FREQUENTLY ASKED QUESTIONS (FAQ) FOR IMPLEMENTING THE TILA-RESPA INTEGRATED DISCLOSURE RULE (TRID)

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1 Best Practices FREQUENTLY ASKED QUESTIONS (FAQ) FOR IMPLEMENTING THE TILA-RESPA INTEGRATED DISCLOSURE RULE (TRID) SUMMARY With the upcoming implementation of the Truth in Lending (TILA)/Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure Rule (Rule), as mandated by the Consumer Financial Protection Bureau (CFPB), Nationstar Mortgage is committed to providing thorough and useful information. In the near future, you will receive various communications from Nationstar Mortgage; however, as always, we continue to urge you to evaluate and implement the process and system changes needed to ensure a smooth implementation process. As part of our commitment to providing you with information, we are pleased to introduce the TILA/RESPA Integrated Disclosure Rule (TRID) Frequently Asked Question (FAQ) that provides high-level information on some of the initial questions that we have received. This FAQ document will be a living document and will be updated with new questions and answers, as they are received. EFFECTIVE DATE As announced by the CFPB on July 21, 2015, the changes mandated by the TILA-RESPA Integrated Disclosure Rule have been extended and are now effective with applications dated on or after October 3, RULE OVERVIEW The CFPB issued a final Rule amending Regulation Z (Truth in Lending Act) and Regulation X (Real Estate Procedures Act) to integrate mortgage loan disclosures. The TILA-RESPA rule consolidates four existing disclosures required under TILA and RESPA for closed-end credit transactions secured by real property into two forms: A Loan Estimate (LE) that must be delivered or placed in the mail no later than the third business day after receiving the consumer s application. The Loan Estimate integrates and replaces the existing RESPA Good Faith Estimate (GFE) and the initial Truth in Lending (TIL) disclosure and helps the borrower understand the key features, costs, and risks associated with the loan for which they are applying. A Closing Disclosure (CD) that must be provided to the consumer at least three business days prior to consummation (generally, the date the borrower becomes legally obligated to repay the loan). The CD integrates and replaces the existing HUD-1 Settlement Statement and the final TIL disclosure and helps the borrower understand all of the costs associated with loan. TRID encompasses much more than the LE and CD, and lenders are expected to maintain policies, procedures, and internal controls to ensure compliance with all requirements. Lenders should consult the final rule, the CFPB s commentary, and the CFPB s compliance guide for implementation guidance. Failure to comply may result in liability under TRID. Lenders represent and warrant to Nationstar Mortgage that they have fully complied with the Rule. 1

2 Question 1. Will Nationstar Mortgage require any new forms? 2. What Nationstar Mortgage specific forms will be updated? 3. What does Nationstar Mortgage require to document intent to proceed? Answer Provide all Loan Estimates (LE) and Closing Disclosures (CD) issued, as well as documentation supporting all Triggering Events. There will be no new Nationstar Mortgage forms specific to the regulation. Please adhere to the regulation for form requirements, as outlined by the Consumer Financial Protection bureau (CFPB). The current Nationstar Mortgage Form 15 Correspondent Stacking Order and Form 22 Fee Itemization Form will be updated to reflect the Loan Estimate (LE) and the Closing Disclosure (CD) requirements. The Servicing Disclosure, Right to Receive a Copy of Appraisals and Valuation Reports, HUD-1 Settlement Statement, Good Faith Estimate(s), and Final Truth in Lending will not be required if TRID disclosures are present.* Nationstar Mortgage does not have requirements for collecting the consumers Intent to Proceed outside of what is specified in the Rule, however, intent to proceed should be documented and present in the loan file. Fees may not be charged or collected until the borrower has issued their intent to proceed. The one exception to this rule is a fee for a bona-fide credit report. That fee may be charged prior to receiving the Intent to Proceed. * 4. Will Nationstar Mortgage allow Loan Estimates (LEs) issued with a to be determined (TBD) property address? Nationstar Mortgage will allow Loan Estimates (LEs) issued with a TBD property address as opposed to issuing a pre-qual. However, that disclosure is considered binding and changes are not permitted due to the property address becoming known. Issuing the Loan Estimate (LE) requires Originators to execute all responsibilities associated with taking a full application even if an element (such as the property address) is missing. 5. Does Nationstar Mortgage require initial Loan Estimates (LEs) issued by a Third Party Originator (TPO)? 6. Will Nationstar Mortgage require the Loan Estimate (LE) to be signed? 7. Will Nationstar Mortgage require the Closing Disclosure (CD) to be signed? 8. What will Nationstar Mortgage require to document the Seller s Transaction? 9. If a Triggering Event occurs that will subsequently require redisclosure, what documentation does Nationstar Mortgage require? Yes. The initial Loan Estimate (LE) must be issued within 3-business days of an application, regardless of the originating company. Nationstar Mortgage will require all Loan Estimates (LEs) on a file. Third Party Originators (TPOs) are responsible, as are creditors, for completing and issuing the Loan Estimate (LE) as outlined by the Consumer Finance Protection Bureau (CFPB). Nationstar Mortgage does not require a signature on the Loan Estimate (LE).* Nationstar Mortgage will require the consummation Closing Disclosure (CD) be signed and dated by all applicants. Revised Closing Disclosures (CDs) do not need to be signed, but final Closing Disclosures (CDs) from escrow states should be stamped Final.* Nationstar Mortgage will require the consummation Closing Disclosure (CD) executed by all parties documenting the Seller s (seller of the subject property) transaction. We will accept an unsigned Closing Disclosure (CD) documenting the seller s transaction if the settlement agent identifies it as a true and correct copy.* Nationstar Mortgage will require each Triggering Event to be documented. No standard form is required, but at minimum, the date the change was requested/update was known, and the reason for the change needs to be documented. Disclosures should be issued within 3-business days of the change.* 2

3 Question 10. What changes made to a Closing Disclosure (CD) prior to consummation require a waiting period that could potentially delay closing? Answer All Triggering Events should be documented as stated above. If any of the following changes occur, Nationstar Mortgage will require proof that the changes were received by the borrower at least 3-business days prior to consummation: Addition of a pre-payment penalty (Pre-payment penalties are not eligible on Nationstar Mortgage products) Change of loan product APR becomes inaccurate Note: These updates to a Closing Disclosure (CD) could delay closing.* 11. When documenting the timing of receipt of disclosures, does Nationstar Mortgage require positive confirmation of the borrower(s) receipt of disclosures for all applicants? 12. What forms of evidence of positive confirmation of borrower receipt of disclosures will Nationstar Mortgage accept? 13. Does Nationstar Mortgage require proof of borrower receipt to be documented? 14. Will Nationstar Mortgage accept a waived waiting period for a bonafide financial emergency? 15. What does Nationstar Mortgage require regarding third-party fees? 16. Will Nationstar Mortgage allow partial payments? Nationstar Mortgage will accept positive confirmation of borrower receipt from any applicant on non-rescindable loans. The first of any applicant to document receipt starts the waiting period. On rescindable loans, positive confirmation of borrower receipt from all applicants and all non-borrowing spouses with the right to rescind is required. The last of all individuals with the right to rescind starts the waiting period. Nationstar Mortgage will presume receipt of the disclosures 3-business days after the date issued, unless the following types of evidence of early receipt of disclosures is present in the file: Hand Deliver: Disclosures hand delivered will be considered received on the date the consumer(s) signs and dates the disclosure. Mail/Overnight Delivery: Disclosures mailed/overnighted will be considered received on the date the consumer(s) sign and date a receipt acknowledging acceptance of the delivery. /E-sign Delivery: Nationstar Mortgage will accept electronically delivered disclosures as long as the Lender provides proof of compliance with E-Sign Act s consent requirements. Nationstar Mortgage will consider the disclosure received early if the Lender provides documentation of the borrower s receipt of the disclosure. Nationstar Mortgage will not accept read receipts as evidence of borrower receipt of disclosures. Scanned/Fax Delivery: Disclosures scanned/faxed will be considered received on the date the consumer(s) faxes the signed and dated documents back.* No. If positive confirmation of borrower receipt of disclosures cannot be documented as stated above, Nationstar Mortgage will require the Mailbox Rule to be followed. Nationstar Mortgage will assume borrower receipt has occurred 3-business day after the disclosure was issued. Loans with any waived waiting periods will not be eligible for purchase by Nationstar Mortgage. As we continue to digest the Final Rule, additional guidelines and/or requirements may be communicated.* All charges required for financing should have at least 1 vendor listed on the Settlement Service Provider List disclosed to the applicants if the service is considered shoppable. Creditors should be able to document charges paid to third-parties. No. Nationstar Mortgage does not allow partial payments. 3

4 Question 17. What requirements does Nationstar Mortgage have regarding the disclosure of finance charges? Answer Nationstar Mortgage will follow regulation requirements regarding finance charges. If seller-paid or lender-paid fees are not clearly itemized, Nationstar Mortgage will assume the fee was borrowerpaid. Any fees paid by the borrower that Nationstar Mortgage deems a finance charge will be documented as such when determining compliance with APR and finance charge disclosure tolerance. Finance Charges that Nationstar Mortgage generally deems as finance charges are as follows: Loan Origination Charges: Origination Fee Discount Fee Tax Service Fee Flood Cert fee Lender Inspection Fee Assumption Fee Broker Fee Application Fee Commitment Fee Processing Fee Underwriting Fee Administrative Fee Document Prep Fee Courier Fee Wire Transfer Fee Warehousing Fee Compliance Audit Fee Assignment Fee MI Application Fee CLO Access Fee Rate Lock Fee Prepaid Interest Credit Guarantee Insurance Premiums Transaction Fees: Settlement or Closing Fee Attorney Fee (Closing Agent) Attorney Fee (Title Services) Sub-escrow Fee Title Courier Fee Funding/Wire/Disbursement Fee Doc Signing Fee Escrow/Escrow Waiver Fee Electronic Delivery Fee Recording Service Fee Debt Cancelation Fee Tie-in Fee Creditors are not required to align with Nationstar Mortgage s policy, but should be aware that additional stipulations may apply. For more guidance on what Nationstar Mortgage considers a finance charge, please see the chart on the following page: 18. How does Nationstar Mortgage expect Principal Reductions, PMI Refunds, and Escrow Rollovers to be documented on the Closing Disclosure (CD)? 19. Does Nationstar Mortgage consider Non-Owner Occupied properties exempt from TRID? Nationstar Mortgage requires that these adjustments be documented on the Closing Disclosure (CD). If the standard CD is delivered, Nationstar Mortgage requires these items to be listed in the Summaries of Transactions table on page 3. Nationstar Mortgage does consider some Non-Owner Occupied properties exempt from TRID provided they are documented Investment properties used for business purposes. See the Seller Guide Section 15OOO for more detail on the requirements. TRID-exempt loans may be documented with either TRID disclosures, or current GFE, TIL, and HUD-1 disclosures. * Future Nationstar Mortgage Seller Guide Updates - Please note that the designation of an asterisk (*) next to the answer of a question specifies that this item will be an update made to our Nationstar Mortgage Correspondent Seller s Guide. These updates will be communicated again to you in a future Nationstar Mortgage Seller Guide Update as we get closer to the implementation date of October 3, At that time, the change will be published in an update, as well as made in the applicable Seller Guide section. 4

5 FINANCE CHARGE DOLLAR COST OF CONSUMER CREDIT: It includes any charge payable directly or indirectly by the consumer and imposed directly by the creditor as a condition of or incident to the extension of credit. CHARGES ALWAYS INCLUDED Interest Transaction fees Loan origination fees Consumer points Credit guarantee insurance premiums CHARGES INCLUDED UNLESS CONDITIONS ARE MET Premiums for credit life, A&H, or loss of income insurance Debt cancellation fees Premiums for property or liability insurance Premiums for vendor s single interest (VSI) insurance CONDITIONS (Any loss) Insurance not required, disclosures are made, and consumer authorizes Coverage not required, disclosures are made, and consumer authorizes Consumer selects insurance company and disclosures are made Insurer waives right of subrogation, consumer selects insurance company, and disclosures are made CHARGES NOT INCLUDED IF BONA FIDE AND REASONABLE IN AMOUNT (Residential mortgage transactions and loans secured by real estate) Fees for title insurance, title examination, property survey, etc. Fees for preparing loan documents, mortgages, and other settlement documents Amounts required to be paid into escrow, if not otherwise included in the finance charge Notary fees CHARGES NEVER INCLUDED Charges payable in a comparable cash transaction Fees for unanticipated late payments Overdraft fees not agreed to in writing Seller s points Participation or membership fees Charges imposed on the creditor for purchasing the loan, which are passed on to the consumer Security interest charges (filing fees), insurance in lieu of filing fees and certain notary fees The fee is for lien purposes, prescribed by law, payable to a third public official and is itemized and disclosed Pre-consummation flood and pest inspection fees Discount offered by the seller to induce payment by cash or other means not involving the use of a credit card Discounts for inducing payment by means other than credit Charges imposed by third parties Use of the third party is not required to obtain loan and creditor does not retain the charge Appraisal and credit report fees Interest forfeited as a result of interest reduction required by law Mortgage broker fees Charges imposed by thirdparty closing agents Creditor does not require and does not retain the fee for the particular service Charges absorbed by the creditor as a cost of doing business Other examples: Fee for preparing TILA disclosures; real estate construction loan inspection fees; fees for post-consummation tax or flood service policy; required credit life insurance charges Appraisal and credit report fees Application fees, if charged to all applicants, are not finance charges. Application fees may include appraisal or credit report fees. 5

6 HIGHLIGHTS OF FORTHCOMING NATIONSTAR REQUIREMENTS AND CORRESPONDENT COMMUNICATIONS It is important that you utilize all available resources, and provide sufficient time to organize all of the various changes required to implement the Rule. It is important to remember that Correspondents retain liability under the Rule and are representing and warranting that they have fully complied with the Rule. As previously mentioned, we urge you to continue to consult with your legal and compliance professionals. You will receive additional updates from Nationstar Mortgage These communications will further outline our requirements regarding the loan review and purchase process. It is important to note that Nationstar Mortgage will firmly follow the guidance regarding the effective date in our review and purchase decisions. ADDITIONAL RESOURCES CFPB s TILA-RESPA Integrated Disclosure rule implementation page provides the following resources to help you: o TILA-RESPA Integrated Disclosure Rule Small Entity Compliance Guide o TILA-RESPA Guide to the Loan Estimate and Closing Disclosure forms o Disclosure Timeline Example o Integrated Loan Disclosure Forms and Samples o Updated 2014 CFPB Mortgage Rules Readiness Guide Videos/Webinars (registration is required to view the recordings): o TILA-RESPA Integrated Disclosures, Part 1 Overview of the Rule o FAQs on the TILA-RESPA Integrated Disclosures, Part 2 Various Topics o FAQ on the TILA-RESPA Integrated Disclosures, Part 3 Completing the Loan Estimate o TILA-RESPA Integrated Disclosures, Part 4 Completing the Closing Disclosure You may also find that some Loan Originating System (LOS) and Document Preparation vendors have prepared training materials for implementing TRID. Please contact your vendors to see if they have available materials, training or webinars. NATIONSTAR CORRESPONDENT COMMUNICATIONS LIBRARY All Nationstar Mortgage Correspondent Communications are published to our AllRegs Lending Library, including this IN FOCUS - Best Practice FAQ document regarding TRID. CORR /8/2015 6