TRID General Rules and Definitions New Required Disclosures Loan Estimate (LE) replaces the GFE and Initial TIL Closing Disclosure (CD) replaces the Final TIL and HUD-1 Home Loan Toolkit replaces the HUD Shopping for Your Home Loan Booklet Transactions Impacted Closed-End Consumer Credit Transactions secured by real property. Includes loans secured by: Primary Residence Second Home Personal investment properties SFRs, PUDs, Condos, Manufactured homes 2-4 units Construction-only loans Loans secured by vacant land Loans secured by 25 or more acres Transactions Not Impacted HELOCs Reverse Mortgages Properties not secured by land These transactions will continue to use the GFE/HUD and TIL disclosures. Consummation Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan. For TRID purposes, NewLeaf will define consummation in all states as the date the Borrower(s) signs the Note. Effective Date Effective for loan applications dated on or after October 3, 2015. Business Day Loans applications dated prior to October 3, 2015 will not be subject to TRID and must be documented by use of the existing GFE/HUD and TIL disclosures through closing. General Business Day: Any day that the Lender is open to the public for carrying out substantially all of its business functions. The Broker must follow the Lender s business days. NewLeaf s business days are Monday-Friday, excluding company and legal holidays. Used to determine when Loan Estimate and Initial Disclosures must be issued. Page 1 of 10 Last Updated: 11/12/2015
Specific Business Day: All calendar days except Sundays and legal holidays. Definition of Application Used for calculation of rescission, Borrower receipt of initial and re-disclosure of LE, and cooling off period for some CD re-disclosure. Disclosure of the Loan Estimate is required when the Broker or creditor has received the following information: Mailbox Rule and Definition of Delivery Good Faith Who is responsible for issuing the Loan Estimate? Delivery of Initial Loan Estimate 1. Borrower s name 2. Property address 3. Borrower s social security number 4. Estimated property value 5. Loan amount requested 6. Borrower s income o Current industry practice is that for transactions that do not require income info, application is considered complete for this purpose without income information A Loan Originator or creditor cannot refuse any of the 6 pieces of information if it is voluntarily offered by the Borrower. The CFPB has suggested obtaining the Social Security number last in order to obtain the credit report. The CFPB has allowed some flexibility that will enable Brokers and creditors to strategically collect information, such as loan terms and product type, prior to the collection of the 6 pieces of information that constitute a loan application that trigger the Loan Estimate. If delivering a Loan Estimate or Closing Disclosure by means other than in person (including electronic delivery) the disclosure is considered to be received 3 business days after placing it in the mail ( mailbox rule ) UNLESS the creditor receives proof of receipt. The CFPB expects that a good faith effort has been made when disclosing fees on the Loan Estimate. It is expected that the fees disclosed are based on the best information reasonably available at the time disclosed. Loan Estimate and Initial Disclosures The Creditor is legally responsible for any errors or defects. NewLeaf Wholesale will issue the Loan Estimate to the Borrower and will provide a copy of it to the Broker. In CA, NewLeaf will also issue the CA Addendum to the LE for brokers licensed under the BRE. Must be delivered to the Borrower or placed in the mail within 3 general business days of application and at least 7 specific business days prior to consummation. Page 2 of 10 Last Updated: 11/12/2015
Borrower Signatures on Loan Estimate Revised Loan Estimate Form (LE) The Borrower is not required to sign the LE. A revised LE must be issue when: 1. Locking the interest rate 2. Expiration of the LE with no intent to proceed 3. Permanent financing of construction loan more than 60 calendar days after original LE with construction loan disclosure (if notice provided to Borrower) 4. Valid changed circumstance increasing the following fees by any amount (zero tolerance fees) a) fees paid to the Creditor, Mortgage Broker or Affiliate of either b) fees for which the Borrower is not permitted to shop c) transfer taxes 5. Valid changed circumstance(s) increase the sum of fees for: a) Charges the consumer is permitted to shop for b) Recording fees There is no longer a 3 day waiting period after any revised Loan Estimate is issued. Delivery and Receipt of Revised Loan Estimate A revised LE may not be issued due to later discovered technical errors, miscalculations or underestimations of charges. A revised Loan Estimate must be sent within 3 general business days of receiving information sufficient to establish a changed circumstance trigger as described below under Changed Circumstance. A revised Loan Estimate form must be received* at least 4 specific business days prior to consummation. It cannot be received by the Borrower on the same day the Borrower receives the Closing Disclosure. *Mailbox Rule and definition of receipt above. Who is responsible for issuing a revised Loan Estimate? Who s name is on the Loan Estimate? NewLeaf is responsible for issuing any revised Loan Estimate. A copy will be provided to the Broker. The Mortgage Broker is responsible to notify NewLeaf immediately of any changes that may impact Borrower eligibility, fees or term of the loan. NewLeaf will prepare the LE to include both NewLeaf and the name of the Broker. If the Broker submits a loan with an LE that either has the Lender name left blank or is populated with another Lender name, NewLeaf will reissue a LE with NewLeaf as the Lender and with NewLeaf s loan number. Page 3 of 10 Last Updated: 11/12/2015
What if LE was previously issued by another Wholesale Lender? Written List of Settlement Service Providers Does the Broker still need to provide Initial Disclosures to the Borrower? Does the date of the Broker s Initial Disclosures need to match the date of the LE issued by the Lender? If the Broker runs credit at the time of application and determines that the Borrower does not qualify, does the Loan Estimate still need to be issued? Estimate of Fees With a Prequalification Can a Loan Estimate with TBD be issued as the property address? If the Broker submits a loan with an LE that has another Lender name, NewLeaf will reissue a LE with NewLeaf as the Lender and with NewLeaf s loan number. NewLeaf is not bound to any lock or Broker Compensation Plan issued on the previous LE issued by the other Lender. The lock and Broker Compensation Plan will reflect what has been negotiated between NewLeaf and the Broker. This list must be provided to the Borrower at the same time as the LE and Must identify at least one available settlement service provider for each service for which the Borrower is permitted to shop Provide sufficient information to allow the Borrower to contact each identified provider State the consumer may choose a different provider for the service The settlement service providers identified on the written list must correspond to the settlement services for which the Borrower can shop as disclosed on the LE NewLeaf will issue a Written List of Settlement Service Providers. If the broker issues the Loan Estimate, the broker must issue a Written List of Settlement Service Providers. Yes. Brokers are responsible for issuing state and federal disclosures that are still required to be issued by them. This includes the new Home Loan Toolkit. No. As long as all initial disclosures are sent to the Borrower within 3 days of the application, it is acceptable. As long as the decision to decline the loan is made and an Adverse Action is sent within 3 days of application, the LE and all other initial disclosures do not need to be issued. Pre-application or Prequalification The Loan Originator may provide a Borrower with a written estimate of terms or costs specific to that consumer before receiving all 6 pieces of information that trigger the requirement of a Loan Estimate. The written estimate must not be in the format of and not look like a Loan Estimate. The document must be in a font size that is no smaller than 12-point font, and must state: Your actual rate, payment and costs could be higher. Get an official Loan Estimate before choosing a loan. A Loan Originator or credit is not required to collect all 6 pieces of information, however for purposes of determining whether an estimate was Page 4 of 10 Last Updated: 11/12/2015
provided in good faith, it is presumed that all 6 pieces of information were collected. If a Loan Originator or Creditor provides the Loan Estimate prior to receiving the property address from the Consumer, the Loan Originator or Creditor cannot use the receipt of the property address as a changed circumstance to change fees. Documenting Intent to Proceed Intent to Proceed Fee Restriction Intent to Proceed Requiring Verification of Documents Broker Compensation on the Loan Estimate Broker Compensation on the Closing Disclosure Disclosure of Lender Credits It is recommended that the Loan Estimate not be issued prior to receipt of all 6 pieces of information and that an alternative written estimate of terms and fees be provided to the Borrower until the property address is identified. Intent to Proceed The Borrower s Intent to Proceed must be expressed. Silence is not indicative of the Borrower s intent to proceed. The Intent to Proceed may be communicated In writing Borrower signs the Intent to Proceed form Verbally - Loan Officer signs attestation form affirming receipt of Borrower s verbal Intent to Proceed Other than a reasonable fee for a credit report, no fees may be charged or collected until the Loan Estimated is provided and the Borrower indicates Intent to Proceed. o Cannot take the Borrower s credit card number o Cannot take a post-dated check o Cannot order an Appraisal regardless of who is paying The Loan Originator or Creditor cannot require additional documentation, such as income or asset documentation, other than the 6 pieces of information that define an application, until the Borrower has received the Loan Estimate. The Loan Origination can ask for the documentation, but cannot require it before the Loan Estimate is delivered. Compensation Lender Paid Broker Compensation is not disclosed on the Loan Estimate. Borrower Paid Compensation is disclosed on the Loan Estimate. Lender Paid Compensation is disclosed on the Closing Disclosure and is displayed in the Paid by Others column. Borrower Paid Compensation is disclosed on the Closing Disclosure and is displayed in the Borrower-Paid column. Whether compensation is Borrower or Lender Paid, general and specific Lender Credits, including rebates or reimbursements, are disclosed on page 2 of the Loan Estimate under Box J under Lender Credits. Fees, Pricing and Locking Page 5 of 10 Last Updated: 11/12/2015
Real Estate Commission Seller Fees Seller Credits: On a purchase, where are Seller Credit displayed on the Closing Disclosure? Seller Paid Transfer Tax Disclosure of Mortgage Insurance Fees on the Loan Estimate Are fee ranges acceptable to help to be within tolerance? If the loan was unlocked when the initial Loan Estimate was disclosed to the Borrower and there were no changes made when the loan was locked, does the Borrower still need to receive another Loan Estimate? Does the Yield Spread Premium (YSP) need to be disclosed on the Loan Estimate? How is the Owner s Title Policy disclosed on the LE and CD? If the Loan Originator is aware of the Real Estate Commission at the time the Loan Estimate is provided, the estimated charge is itemized in Box H, Other. When known at closing, the Real Estate Commission is disclosed on the Closing Disclosure in Box H, Other as well. Both Buyer and Seller fees will be disclosed on the Closing Disclosure. A Closing Disclosure will be provided to the Buyer by NewLeaf and a separate Seller Closing Disclosure will be provided to the Seller by the settlement agent. The allocation of Seller Credits for specific items is shown on page 2 of the Closing Disclosure. Under the heading Closing Cost Details columns, the applicable fee would be marked as Seller Paid. Seller Paid Transfer Taxes are not disclosed on the Loan Estimate, but are disclosed on the Closing Disclosure. Mortgage Insurance Rate Cards should be used to disclose MI on the Loan Estimate. The standard is to provide information that is reasonably available at the time of disclosure. Fee ranges are not acceptable. The purpose of the Loan Estimate is to provide meaningful disclosure of credit terms to enable Borrowers to compare credit terms available in the marketplace more easily and avoid the uninformed use of credit. Loan Estimates include estimated Settlement Charges. If a revised Loan Estimate is provided pursuant to timing requirements due to a rate lock and no subsequent changes occur, a Closing Disclosure reflecting the Actual Settlement Charges, must still be received by the Borrower 3 business days prior to consummation. Yes. YSP is disclosed as a Lender credit in Box J of the Loan Estimate. When both a Loan and Owner s Title Insurance Policies will be purchased in a transaction (called simultaneous insurance ) TRID requires the Lender to inaccurately disclose the title premiums on the LE and CD. In roughly half the states, a Consumer is entitled to discount on Loan Title Insurance Policy when an Owner s Policy will be simultaneously issued. Regardless of lower, actual simultaneous issue rate for Lenders Policy (LTP), pricing is to be shown at full rate (even on CD). If an Owners Policy (OTP) is also purchased, rate shown for OP is accordance Page 6 of 10 Last Updated: 11/12/2015
with CFPB formula, again not the actual rate charged. How to disclose: Owners Title Policy = OTP Premium + LTP Simultaneous Premium Full LTP Premium Lenders Title Policy = FULL LTP Premium (with no discounts for simultaneous) Example: Owners Title Policy = $902; $1509 (OTP Premium) +$595 (LTP Simultaneous Premium) -$1202 (Full LTP Premium) $902 Lenders Title Policy = $1202 (Full LTP Premium with no discounts) Changed Circumstances Change of Circumstance The terms of the Loan Estimate are binding subject to one of the six legitimate reasons for revisions: 1. Changed circumstance that cause an estimated settlement charge to increase beyond the applicable tolerance 2. Changed circumstances affecting eligibility (creditworthiness or value of property to secure the loan) that cause an estimated settlement charge to increase beyond the applicable tolerance 3. Borrower requested changes 4. Expiration of the Loan Estimate (10 general business days) with no intent to proceed from the Borrower In this case, the original LE has expired and a new LE may be issued with revised charges without any justification, other than the laps of the 10 general business day period. 5. Interest rate dependent changes Rate lock, relock or lock extension In this case, a revised LE must be issued, even if the only change is to reflect that the rate is locked or the date on which the lock expires 6. Delayed settlement date on a construction-perm loan if notice is provided Page 7 of 10 Last Updated: 11/12/2015
Zero Tolerance Tolerances Costs that cannot increase from initial Loan Estimate to Closing Disclosure: Transfer Taxes Fees paid to the Creditor or Mortgage Broker Fees paid to an Affiliate of Creditor or Mortgage Broker Fees paid to an Unaffiliated Third Party if the Creditor did not permit the Borrower to shop for the Third Party Examples: o Credit report o Appraisal o HOA Cert o Subordination fee o Third party processing company Any time the Loan Estimate is re-disclosed for an increase in the fees due to a valid changed of circumstance (see above), the tolerance is reset for the purpose of determining good faith. 10% Tolerance Costs that may increase in the aggregate up to 10% Recording fees Services the Borrower is permitted to shop for and selects a provider from the Mortgage Broker s or Creditor s list (cannot be an Affiliate) Services the Borrower is permitted to shop for and does NOT select a provider (result is Broker or Creditor selects provider other than an Affiliate) Services for which the Creditor permits a Borrower to shop but fails to provide a written list of providers (unless the provider is an Affiliate. If Affiliate, see zero tolerance) Any time the Loan Estimate is re-disclosed for exceeding the 10% cumulative tolerance due to a valid Change of Circumstance (see above), the tolerance is reset for the purpose of determining good faith. No Tolerance Costs that may increase in any amount Prepaid Interest Property Insurance Premiums Amounts paid into Escrow/Impound Accounts Charges paid to Third-Party Service Providers selected by the Borrower that are not on the Broker s or Creditors written list Charges paid for Third-Party Services not required by the Creditor (may be paid to Affiliate of the Creditor) Page 8 of 8 Last Updated: 11/12/2015
Tolerance Violation Cures Can fees be lower than originally disclosed, regardless of any tolerance violation? What if I find out later that there is a property characteristic that I didn t know about that increases the price of the Appraisal? Closing Disclosure (CD) Who can prepare the Closing Disclosure? Delivery and receipt of Closing Disclosure If more than one revised LE was issued, the Creditor must compare the last issued LE with the CD For charges that are subject to zero tolerance, any amount paid by the Borrower in excess of the amount disclosed on the LE must be refunded to the Borrower For charges that are subject to a 10% cumulative tolerance, to the extent the total of actual charges paid by the applicant exceed the total of charges in that tolerance bucket that were disclosed on the LE, the difference must be refunded to the Applicant Charges that decrease at consummation are not a violation since good faith criteria is that charges may not increase at consummation. However, this does not mean that fees can be padded. The fees must be accurate based on the facts known at the time. Appraisal is a zero tolerance fee. BUT there may be instances where you learn something additional about the subject property after you have taken the loan application. For instance, the Borrower said their property was a SFR, but it was actually a condo. Cases such as this would qualify as a change of circumstance and the fee could be increased and re-disclosed. It is important to ask more questions of the Borrower at the time of application so you are disclosing your fees in good faith (see above) as accurately as possible. Closing Disclosure Replaces Final TIL and HUD-1 Creditor and Settlement Agent may agree to divide responsibility for completion by Creditor remains primarily responsible for any errors or defects. NewLeaf will prepare the Closing Disclosure. A copy will be provided to the Broker. The Closing Disclosure must be received by the Borrower no later than 3 specific business days prior to consummation. Cannot be received Borrower on the same day as a revised LE. If delivering the CD by means other than in person, (including electronic delivery) the disclosure is considered to be received 3 business days after placing in the mail ( Mailbox Rule ) unless credit receives proof of receipt. Page 9 of 9 Last Updated: 11/12/2015
When will NewLeaf issue the Closing Disclosure? Charges Disclosed on Closing Disclosure Revised Closing Disclosure NewLeaf will issue the CD when: Loan is Approved All appraisal conditions have been met Loan is locked Actual charge imposed by Settlement Service Provider. These fees must be exact to the actual charge. Changes requiring a revised Closing Disclosure AND new 3 specific business day waiting period: 1. The disclosed APR becomes inaccurate (increases by more than.125% or.25% on irregular loans) 2. The loan product changes 3. A prepayment penalty is added Changes requiring a revised Closing Disclosure at or before Consummation but NO new waiting period 1. Any change other than those described above. The revised CD must be available the day before Consummation if requested by Borrower. Changes following Consummation requiring a revised Closing Disclosure 1. Any change that causes the amount paid by the Consumer OR Seller within 30 days of Consummation, a revised CD is required within 30 calendar days of receipt of change information 2. Non-numeric clerical errors a revised CD is required within 60 calendar days of consummation Lender Name, Loan Number and Fee Names Lender Name, Loan Number and Fee Names used in the Closing Disclosure must be identical to the Lender Name, Loan Number and Fee Names used in the Loan Estimate. If there is a difference in the Lender Name, Loan Number or Fee Name(s) from the Initial LE to the Final CD, the CD must be re-disclosed. There is no additional 3 specific business day waiting period for curing this type of disclosure error. Page 10 of 10 11/12/2015 Last Updated: