate. (12 CFR (o)(4)); e. Total Interest Percentage (TIP). Expressed as a percentage; with the following statement: The total amount of interest that you will pay over the loan term as a percentage of your loan amount. (12 CFR (o)(5)) Other Disclosures 12 CFR (p) (Page 5 of the Closing Disclosure) 1. Other Disclosures. Determine whether the creditor accurately provides the following disclosures: a. Appraisal. For transactions subject to 15 U.S.C. 1639h or 1691(e), as implemented in this part or Regulation B, 12 CFR part 1002, respectively, under the subheading Appraisal: (12 CFR (p)(1)) i. If there was an appraisal of the property in connection with the loan, the creditor is required to provide the consumer with a copy at no additional cost to the consumer at least three days prior to consummation; (12 CFR (p)(1)(i)) and ii. If the consumer has not yet received a copy of the appraisal, the consumer should contact the creditor using the information disclosed in the Closing Disclosure. (12 CFR (p)(1)(ii)) b. Contract Details. A statement that the consumer should refer to the appropriate loan document and security instrument for information about nonpayment, what constitutes a default under the legal obligation, circumstances under which the creditor may accelerate the maturity of the obligation, and prepayment rebates and penalties. (12 CFR (p)(2)) c. Liability after Foreclosure. A brief statement of whether, and the conditions under which, the consumer may remain responsible for any deficiency after foreclosure under applicable state law, a brief statement that certain protections may be lost if the consumer refinances or incurs additional debt on the property, and a statement that the consumer should consult an attorney for additional information. (12 CFR (p)(3)) V 1.101

61 V. Lending TILA d. Refinance. The statement required on the Loan Estimate by 12 CFR (m)(5) that Refinancing this loan will depend on your future financial situation, the property value, and market conditions. You may not be able to refinance this loan. (12 CFR (p)(4)) e. Tax Deductions. A statement that, if the extension of credit exceeds the fair market value of the property, the interest on the portion of the credit extension that is greater than the fair market value of the property is not tax deductible for Federal income tax purposes and a statement that the consumer should consult a tax adviser for further information. (12 CFR (p)(5)) f. Loan Acceptance. If the creditor does not provide a line for the consumer's signature, the creditor must include with the other disclosures the same statement required in the Loan Estimate that You do not have to accept this loan because you have received this form or signed a loan application. This is the same requirement as in the Loan Estimate under 12 CFR (n)(2). (12 CFR (s)(2)) Questions Notice 12 CFR (q) (Page 5 of the Closing Disclosure) 1. Questions. Determine whether the creditor provides a separate questions notice. The creditor must include a prominent question mark, a statement directing the consumer to use the contact information for questions, and a reference to CFPB s website for more information and to submit a complaint, and a link to (12 CFR (q)(1)-(3)). Contact Information 12 CFR (r) (Page 5 of the Closing Disclosure) 1. Contact Information. Determine whether the creditor provides the required contact information for each lender, mortgage broker, consumer's real estate broker, seller's real estate broker, and settlement agent participating in the transaction; the name of the person, address, NMLSR ID number, or if none, state and License ID; the name of the natural person who is the primary contact for the consumer at each entity, identified as Contact, along with that person s Contact NMLS ID or Contact License ID, address, and phone number. (12 CFR (r)(1)-(7)) Confirm Receipt 12 CFR (s) (Page 5 of the Closing Disclosure) 1. Confirm Receipt. Determine whether, if the creditor chooses to provide a signature statement, the creditor discloses, above the signature line, the statement By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or received this form. (12 CFR (s)(1)) NOTE: If the creditor does not provide a line for the consumer's signature, the creditor must include the following statement, labeled Loan Acceptance: You do not have to accept this loan because you have received this form or signed a loan application. (12 CFR (s)(2) Form of Disclosures 12 CFR (t) 1. Determine whether the creditor follows the format and content of form H-25, set forth in appendix H, changes formatting only if there is an exception, including acceptable modifications in appendix H for transactions without a seller, and complies with the following rounding rules for dollar amounts and percentages: a. Rounding - nearest dollar. The following dollar amounts are rounded to the nearest whole dollar: i. The dollar amounts for Loan Terms (required to be disclosed by 12 CFR (b)) that are required to be rounded by 12 CFR (o)(4)(i)(A) when disclosed under 12 CFR (b)(6) and (7) (i.e., adjustments after consummation and details about prepayment penalty and balloon payments); ii. The dollar amounts for projected payments or range of payments required by 12 CFR (c) that are required to be rounded by 12 CFR (o)(4)(i)(A) when disclosed under 12 CFR (c)(1)(iii) (i.e., minimum and maximum amounts of principal and interest for projected periodic payments or range of payments); iii. The dollar amounts required to be disclosed by 12 CFR (e) (Alternative Calculating Cash to Close table for transactions without a seller) and 12 CFR (i) (Calculating Cash to Close table) under the subheading Loan Estimate; iv. The dollar amounts required to be disclosed by 12 CFR (m) (adjustable payment table); and v. The dollar amounts required to be disclosed by 12 CFR (c) (projected payments) that are required to be rounded by 12 CFR (o)(4)(i)(C) when disclosed under 12 CFR (c)(2)(iv) (i.e., total monthly payment). b. Percentages. The percentage amounts disclosed under 12 CFR (b) (i.e., loan terms), (f)(1)(i) (i.e., origination charges), (g)(2)(iii) (i.e., prepaids), (l)(3) (i.e., late payment), (n) (i.e., adjustable interest rate table), and (o)(5)(i.e., total interest percentage or TIP) are not rounded and are disclosed up to two or three decimal places. The percentage amount required to be V FDIC Compliance Manual November 2015

62 V. Lending TILA disclosed under 12 CFR (o)(4) (APR) is not rounded and is disclosed up to three decimal places. Amounts that are whole numbers are disclosed truncated at the decimal point. c. Loan amount. The dollar amount of the loan amount (required to be disclosed by 12 CFR (b) as required by 12 CFR (b)(1)) is disclosed as an unrounded number, except that if the amount is a whole number, then the amount disclosed is truncated at the decimal point. (12 CFR (t)(1)-(5)) FDIC Compliance Manual November 2015 V 1.103

63 The Honorable Richard Cordray Director Consumer Financial Protection Bureau (CFPB) 1700 G Street, NW Washington, D.C March 30, 2016 Dear Director Cordray, On behalf of the Association of Mortgage Investors (AMI), we write to express the mortgage investor community s concerns over the Bureau s Know Before You Owe mortgage disclosure rule ( the Rule ). The recent evidence is that the Rule, while extremely well-intentioned, has resulted in a climate of legal uncertainty and is chilling private investment in the U.S. mortgage market. We urge the Bureau to open a new public comment period to address the concerns of mortgage investors. We seek formal written guidance clarifying the liability for a violation of each individual TRID requirement, as well as, the scope and applicability of TRID s cure mechanisms. The AMI was organized as the primary trade association representing investors in mortgagebacked securities, including university endowments and pension funds. The AMI was founded, in part, to play a primary role in the analysis, development, and implementation of mortgage and housing policy to help keep homeowners in their homes and provide a sound framework that promotes continued home purchasing. Since its formation, the AMI has been developing a set of policy priorities that we believe can contribute to achieving this goal. We are an investor-only group comprised of a significant number of substantial institutional investors in commercial and residential mortgage-backed (RMBS) and other asset-backed securities (ABS). Accordingly, our concerns focus on the Rule s impact and consequences, whether unforeseen, on mortgage availability and affordability. We seek formal guidance clarifying whether the statutory authority for each TRID requirement is under RESPA or TILA, as well as the scope and applicability of TRID s cure mechanisms. Without clarification, investors will generally interpret the regulation in a strict manner, identifying any deviation from the rule as a material error that exposes an investor to full TILA liability. As lenders are implementing TRID, there are mistakes made. In some cases these mistakes are in-process and can be fixed going forward. In other cases, they are a matter of interpretation, and still others are due to individual human error, as mortgages contain numerous fields and clerical errors do occur. Generally, increased liability risk will result in additional costs that will ultimately be passed onto borrowers. We believe that it has already resulted in lower loan origination. It is not simply the probability of a lawsuit or potential legal costs although those are certainly factors there is reputational risk; increased

64 AMI CFPB TRID March 2016 Page 2 transaction and operational costs; and, post-crisis, there is little corporate tolerance for any legal or regulatory risks. Some have stated that this is a minor concern because it only affects loans outside of the agency standards and that is currently a small market. But it could have an outsized impact on the origination of loans that do not meet agency standards. This means that it will particularly impact lending for borrowers with few other options. Eventually, we believe that even agency loans could also undergo scrutiny should they experience delinquencies. The GSEs at that point may decide to review TRID documentation and penalize lenders who made even small clerical errors in the disclosures. Therefore, how to handle TRID errors, the ability to make corrections, and how to reduce resulting liability will be issues that the industry will need to deal with in the years to come. Clarification Over Liability Sought Since the Bureau s adoption of the Rule, legal experts have expressed concerns about the additional liability surrounding investment and loan origination. The specific liability that we seek clarification on arises from private right of action under TILA. Your public comments surrounding TRID s limited impact on liability are appreciated in the context of an originator exam, such as detailed in your letter to the Mortgage Bankers Association (MBA) dated December 29, However, legal experts advise that these comments are neither legally binding nor do they clarify the legal uncertainty around liability for violations of TRID. Experts noted the following example. In your letter to the MBA, you explain: [T]he listed disclosures in 15 U.S.C. 1640(a) that give rise to statutory and class action damages do not include either the RESPA disclosures or the new Dodd-Frank Act disclosures, including the Total Cash to Close and Total Interest Percentage. The analysis by industry legal experts results in a far less optimistic picture than portrayed. In contrast to the vast legal authority is that beyond RESPA, a broader category of liability exists under TILA. Borrower lawsuits under TILA regarding TRID violations could result in statutory damages, borrower defenses and set-offs against investor claims in a foreclosure action. However, because the statutory authority for many requirements under TRID is unclear, the industry does not know whether many violations of TRID carry liability under TILA. Without a clear picture of the liability for TRID violations, the industry is taking a conservative approach and rejecting the purchase of loans for immaterial errors (see Appendix I, II, and III). Potential liability against loan investors and bond investors must be more clearly defined. Accordingly, the AMI and mortgage investors welcome additional specific and formal guidance from the Bureau clearly defining the contours of TILA liability for violations of each TRID requirement M Street, N.W., Suite 500S, Washington, D.C main fax

65 AMI CFPB TRID March 2016 Page 3 Additionally, formal guidance or rulemaking would be welcome regarding the scope of the cure mechanisms under TRID. Description of Process and Background Secondary market investors that buy mortgages (also known as whole loans or loans ) from primary lenders generally choose to retain the mortgages in portfolio, sell them as whole loans to another investor, or aggregate a pool and issue residential mortgage-backed securities ( RMBS ) to be sold to fixed income investors. Prior to purchasing whole loans, an investor typically engages a third-party due diligence firm to review each loan in three areas: credit, collateral, and compliance. If a loan is intended for securitization, the investor will request that the diligence firm supply a rating agency grade for each of the three areas. Each rating agency has its own criteria and grading scheme for the various diligence firms to use in performing loan evaluations. As part of their review, due diligence firms also verify that loans meet investor and rating agency eligibility criteria and identify exceptions when eligibility criteria is not met. Due to uncertainty around the new TRID rules, all TRID errors (including those that one could view as technical or clerical in nature) are being identified by due diligence providers as material exceptions to rating agency and investor compliance criteria because they are considered to be noncompliant with TRID. As a result, these technical or clerical errors end up receiving the same rating agency grade as the seven areas that the CFPB identified as likely to result in statutory damages under TRID. While investors will typically work with the primary lender to cure TRID exceptions as permitted under the rule, many exceptions cannot be cured. Without a cure, an investor must decide if it is willing to purchase a loan with a TRID error, regardless of its materiality or impact to the consumer. In the securitization process, investors select multiple rating agencies to rate the transaction. As part of the ratings process, the rating agencies review pertinent information about the transaction, including the loan characteristics, reports prepared by due diligence providers, and the cash flow structure of the bonds issued as part of the securitization. When rating agencies issue their report, they provide the required credit enhancement levels for the bonds to achieve the ratings requested by the issuer. The list of material exceptions on the loans and their corresponding lower rating agency grades may result in an increase in the credit enhancement levels, making it more costly for aggregators to securitize a pool of loans and, consequently, increases the overall cost to produce mortgage loans (typically, with such costs borne by the borrowers). The Rule s Impact on The Mortgage Market: Chills Mortgage Availability and Affordability In the 100+ days since the Rule has gone into effect, numerous press and industry observers have commented on its scope and impact. The nearly universal feedback is that the Rule is ambiguous and therefore viewed as extremely problematic M Street, N.W., Suite 500S, Washington, D.C main fax

66 AMI CFPB TRID March 2016 Page 4 Many such examples have been reported in the press. First, Moody s Investors Service recently reported that TRID compliance violations are running rampant among newly originated loans. Analysts also report that several third-party firms have reviewed a number of recent mortgage loans for TRID compliance and found violations in more than 90% of the loans. 2 Second, origination volumes for November 2015 were markedly down, especially in California. These news reports are well known to industry participants. As the following graph illustrates, the operational impact of the Rule is coincident with a significant decline in mortgage credit availability for December Some may suggest that this is either mere coincidence or that it is a blip as things shake out concerning the Rule s implementation. Investors, however, remain concerned about any obstacle toward restoring capital into the U.S. mortgage market. Specific Examples Concerning Mortgage Investors The following are examples of issues that we, as mortgage investors, are observing in prepurchase diligence reviews. In the near term, TRID-related issues are causing a significant percentage of loans to be deemed ineligible by investors. The biggest hurdle to overcome at the present is the narrow scope of (f)(2)(iv) (clerical corrections). A high percentage of the defects we are seeing involve numeric values that cannot be addressed through a corrected CD. In each of these examples, the defects do not impact the borrower s final costs. While the CFPB has provided an informal grace period for good faith efforts for lenders to comply with TRID, such grace period does not extend to the secondary market because borrowers may still bring a private right of action under TILA. Consequently, investors remain very concerned with the possible action that borrowers may bring for defects on loans that have occurred during the CFPB s grace period M Street, N.W., Suite 500S, Washington, D.C main fax

67 AMI CFPB TRID March 2016 Page 5 Example 1. Values from the last LE issued do not match the LE value in the Calculating Cash to Close table of the CD. This appears to be a data mapping issue in the lender s operating systems or with their document vendors. This value is present for comparison purposes and has no impact on the borrower s actual closing costs or cash to close. The purpose is to allow the borrower to compare the last LE (for which s/he has a copy) to the final closing costs. Example 2. In a number of refinancing transactions, we have seen cases where the alternative Calculating Cash to Close table was used on the LE but the standard table was used on the CD. If the CD was corrected to use the alternative table and the values remained constant, we believe that this would not be a numeric change, but rather merely a formatting change. However, it is unclear whether the clerical error cure mechanism under TRID applies to this error M Street, N.W., Suite 500S, Washington, D.C main fax

68 AMI CFPB TRID March 2016 Page 6 Example 3. In the 12/29/2015 letter from the CFPB to the MBA, a reference was made to 15 U.S.C (b) and (c) and the ability for the correction of errors. It would be helpful to have more clarity on this topic. Historically, 1640(b) was applied to correcting material violations (e.g. APR, finance charges, etc.). On the other hand, 1640(c) was not frequently relied upon by the industry because it requires, among other things, a the preponderance of the evidence and may be interpreted differently by different courts. Is it the CFPB s opinion that the ability to correct errors under 1640(c) extends to the issue identified in the examples above? Example 4. Further, investors seek further clarity regarding this application of the cure provisions in TILA. The letter states, [You ask] about cure provisions for violations of the rule. The Know Before You Owe mortgage disclosure rule provides for the issuance of a corrected closing disclosure, even after closing. This can be used, for example, to correct non-numerical clerical errors or as a component of curing any violations of the monetary tolerance limits, if they exist. As a general matter, consistent with existing Truth in Lending Act (TILA) principles, liability for statutory and class action damages would be assessed with reference to the final closing disclosure could, I many cases, forestall any such private liability M Street, N.W., Suite 500S, Washington, D.C main fax

69 AMI CFPB TRID March 2016 Page 7 Accordingly, investors wish to know whether the CFPB is maintaining that any error on the LE can be cured by issuing a subsequent corrective LE or a CD? If that is the case, then can one correct an error without a valid COC? The CFPB also has stated that it does not believe these loans should be rejected by investors for formatting and minor errors. It would be valuable for the CFPB to provide a concrete list of examples they believe should not cause the loan to be rejected and the statute in which they are providing cover for those defects. By way of example, investors/originators keep getting loans with errors in the index description, specifically when the index lists LIBOR and fails to specify a duration (i.e., a 6-month, 12-month, etc). AMI investor members believe this is fatal, whereas sellers do not. Accordingly, the market needs the CFPB to provide clarity. Finally, within the TILA framework, it is argued that one has a 60-day cure provision once a defect has been identified. Under TRID, we have two specific cure provisions to cure a tolerance cure or a non-numeric technical defect within 60 days of consummation. Again, investors are faced with a dilemma that could result in jeopardy, which timing is correct for tolerance cures: the 60 days from consummation as TRID states or 60 days from discovery as TILA states? In response, mortgage investors wish to constructively engage the Bureau about opening a meaningful dialogue, introducing certainty and clarity to the framework for liability for TRID violations, and developing a reasonable series of corrective steps toward the end of preserving private capital in the U.S. mortgage market. Please do not hesitate to contact AMI if you would like us to further brief you regarding these concerns. Thank you. Sincerely, CHRIS KATOPIS Executive Director Association of Mortgage Investors CC: Patricia McClung, Assistant Director, Mortgage Markets 1800 M Street, N.W., Suite 500S, Washington, D.C main fax

70 AMI CFPB TRID March 2016 Page 8 Appendix I - Frequent Loan Estimate Defects Non-numerical clerical errors on the Loan Estimate (e.g., improper shading and formatting). Lender name and address information missing from the top of the Loan Estimate form. Loan Terms table lists incorrect information or is incomplete (e.g., inaccurate Product Type description). The Estimated Taxes, Insurance, & Assessments checkboxes are inaccurate or incomplete. Descriptions of the type of charge are missing to the right of Other checkbox when box is checked. Numerical computation errors on the Loan Estimate (e.g., itemization of Loan Costs do not total the Total Loan Costs on page two of the Loan Estimate, Loan Costs and Other Costs do not total Estimated Closing Costs in the Costs at Closing table on page one of the Loan Estimate). The Estimated Closing Costs are not calculated in the same manner as the Total Closing Costs disclosed on page 2 of the Loan Estimate. Prepaids table does not include the applicable time period covered by the amount to be paid by the borrower and the total amount paid. Initial Escrow Payment at Closing table does not include amount escrowed per month for each item, the number of months collected at consummation and the total amount paid. Contact Information table is incomplete for the creditor and/or mortgage broker. Other Considerations table is incomplete. (e.g. whether or not the subsequent purchaser can assume the loan on the original terms checkbox is not selected, a statement detailing any amount that may be imposed for a Late Payment is not provided) M Street, N.W., Suite 500S, Washington, D.C main fax

71 AMI CFPB TRID March 2016 Page 9 Appendix II - Frequent Closing Disclosure Defects Non-numerical clerical errors (e.g., improper shading and formatting). Missing or incomplete Closing Information (e.g., missing closing date, missing settlement agent name, file#), Transaction Information (e.g., seller name and address), and Loan Information (e.g., missing loan ID #). The Estimated Taxes, Insurance, & Assessments checkboxes are inaccurate or incomplete and description of the type of charge is missing. The Closing Costs are not calculated in the same manner as the Total Closing Costs disclosed on page 2 of the Closing Disclosure. Numerical computation errors (e.g., itemization of Loan Costs do not total the Total Loan Costs on page two of the Closing Disclosure, Loan Costs and Other Costs do not total Closing Costs in the Costs at Closing table on page one of the Closing Disclosure). Loan Costs table includes fees for services not previously disclosed. Prepaids table does not include the applicable time period covered by the amount to be paid by the borrower and the total amount paid. Initial Escrow Payment at Closing table does not include amount escrowed per month for each item, the number of months collected at consummation and the total amount paid. Other Costs table includes fees not previously disclosed. Fees listed under the Closing Cost Details section of the Closing Disclosure do not match Closing Cost Details on the most current revised Loan Estimate issued. Calculating Cash to Close table does not reflect Yes when amount changed from Loan Estimate to Final. When the answer to the question is Yes, there is no indication where the consumer can find the amounts that have changed on the Loan Estimate. Appropriate checkboxes on Loan Disclosures table are not checked. Loans closed prior to three day waiting period M Street, N.W., Suite 500S, Washington, D.C main fax

72 AMI CFPB TRID March 2016 Page 10 Rounding and Decimal Points Appendix III Examples of Technical and Minor Errors Frequently Cited As TRID Violations TRID: LE Total Interest Paid (TIP) calculation discrepancy LE issued 11/224/15 reflects a TIP of %, which is not carried out to 3 decimal places. LE issued 12/9/15 reflects a TIP of %, which is over disclosed by 0.002% when compared to TPR data. TRID: LE Loan Calculation Discrepancy. The Loan Estimate Issued 11/4/2015 reflects % as the "Total Interest Percentage (TIP)". Our calculation shows an unrounded figure of %. The TIP should not be rounded to 2 decimal places as reflected on the LE and should remain out to three decimal places. TRID: Loan Estimate Loan Calculation Deficiency. The Loan Estimate issued 10/30/2015 has the TIP Figure on the Comparisons Table rounded incorrectly to 2 places. The Calculation of the TIP is % and the LE reflects 77.87%. The TIP figure should be rounded to 3 decimal places and show % TRID: LE issued 12/15/15 TIP amount of % is incorrectly truncated to 2 decimal places. TRID: Loan Estimate Loan Calculations TIP variance- LE dated 12/11/2015 shows % LLN data shows % it appears that LE was rounded to 2 decimal places when it should be disclosed to 3 decimal places. TRID: LE issued 11/18/15 TIP Deficiency Disclosure shows % however LLN data shows %. It appears that the TIP was rounded up it should be disclosed at 3 decimal places if applicable. TRID: Loan Calculation Discrepancy - LE dated reflects a TIP of %. LLN data reflects %, indicating that the TIP disclosed on the LE was rounded to 2 decimal places. TRID: Closing Disclosure Loan Calculations CD issued 1/14/2016 (signed) TIP shows as % TPR Data shows %. TRID: Closing disclosure loan terms-interest Rate - **Comment: 01/04/ Interest rate on LE and CDs is not properly rounded to two decimal places. Rate should be rounded to 8.37% (vs % when there are only two decimal places. Correction required per (f)(2)(ii) M Street, N.W., Suite 500S, Washington, D.C main fax

73 AMI CFPB TRID March 2016 Page 11 TRID: Loan Estimate rounding error- initial LE dated 11/5/2015 is not properly rounded it should be truncated at 6.5% not 6.500%. Abbreviations TRID: LE Loan Costs/Other Costs Deficiency - The "Title - CPL" Fee is not labeled correctly on the Loan estimates. CPL is not an Acceptable abbreviation and should reflect "Closing Protection Letter". TRID: CD Loan Costs and/or Other Costs Deficiency -Post-consummation CD dated 1/26/16 provided in the file abbreviates "Fed X". No fee should be abbreviated. TRID: Loan Estimate Deficiency - **Comment: 12/29/ The Loan costs section of the loan estimates have a fee labeled as "PEST". This is an unclear abbreviation of the fee charged to the borrower and abbreviations are not acceptable for labeling of fees. Technical violation as fee was not charged on final CD. Miscellaneous TRID: Interim CD Total Interest Paid (TIP) discrepancy CD issued 12/29/15 reflects a TIP of %, which is over disclosed by 0.002% when compared to TPR data. TRID: Loan Calculations Discrepancy. The TOP is off by $1.61 and the TIP is off by 0.001%. TRID: Closing Disclosure Loan Calculation Deficiency. The TIP calculation on the Closing Disclosure reflects %, LLN data reflects %, a difference of 0.027%. TRID: Loan Estimate disclosed the Courier, wire, and storage fees on the same line in the closing costs section. Each fee should be disclosed on its own line. TRID: Closing Disclosure dated 12/22 (Initial) show several title fees listed in section B, which should be in C as they were a shoppable service and the borrower selected the service provider M Street, N.W., Suite 500S, Washington, D.C main fax

74 AMI CFPB TRID March 2016 Page 12 TRID: Loan Estimate- Contact Information - missing the lender and loan officer's NMLS numbers. TRID: Loan Estimate Deficiency - LE dated 11/05/2015 is marked as Yes for the other box, however the other box is not checked which is required when Other Box is marked as yes. TRID: Loan Estimate Loan Costs and/or Other Costs Deficiency 1) LE dated 11/4/15: Section C fees out of alphabetical order. Not all title fees begin with the required "Title - ". 2) LE dated 12/23/15: "Title Sub Escrow Fee" in Section C is not disclosed properly and is out of alphabetical order. TRID: Loan Estimate Loan Costs and/or Other Costs Deficiency - LE dated 12/1/15 does not preface all Title fees with "Title -". TRID: CD issued 1/22 TIP is under disclosed by.022% when compared to TPR Data. TRID: LE Deficiency. LE provided missing the Unit# in the property address. TRID: Shoppable / Non-Shoppable Fee Defect - LE shows all title fees listed in section B, however the Service Providers List reflects these are shoppable items and therefore should be listed in section C. Loan Estimate is Incomplete with Blanks or N/A's: Loan Estimates are missing Applicants' mailing address. TRID: CD issued 1/27 Missing File Number in Closing Information Section. TRID: Closing disclosure Loan Costs and/or Other Costs deficiency - CD shows Credit Report Paid to detail as Other, rather than the third party name who provided the report. TRID: Loan Estimate Loan Costs/Other Costs Deficiency 1) LE dated 10/21/15: Section C fees are out of alphabetical order M Street, N.W., Suite 500S, Washington, D.C main fax

75 8/29/2016 TRID: Calculating Cash to Close 2016 Temenos USA. All rights reserved. 1 What you will learn Calculating cash to close What is required Positive/negative entries Alternative calculating cash to close without a seller 2 1

76 8/29/ What is required Calculating cash to close An itemization of the total amount of cash or other funds that must be provided by the consumer at consummation Not as simple as the old TIL Math degree may be required 4 2

77 8/29/2016 Calculating Cash to Close 5 Calculating Cash to Close Total Closing Costs (J) The sum total of Blocks + (A) Origination Charges + (B) Services You Cannot Shop For + (C) Services You Can Shop For + (E) Taxes and Other Government Fees + (F) Prepaids + (G) Initial Escrow Payment at Closing + (H) Other (any other amounts the consumer is likely to pay or has contracted to pay someone other than the creditor or loan originator) that the creditor is aware of at the time the LE is issued - any Lender Credits (includes credits and rebates) Disclose the sum as a positive number 6 3

78 8/29/2016 Calculating Cash to Close Closing Costs Financed (Paid from your Loan Amount) The difference between: Loan Amount - The total amount of payments to third parties that have not already been disclosed in Total Closing Costs If the difference is a positive amount, disclose as a negative number to the extent that the amount does not exceed the amount of Total Closing Costs If the difference is zero or a negative amount, disclose as $0 7 Calculating Cash to Close Down Payment/Funds from Borrower Purchase transaction The difference between: Purchase price of the property - Principal amount of the loan If the difference is a positive number, disclose the amount If the loan amount exceeds the purchase price of the property (other than a construction loan), the amount of $0 Non-purchase transaction See Funds for Borrower to determine amount to enter 8 4

79 8/29/2016 Calculating Cash to Close Deposit Purchase transaction The amount paid to the seller or held in trust or escrow by an attorney or other party under the terms of the contract for sale of the property Disclose as a negative number Non-purchase transactions Enter $0 9 Calculating Cash to Close Funds for Borrower Only used in a non-purchase transaction The difference between: Total amount of all existing debt to be satisfied, except to the extent the satisfaction of such existing debt is disclosed under Total Closing Costs (Block J) - Principal amount of the credit extended, excluding any amount disclosed under Closing Costs to be Financed Depending on what the difference is, amounts are used to determine Funds for Borrower and Down Payment/Funds from Borrower fields 10 5

80 8/29/2016 Calculating Cash to Close Funds for Borrower (Only used in non-purchase transactions) Only used in a non-purchase transaction If the difference is a positive number Enter the amount in Down Payment/Funds from Borrower Enter $0 for Funds for Borrower If the difference is a negative number Enter $0 in Down Payment/Funds from Borrower Enter the amount in Funds for Borrower If the difference is $0 Enter $0 in both the Down Payment/Funds from Borrower and Funds for Borrower 11 Calculating Cash to Close Seller Credits The sum total that the seller will pay for: + Origination Charges + Services You Cannot Shop For + Services You Can Shop For + Taxes and Other Government Fees + Prepaids + Initial Escrow Payment at closing + Any other amounts the consumer is likely to pay or has contracted to pay someone other than the creditor or loan originator to the extent known at the time of disclosure Disclose as a negative number 12 6

81 8/29/2016 Calculating Cash to Close Adjustments and Other Credits The sum total that will be paid for by persons other than the loan originator, creditor, consumer or seller: + Origination Charges + Services You Cannot Shop For + Services You Can Shop For + Taxes and Other Government Fees + Prepaids + Initial Escrow Payment at closing + Any other amounts the consumer is likely to pay or has contracted to pay someone other than the creditor or loan originator to the extent known at the time of disclosure Examples Gifts from family Developer or homebuilder organization credits Not the seller Proceeds of subordinate financing, local or State housing assistance grants, or other similar sources 13 Calculating Cash to Close Estimated Cash to Close The sum total of: + Total Closing Costs (J) + Closing Costs Financed (Paid from your Loan Amount) + Down Payment/Funds from Borrower + Deposit + Funds for Borrower + Seller Credits + Adjustments and Other Credits 14 7

82 8/29/2016 Alternative Calculating Cash to Close May use for transactions without a seller If use Alternative on LE, must use Alternative on CD 15 Alternative Calculating Cash to Close Loan Amount The amount of credit to be extended under the terms of the legal obligation 16 8

83 8/29/2016 Alternative Calculating Cash to Close Total Closing Costs (J) The sum total of Blocks + (A) Origination Charges + (B) Services You Cannot Shop For + (C) Services You Can Shop For + (E) Taxes and Other Government Fees + (F) Prepaids + (G) Initial Escrow Payment at Closing + (H) Other (any other amounts the consumer is likely to pay or has contracted to pay someone other than the creditor or loan originator) that the creditor is aware of at the time the LE is issued - any Lender Credits (includes credits and rebates) Disclose the sum as a positive number 17 Alternative Calculating Cash to Close Estimated Total Payoffs and Payments The total amount of payoffs and payments to be made to third parties not otherwise disclosed under Total Closing Costs (J) Disclose as a negative number Examples Existing mortgage Deeds of trust Judgments; mechanic s liens Tax liens Other outstanding debt Could be condition of loan 18 9

84 8/29/2016 Alternative Calculating Cash to Close Estimated Cash to Close The sum total of: + Loan Amount + Total Closing Costs + Estimated Payoffs and Payments Check boxes are used to disclose whether the Estimated Cash to Close is either due from the consumer or will be paid to the consumer at consummation 19 Alternative Calculating Cash to Close Closing costs financed The sum total of: Loan Amount + Payoffs and Payments But only to the extent that the sum is greater than $0 and less than or equal to Closing Costs Financed (Paid from your Loan Amount) Disclosed below the table 20 10

85 8/29/2016 Questions? 2016 Temenos USA. All rights reserved

86 8/29/2016 TRID: The Bucket Challenge 2016 Temenos USA. All rights reserved. 1 What You Will Learn Quick review Good faith Changed circumstance The tolerance buckets Fee Bucket Challenge 2 1

87 8/29/2016 General rule Creditors are generally bound by Loan Estimate May not issue revisions because later discover technical errors, miscalculations or underestimations of charges May only charge more than amount disclosed when original estimate, or lack thereof, was based on the best information reasonably available at the time of the disclosure 3 Good faith Loan Estimate figures must be made in good faith and consistent with the best information reasonably available at the time of disclosure To determine good faith: Look at difference between estimated charges originally provided in LE and actual charges paid by or imposed on consumer Generally, if charge paid by or imposed on consumer exceeds amount originally disclosed on Loan Estimate, it is not in good faith unless it meets an exception 4 2

88 8/29/2016 Valid Changed Circumstance Changed circumstance means: An extraordinary event beyond control of any interested party or other unexpected event specific to consumer or transaction; Information specific to consumer or transaction that creditor relied upon when providing LE and that was inaccurate or changed after LE provided; or New information specific to consumer or transaction that creditor did not rely on when providing the original LE 5 5 Revised Loan Estimate Permitted only in certain specific circumstances: Changed circumstances that occur after LE provided to consumer cause settlement charges to increase more than permitted Changed circumstances that occur after LE provided to consumer affect consumer s eligibility for the terms for which consumer applied or the value of the security for the loan Revisions are requested by consumer Interest rate not locked when Loan Estimate was provided, and locking rate causes points or lender credits disclosed on LE to change Consumer indicates an intent to proceed with transaction more than 10-business days after LE was originally provided Loan is a new construction loan and settlement is reasonably anticipated to be delayed more than 60-days 6 3

89 8/29/2016 Zero Tolerance Threshold Creditor may never charge more than estimated amount unless changed circumstance (or other triggering event) Fees paid to creditor, mortgage broker, or an affiliate of either Fees paid to an unaffiliated third party if creditor did not permit consumer to shop Transfer taxes % Tolerance Threshold Some charges subject to a 10% cumulative tolerance Recording fees Charges for third-party services where Charge is not paid to creditor or creditor s affiliate Consumer is permitted by creditor to shop but selects a third-party service provider on creditor s written list of service providers Critical distinction from current rules Must meet Tipping Point to re-set the fees 8 8 4

90 8/29/2016 Not subject to a tolerance limitation Certain charges may exceed amount disclosed on LE by any amount Prepaid interest; property insurance premiums; amounts placed into an escrow, impound, reserve or similar account; Services required by creditor if creditor permits consumer to shop and consumer selects 3rd party service provider not on creditor s written list of service providers; and Charges paid to 3rd party service providers for services not required by creditor (may be paid to affiliates of creditor) However... Creditors may only charge more than amount disclosed when original estimate, or lack thereof, was based on best information reasonably available at the time of disclosure Good faith 9 9 Tolerance Cures General Rule If amounts paid by consumer at closing exceed amounts disclosed on LE beyond applicable tolerance threshold, creditor must: Refund excess no later than 60 days after consummation, and Deliver or place in the mail a corrected CD that reflects such refund Lender Credits (tolerance cure) Zero tolerance charges Must be refunded to consumer 10% cumulative tolerance charges Amount that exceeds the 10%, must be refunded to consumer

91 8/29/2016 Fee bucket challenge Each table has been provided a Fee slip or two or three Take 5 minutes to mark: Which tolerance bucket the fee under the conditions provided is subject to Based on the conditions, should there be a tolerance cure 11 Questions? Don t forget your Answer Key on the way out 2016 Temenos USA. All rights reserved. 12 6