TRID FAQs: Payment Columns and the Black Hole Suzanne Garwood, Associate General Counsel
Topics Payment Table Columns Index ARMs and Four Columns What if? The Black Hole What is it? What if? 2
Payment Table Columns Projected Payments Maximum four columns First column MUST reflect initial periodic payment or range of payments Next columns reflect Trigger Events» Change to periodic principal and interest is a Trigger Event» No exception for if the range displayed is the same for mandatory display of Trigger Event as a new column 3
Payment Table Columns Projected Payments Change in periodic principal and interest is a Trigger Event Periodic principal and interest payments. For purposes of 1026.37(c)(1)(i)(A), periodic principal and interest payments may change when the interest rate, applicable interest rate caps, required periodic principal and interest payments, or ranges of such payments may change. Minor payment variations resulting solely from the fact that months have different numbers of days are not changes to periodic principal and interest payments. 4
Payment Table Columns Disclosure for loan described below if assumption is that MI terminates in year 15 Loan Amount = $237,000 Note Rate 2.75 Loan Term = 30 Years Index 0.856 Margin 2.25 Max Rate 7.75 Floor Rate 2.25 First Rate Adjustment Change First Adjustment Increase Cap Subsequent Rate Adjustment Period 60 months 5 First Decrease Cap 5 12 months Subsequent Increase Cap 2 Subsequent Decrease Cap 2 5
Payment Table Columns Payment Calculation Years 1-5 Year 6 Year 7 Years 8-30 Principal & Interest $967.53 $915 min $1,584 max $915 min $1,584 max $915 min $1,584 max Mortgage Insurance + 255.20 + 255.20 + 255.20 + 255.20 Estimated Escrow Amount can increase over time + 0 + 0 + 0 + 0 Estimated Total Monthly Payment $1,222.73 $1,170 - $1,839 $1,170 - $1,839 $1,170 - $1,839 6
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Black Hole What is it? 8
Commentary Language Revised disclosures may not be delivered at the same time as the Closing Disclosure. Section 1026.19(e)(4)(ii) prohibits a creditor from providing a revised version of the disclosures required under 1026.19(e)(1)(i) on or after the date on which the creditor provides the disclosures required under 1026.19(f)(1)(i). Section 1026.19(e)(4)(ii) also requires that the consumer must receive a revised version of the disclosures required under 1026.19(e)(1)(i) no later than four business days prior to consummation, and provides that if the revised version of the disclosures are not provided to the consumer in person, the consumer is considered to have received the revised version of the disclosures three business days after the creditor delivers or places in the mail the revised version of the disclosures. See also comments 19(e)(1)(iv) 1 and 2. If, however, there are less than four business days between the time the revised version of the disclosures is required to be provided pursuant to 1026.19(e)(4)(i) and consummation, creditors comply with the requirements of 1026.19(e)(4) if the revised disclosures are reflected in the disclosures required by 1026.19(f)(1)(i). 9
Commentary Language Section 1026.19(e)(4)(ii) prohibits a creditor from providing a revised version of the disclosures required under 1026.19(e)(1)(i) on or after the date on which the creditor provides the disclosures required under 1026.19(f)(1)(i). What this means:» Creditors are prohibited from providing a Revised Loan Estimate after the creditor has provided a Closing Disclosure Why is this important?» A Revised Loan Estimate is the only vehicle by which a creditor may rebaseline: Revised estimates. For the purpose of determining good faith under paragraph (e)(3)(i) and (ii) of this section, a creditor may use a revised estimate of a charge instead of the estimate of the charge originally disclosed under paragraph (e)(1)(i) of this section if the revision is due to any of the following reasons» Although Closing Disclosures MUST be revised whenever they become inaccurate, such changes do NOT rebaseline because such changes do not affect the good faith analysis: Good Faith Test: An estimated closing cost disclosed pursuant to paragraph (e) of this section is in good faith if the charge paid by or imposed on the consumer does not exceed the amount originally disclosed under paragraph (e)(1)(i) of this section, except as otherwise provided in paragraphs (e)(3)(ii) through (iv) of this section CD Changes. Except as provided in paragraph (f)(2)(ii), if the disclosures provided under paragraph (f)(1)(i) of this section become inaccurate before consummation, the creditor shall provide corrected disclosures reflecting any changed terms to the consumer so that the consumer receives the corrected disclosures at or before consummation. 10
Commentary Language Section 1026.19(e)(4)(ii) also requires that the consumer must receive a revised version of the disclosures required under 1026.19(e)(1)(i) no later than four business days prior to consummation, and provides that if the revised version of the disclosures are not provided to the consumer in person, the consumer is considered to have received the revised version of the disclosures three business days after the creditor delivers or places in the mail the revised version of the disclosures. What this means:» Consumers must RECEIVE any Revised Loan Estimates no later than four business days prior to consummation Why is this important?» This could affect your timing for closing if: You send your LE via mail and it gets there later than your CD; or Your customer opens his CD electronically but never opens the LE» Unlike the seven day and three day waiting period there is NO WAIVER of this waiting period (NOTE: Chase Correspondent will not buy any loans with waivers, this is just a practical tip for your retail channel!) 11
Commentary Language If, however, there are less than four business days between the time the revised version of the disclosures is required to be provided pursuant to 1026.19(e)(4)(i) and consummation, creditors comply with the requirements of 1026.19(e)(4) if the revised disclosures are reflected in the disclosures required by 1026.19(f)(1)(i). What this means:» If you plan to consummate the loan such that by the time you would have provided a Revised Loan Estimate, the consumer would not have received it in time to close the loan on time, you can use the CD instead Why is this important?» This is the ONLY authority in the Regulation to utilize the CD to rebaseline a loan instead of a Revised Loan Estimate 12
The Black Hole a Visual SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY 1 2 3 4 5 6 Receives Application 7 8 Posts LE 9 10 11 12 13 LE Received 14 15 16 17 18 19 20 21 22 23 24 25 26 27 CIC Occurs SEVEN BUSINESS DAYS BEFORE CLOSING Day 1 to provide SIX BUSINESS DAYS BEFORE CLOSING Day 2 to provide FIVE BUSINESS DAYS BEFORE CLOSING Day 3 to provide FOUR BUSINESS DAYS BEFORE CLOSING THREE BUSINESS DAYS BEFORE CLOSING TWO BUSINESS DAYS BEFORE CLOSING 28 29 30 1 2 3 4 ONE BUSINESS DAYS BEFORE CLOSING SCHEDULED CLOSING HOLIDAY 13
Proposed Changes - Preamble 19(e)(4)(ii) Relationship to Disclosures Required Under 1026.19(f) Section 1026.19(e)(4)(ii) imposes certain timing restrictions on the issuance of revised Loan Estimates relative to consummation and the issuance of a Closing Disclosure to ensure that the consumer does not receive disclosures containing estimates and disclosures containing actual costs at the same time. Existing comment 19(e)(4)(ii)-1 explains that, where the rule prohibits issuance of a revised Loan Disclosure, the creditor can instead use the Closing Disclosure to reflect changes in costs that would otherwise justify issuing a revised estimate under 1026.19(e)(3)(iv) and that that Closing Disclosure may be used for the purpose of determining good faith under 1026.19(e)(3). The Bureau proposes to add comment 19(e)(4)(ii)-2 to clarify that creditors may use corrected Closing Disclosures provided under 1026.19(f)(2)(i) or (ii) to reflect further changes in costs that will be used for purposes of determining good faith under 1026.19(e)(3). 14
Proposed Changes - Preamble 19(e)(4)(ii) Relationship to Disclosures Required Under 1026.19(f) Section 1026.19(e)(4)(ii) requires that a creditor ensures receipt of any revised Loan Estimate no later than four business days before consummation and further prohibits the issuance of a revised Loan Estimate on or after the date on which the creditor provides the Closing Disclosure. Even when the creditor may not provide a revised Loan Estimate under 1026.19(e)(4)(ii), however, it can still use revised amounts for the purpose of determining good faith if the revised amounts are reflected in the Closing Disclosure, subject to the other requirements of 1026.19(e)(4). [Note.19(e)(4)(ii): The consumer must receive a revised version of the disclosures required under paragraph (e)(1)(i) of this section not later than four business days prior to consummation.] 15
Proposed Changes - Preamble 19(e)(4)(ii) Relationship to Disclosures Required Under 1026.19(f) Although existing comment 19(e)(4)(ii)-1 expressly references only the initial Closing Disclosure issued pursuant to 1026.19(f)(1) in explaining this fact, the same logic applies to corrected Closing Disclosures issued pursuant to 1026.19(f)(2). As explained in comment 19(f)(1)(i)-1, if a Closing Disclosure provided to comply with 1026.19(f)(1)(i) later becomes inaccurate, a creditor can satisfy the requirements of 1026.19(f)(1)(i) by providing corrected disclosures that contain the actual terms of the transaction, provided that the creditor meets the timing requirements of 1026.19(f)(2). Thus, the provision of a corrected Closing Disclosure under 1026.19(f)(2) is properly an extension of the ongoing requirements of 1026.19(f)(1)(i). As a result, the creditor s issuance of a corrected Closing Disclosure, as with the issuance of an original Closing Disclosure, falls within comment 19(e)(4)(ii)-1 s ambit. Accordingly, a creditor may use a corrected Closing Disclosure to reset applicable good faith tolerances when there are fewer than four business days remaining before consummation or when the Closing Disclosure has already been issued, provided that the creditor also complies with the other requirements of 1026.19(e)(4). The Bureau is proposing comment 19(e)(4)(ii)- 2 to clarify this point. 16
Proposed Changes - Commentary 2. Corrected disclosures provided under 1026.19(f)(2)(i) or (2)(ii). If there are fewer than four business days between the time the revised version of the disclosures is required to be provided under 1026.19(e)(4)(i) and consummation or the Closing Disclosure required by 1026.19(f)(1) has already been provided to the consumer, creditors comply with the requirements of 1026.19(e)(4) (to provide a revised estimate under 1026.19(e)(3)(iv) for the purpose of determining good faith under 1026.19(e)(3)(i) and (ii)) if the revised disclosures are reflected in the corrected disclosures provided under 1026.19(f)(2)(i) or (2)(ii), subject to the other requirements of 1026.19(e)(4)(i). 17
Proposed Changes and Current Commentary Revised disclosures may not be delivered at the same time as the Closing Disclosure. 1. Section 1026.19(e)(4)(ii) prohibits a creditor from providing a revised version of the disclosures required under 1026.19(e)(1)(i) on or after the date on which the creditor provides the disclosures required under 1026.19(f)(1)(i). Section 1026.19(e)(4)(ii) also requires that the consumer must receive a revised version of the disclosures required under 1026.19(e)(1)(i) no later than four business days prior to consummation, and provides that if the revised version of the disclosures are not provided to the consumer in person, the consumer is considered to have received the revised version of the disclosures three business days after the creditor delivers or places in the mail the revised version of the disclosures. See also comments 19(e)(1)(iv) 1 and 2. If, however, there are less than four business days between the time the revised version of the disclosures is required to be provided pursuant to 1026.19(e)(4)(i) and consummation, creditors comply with the requirements of 1026.19(e)(4) if the revised disclosures are reflected in the disclosures required by 1026.19(f)(1)(i). 2. Corrected disclosures provided under 1026.19(f)(2)(i) or (2)(ii). If there are fewer than four business days between the time the revised version of the disclosures is required to be provided under 1026.19(e)(4)(i) and consummation or the Closing Disclosure required by 1026.19(f)(1) has already been provided to the consumer, creditors comply with the requirements of 1026.19(e)(4) (to provide a revised estimate under 1026.19(e)(3)(iv) for the purpose of determining good faith under 1026.19(e)(3)(i) and (ii)) if the revised disclosures are reflected in the corrected disclosures provided under 1026.19(f)(2)(i) or (2)(ii), subject to the other requirements of 1026.19(e)(4)(i). 18
Black Hole What if I issue my CD on August 1 with a planned closing date of September 1 and:» On August 3 the consumer asks for a change to the loan product that will increase points by 0.25 (CIC A )» On August 24 the consumer asks for a change to the loan product that will increase points by 0.25 (CIC B ) Saturday IS a general business day The change does increase the APR out of tolerance The loan closes as planned on September 1 Can I pass on the 0.25 increase? 19
Black Hole Can I pass on the 0.25 increase? On August 3 the consumer asks for a change to the loan product that will increase points by 0.25» No On August 24 the consumer asks for a change to the loan product that will increase points by 0.25» Yes 20
The Black Hole a Visual SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY 1 2 3 4 5 6 CD PROVIDED CD RECEIVED CIC A 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 CIC B Day 1 Day 2 Day 3 28 29 30 31 1 Day 4 2 3 CONSUMMATION Day 3 Day 2 Day 1 21
Black Hole What if I issue my CD on August 1 with a planned closing date of September 1 and:» On August 24 the consumer asks for a change to the loan product that will increase points by 0.25» On August 30 the consumer requests a new closing date of October 1 22
Black Hole Can I pass on the 0.25 increase? On August 24 the consumer asks for a change to the loan product that will increase points by 0.25 On August 30 the consumer requests a new closing date of October 1» Yes, if You issued a rebaselined CD no later than August 27 with a closing date no later than September 1 You provide an LOX indicating that consumer amended the closing date after you believed the rebaseline to be valid 23
The Black Hole a Visual SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY 1 2 3 4 5 6 CD PROVIDED CD RECEIVED 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 CIC Day 1 Day 2 Day 3 Revised CD 28 29 Day 3 30 New Closing Date Requested* Day 2 31 Day 1 1 *SCHEDULED CONSUMMATION Day 4 2 3 *Actual consummation in October 24
Available Resources Resource Online Guide TRID FAQs TRID Webinars Location ChaseLoanManager > View Guides > Compliance- Related Topics Section Chaseb2b.com > News Section ChaseLoanManager > Resource Center > Doing Business with Chase Topic Chase Customer Support (877) 275-2427 (ASK-CHASE), Option 7, then Option 1 correspondent.customer.support@chase.com Operations Relationship Team (877) 275-2427 (ASK-CHASE), Option 7, then Option 2 25
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For real estate and lending professionals only and This not document for distribution for general to consumers. informational This purposes document and is does not not an advertisement contain or convey for consumer credit as defined in 12 CFR 1026.2(a)(2). All home lending products are subject to credit and property approval. Rates, program terms and conditions are subject to change without notice. Not all products are available in all states or for all dollar amounts. Other restrictions and limitations apply. Chase Correspondents reserves the right should to decline provide any loan customers that does with not clear meet requirements. and balanced product descriptions. 091616 Final 2016 JPMorgan Chase & Co.