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TRID - Powerpoint
- 1. Brief Walk Through of TRID Presentedby: Vance Edwards MGIC Marketing Program Director
- 2. MGIC.com/social The information presentedin this presentation is for general information only, and is based on guidelines and practices generally accepted within the mortgage finance industry and is not intended to be all-inclusive. MGIC makes no representations or warranties of any kind with respect to the accuracy, completeness or suitability for any purpose of the information contained in this presentation. MGIC expressly disclaims any and all warranties, express or implied, including without limitation warranties of merchantability and fitness for a particular purpose regarding these materials and this presentation. In no event will MGIC be liable for any direct, indirect, incidental, punitive or consequential damages of any kind with respect to the presentation or materials provided. All examples are hypothetical and are for illustrative purposes only. This presentation is not intended and should not be interpreted or relied upon as legal advice. We encourage you to seek advice from a qualified professional.
- 3. MGIC.com/social TRID does notcover • HELOCs • Reverse mortgages • Mortgages secured by mobile homes or dwellings that are not attached to real property (i.e., land) • Rule does not apply to loans made by creditors that make 5 or fewer mortgage loans per year
- 4. MGIC.com/social TRID timeline • Dodd-Frankmandate • Final TRID rule issued by CFPB November 20, 2013 • Goes into effect October 1, 2015
- 5. MGIC.com/social “New forms”“Old forms” Canforms be used early? • Use GFE, HUD-1 and Truth-in-Lending forms for applications received prior to October 1, 2015 • Use Loan Estimate on October 1, 2015, and from there on
- 6. MGIC.com/social It all startswith an application • You have an application when consumer provides: • Name • SSN (to pull credit) • Income • Loan amount sought • Estimate property value • Property address • Can ask for more, but no longer rely on “anything else lender deems necessary”
- 7. MGIC.com/social Preapprovals? • You havean application when consumer provides: • Name • SSN (to pull credit) • Income • Loan amount sought • Estimate property value • Property address If we don’t have a property address, we don’t have an application and a LE does not need to be issued.
- 8. MGIC.com/social • TRID prohibitsrequiring income documentation prior to issuing a LE • Borrower can volunteer the information prior Can you verify income?
- 9. MGIC.com/social Terms to know LoanEstimate (LE) - Replaces and combines the GFE, initial TIL and servicing disclosures
- 10. MGIC.com/social Terms to know LoanEstimate (LE) - Replaces and combines the GFE, initial TIL and servicing disclosures - No fees may be imposed on consumer before consumer receives LE and indicates to lender intent to proceed (except “bona fide and reasonable” fee for obtaining credit report) - Lender is bound by LE; revisions only permitted for limited circumstances - Consumer has 10 days from when LE was delivered or placed in the mail to indicate intent to proceed with transaction - Consumer can indicate intent by phone, e-mail or in writing
- 11. MGIC.com/social Terms to know ClosingDisclosure (CD) - Replaces and combines the TIL disclosure, Itemization of Amount financed and HUD-1 Settlement Statement
- 12. MGIC.com/social Have an app;now what? • Within 3 business days of receipt of application, creditor must deliver or place in the mail the Loan Estimate • Loan Estimate must be delivered or placed in the mail no later than 7 business days prior to consummation • Consumer can only waive the 7-business day waiting period if the consumer has a “bona-fide personal financial emergency”
- 13. MGIC.com/social • Loan Estimate Businessday = Day when the creditor’s offices are open to the public for carrying out substantially all of its business functions • Closing Disclosure Business day = All calendar days except Sundays and federal legal holidays • Mailbox rule Considered received 3 business days after mailed Business day vs. business day
- 14. MGIC.com/social • General info Date,address, rate lock, etc. • Loan terms table Loan amount, interest rate, monthly P&I, prepayment penalty, balloon payment • Projected payments table P&I, MI, estimated total monthly payment • Costs at closing table Let’s take a look at the LE Page 1 includes…
- 15. MGIC.com/social • Loan costs& other costs A good-faith itemization • Calculating cash to close Shows how amount was calculated • Adjustable Payment table If transaction has monthly payments that will change • Adjustable Interest Rate table Shows how the interest rate will change (if it can) Let’s take a look at the LE Page 2 includes…
- 16. MGIC.com/social • Contact information Agood-faith itemization • Comparisons table Show how amount was calculated • Other considerations If transaction has monthly payments that will change • Signature statement Acknowledging receipt does not equal intent to proceed Let’s take a look at the LE Page 3 includes…
- 17. MGIC.com/social • Replaces theTotal Payments from the initial TIL • Used to be a big $ amount; now a big % amount Tip on TIP
- 18. MGIC.com/social • Creditors responsiblefor ensuring figures provided are made in good faith • If charges are lower on Closing Document, fine LE – Good Faith
- 19. MGIC.com/social • Creditors responsiblefor ensuring figures provided are made in good faith • If charges are lower on Closing Document, fine • If higher, deemed not in good faith unless: • Certain variations between the amount disclosed and the amount charged are expressly permitted by the TILA-RESPA rule; or • The amount charged falls within explicit tolerance thresholds (and the estimate is not for a zero tolerance charge where variations are never permitted); or • Changed circumstances permit a revised Loan Estimate or a Closing Disclosure that permits the charge to be changed. LE – Good Faith
- 20. MGIC.com/social • Prepaid interest,property insurance premiums, amounts placed into escrow • Services required by creditor that the borrower shops for and selects third-party provider not on written list of service providers • Charges paid to third-party service provider not required by the creditor (may be affiliate of creditor) LE – Change without tolerance
- 21. MGIC.com/social • 10% iscumulative tolerance • Charges include: • Recording fees • Charges for third-party services where: • Not paid to the creditor or affiliate of the creditor; AND • Borrower was permitted by the creditor to shop, and the borrower selected a third-party provider on the list provided by the creditor. LE – 10% tolerance
- 22. MGIC.com/social • Not permittedto charge borrower more than what is listed on the LE under any circumstance other than changed circumstance that permits revised LE • Includes: • Fees paid to the creditor, mortgage broker, or an affiliate of either • Fees paid to an unaffiliated third party if the creditor did not permit the consumer to shop for a third-party service provider for a settlement service or • Transfer taxes LE – Zero tolerance
- 23. MGIC.com/social • Valid changein circumstance • Change affecting settlement charges • Extraordinary event beyond control of any interest party (think Act of God clauses…hurricane, earthquake, etc.) • Inaccurate or changed information specific to consumer or transaction (similar to RESPA today) • New information specific to the consumer or transaction • Change affecting eligibility • Consumer is ineligible because of changed circumstance such as creditworthiness or value of security Valid change
- 24. MGIC.com/social • Consumer requestsrevision • Interest rate dependent charges (Points or lender credits change because consumer did not lock when required) • LE expires • Delayed settlement date on construction loan Other revisions
- 25. MGIC.com/social • A revisedLE cannot be issued on the same day or after the Closing Disclosure • Last day to issue a revised LE is 4 business days prior to closing Revised LE
- 26. MGIC.com/social • General info •Loan terms table • Projected payments table • Costs at closing table Let’s take a look at the CD Page 1 includes…
- 27. MGIC.com/social • Closing CostDetails • Loan costs • Other costs Let’s take a look at the CD Page 2 includes…
- 28. MGIC.com/social Let’s take alook at the CD Page 2 includes…
- 29. MGIC.com/social • Calculating cashto close • Summaries of Transaction tables Let’s take a look at the CD Page 3 includes…
- 30. MGIC.com/social • Additional information aboutthis loan: • Loan disclosures • Adjustable payment • Adjustable interest rate Let’s take a look at the CD Page 4 includes…
- 31. MGIC.com/social • Loan calculations •Other disclosures • Questions and complaint info • Contact info • Confirm receipt (optional) Let’s take a look at the CD Page 5 includes…
- 32. MGIC.com/social http://www.consumerfinance.gov/regulatory-implementation/tila-respa/ CFPB Timeline example Applicationdate received: August 3, 2015 Closing date: October 29, 2015
- 33. MGIC.com/social Let’s walk througha timeline… Creditor is closed on Saturday • Loan Estimate Business day = Day when the creditor’s offices are open to the public for carrying out substantially all of its business functions • Closing Disclosure Business day = All calendar days except Sundays and federal legal holidays
- 34. MGIC.com/social Lets walk througha timeline… 3 business days Creditor has 3 business days to deliver or mail the LE to the borrower. After doing this, the creditor is now able to request verifying information from the borrower.
- 35. MGIC.com/social Lets walk througha timeline… 7 business days from LE delivery
- 36. MGIC.com/social Lets walk througha timeline… 7 business days from LE delivery
- 37. MGIC.com/social Lets walk througha timeline… Accepting receipt of LE is not the same as wishing to proceed, and the LE expires after 10 days if the borrower has not indicated desire to proceed.
- 38. MGIC.com/social Thanksgiving Veteran’s Day Lets walkthrough a timeline… 3 business days
- 39. MGIC.com/social Thanksgiving Veteran’s Day Lets walkthrough a timeline… 3 business days 3 business days
- 40. MGIC.com/social 3-day waiting periodon CD change Only 3 changes to CD that require new 3-day wait period • Annual Percentage Rate (APR) becomes inaccurate if changes made by lender cause APR to increase greater than ⅛ on fixed-rate loan or ¼ on ARMs • Changes to the loan product • A prepayment penalty is added to the loan
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Editor's Notes
- #2 Welcome and general opening statements Our goal here today is not to dive into the weeds and explore every t that has been crossed and i that has been dotted in the nearly 1900 page TRID rule. We don’t have the time, nor do I claim to be a lawyer, or even an official TRID expert. No, our goal is to go over the basics, the general rules and timelines. We will also look at the new forms, both the Loan Estimate and Closing Disclosure. And you don’t have to be a TRID expert to do that. I encourage you to use this presentation, or your own, to walk your realtor referral partners through TRID. I will be showing you basically how I would do that if I were you or you asked me to speak to your realtor audience. Afterward, we will hopefully all have an understanding of the new TRID changes that are coming. And they are coming. CFPB has proposed a delay until October 1st and before the delay mentioned there will be a grace period on enforcement. As for the grace period, specifically they said the CFPB regulators “will be sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with the rule on time.” I think that statement shows how some of the nuances of this bill will need to play out even after the assumed October 1st effective date.
- #3 I normally skip over the legal mumbo jumbo stuff other than to say that our legal department will deny this event ever took place or that my parents ever met. However with this topic I do want to again stress that I am not offering legal advice. I am sharing with you what the CFPB and others have shared, but it is always up to each company to consult their own legal team on matters, especially those surrounding disclosures and the CFPB.
- #4 Keep in mind TRID is not just a mortgage industry issue. It impacts all of us who make our living helping people get into homes. Be that a loan officer, real estate agent or private mortgage insurance guy like myself. That of course is why we are here today. The TILA-RESPA rule, or TRID, applies to most closed-end consumer credit transactions secured by real property. Credit extended to certain trusts for tax or estate-planning purposes is not exempt from the rule. However, some specific categories of loans are excluded from the rule. Specifically, TRID does not apply to HELOCs, reverse mortgages or mortgages secured by mobile homes or dwellings that are not attached to real property. Also creditors that make 5 or fewer mortgages in a year also not held to the TRID rules.
- #5 Quick rundown of the history: The Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank, directed the CFPB to integrate the mortgage loan disclosures under TILA and RESPA . The CFPB issued that rule in November 2013, and as we stated the CFPB proposed having it now go into effect on October 1st of this year (a 2-month delay from the original August 1st start date). Again, recently the CFPB announced a good faith grace period on enforcing, however, the rule itself will go into effect come October 1st.
- #6 Can we go ahead and start using the new forms early? No. According to the CFPB, creditors will still be required to use the GFE, HUD-1 and Truth-in-Lending forms for applications received prior to October 1, 2015, and cannot use the LE and CD before the October 1 effective date. So in simple terms, a loan application on September 30th will use today’s forms, or the old forms. A loan application on October 1st will use the new forms and be tied to the required delivery dates that we will get into shortly.
- #7 As you just heard, it all starts with an application. That is the key trigger in TRID and starts the clock ticking, if you will, on what needs to be delivered to the consumer and by when. AND when you can close. There are 6 pieces of information, that once the creditor has them, they officially have an application. Those are name, social security number (in order to pull credit), income, loan amount, estimated property value and the property address. There used to be a 7th more general, anything else the creditor deemed needed but that has gone away. If you have these six pieces of information, you have an application and the clock starts. And it doesn’t matter how you received those pieces of information. On-line form, in your office, Starbuck’s napkin. If you have all 6 you have an application.
- #8 So what about preappovals? There has been a lot of debate and discussion on this topic, and sadly I don’t think I will be able to clear it up for you as it is one of those each lender may need to decide for themselves until the rule plays out more. On the one hand, if you are missing one of these pieces of information ─ say the property address ─ you do not have an application. Therefore you do not need to issue a Loan Estimate and in theory could issue a preapproval. However…
- #9 …can a creditor verify income prior to having an application? I haven’t seen a clear answer on that. Even the CFPB, on a recent webinar I participated in, seemed to leave it in a gray area. The CFPB prohibits creditors from requiring a borrower to provide verifying documentation prior to the Loan Estimate. On the webinar I attended, the CFPB pointed out that TRID only prohibits requiring the information. But if voluntarily provided by the borrower, it was permissible. Great. However, the CFPB immediately stated right afterward that a lender that explicitly or implicitly requires such documentation would be violating the law. My very much non-legal opinion is that IF a lender were to make it very clear to the borrower, and be able to prove that it was voluntary if ever called on it, that they are able to provide a preapproval with verified income documentation. Without that information, as you know, it would be more of a pre qualification. However, terms like “should be” and “if” are dangerous terms when looking at CFPB fines. Other lenders I have spoken to have basically said, look, if I don’t have the address I don’t have an application and therefore not entered into TRID rules, meaning there is no LE to issue yet and I can collect whatever documentation I want including pay stubs to verify income to do a preapproval. I understand that logic too. I’m just not sure if the CFPB is saying you can’t require documentation until you issue an LE…in cases where you have an application…or you simply cannot require documentation until you issue an LE period. Again, time will tell how each lender treats this issue. If you are doing a presentation for realtors adjust this slide as your company sees fit. Side note, the best approach I have heard, (again my opinion only here, not MGIC, not legal advice) is a document offering the borrower a clear option of a prequal, no documents and what that provides them, or choosing a preapproval and voluntarily providing income verification. And having the borrower sign that.
- #10 Okay, let’s go back to things we do know about TRID. The two terms we must know are Loan Estimate or LE and Closing Disclosure or CD. The LE integrates and replaces the existing RESPA GFE and the initial truth-in-lending.
- #11 The creditor is required to provide the Loan Estimate within 3 business days of the receipt of the consumer’s loan application. The LE must contain a good-faith estimate of credit costs and transaction terms and must be in writing. If any information necessary for an accurate disclosure is unknown, the CFPB says the creditor must make the disclosure based on the best information reasonably available at the time the disclosure is provided to the consumer, and use due diligence in obtaining the information. Creditors generally may not issue revisions to Loan Estimates because they later discover technical errors, miscalculations or underestimations of charges. Creditors are permitted to issue revised Loan Estimates only in certain situations, such as when changed circumstances result in increased charges, which we will get into soon. The consumer has 10 days from the time the LE is delivered or mailed to indicate their wish to proceed with the transaction, otherwise the LE expires.
- #12 The Closing Disclosure, or CD, integrates and replaces the existing HUD-1 and the final truth-in-lending disclosure, and must contain the actual terms and costs of the transaction. It is generally required to be delivered to the consumer no later than 3 business days before consummation of the loan.
- #13 Alright, so once we have an application, what happens? Well as mentioned already, the creditor has 3 days to issue the LE. The LE must be delivered or placed in the mail at least 7 days before the loan could close. Can the borrower waive the 7 days? Yes…kind of. If the consumer has what the CFPB calls a “bona-fide” personal financial emergency. Wanting to still close or not having a place to move into, are not going to fit that definition. An example the CFPB has given of a “bona-fide” personal financial emergency is the imminent sale of the consumer’s home at foreclosure, where the foreclosure sale will proceed unless loan proceeds are made available to the consumer during the waiting period. To modify or waive the waiting period, the consumer must give the creditor a dated written statement that describes the emergency, specifically modifies or waives the waiting period, and is signed by all consumers primarily liable on the legal obligation. The creditor may not provide the consumer with a pre-printed waiver form. Again it will be the lender on the hook for this if auditors decide it did not meet the criteria of a bona-fide emergency so I expect lenders to tread carefully in this area. My opinion, not legal advice.
- #14 So what is a business day? Well in one of many shake-your-head aspects of the rule, the LE and the CD do not use the same definition of a business day. For the LE, a business day is when the creditor’s offices are open to the public. So if open on Saturday that’s a business day. If not, then not. With the CD, the CFPB defines that business day as all calendar days, except Sundays and federal holidays. So even if the creditor is closed on Saturday, it is part of the CD’s business days. Many in the industry tend to think that most lenders will want to mail the documents, not just deliver them electronically. If mailed they are considered received after 3 days.
- #15 Alright, so let’s take a look at the LE. Page 1 is going to contain the general information along with a Loan Terms table that contains descriptions about the loan, a Projected Payments table and a Costs at Closing table. It also advises the borrower to save this and use it to compare to the CD that will be issued later.
- #16 Page 2 of the LE covers 4 main categories of different charges. First there is the good-faith itemization of the Loan Costs and Other Costs associated with the loan. Generally, Loan Costs are those costs paid by the consumer to the creditor and third-party providers of services the creditor requires to be obtained by the consumer during the origination of the loan. Other Costs include taxes, governmental recording fees and certain other payments involved in the real estate closing process. Next is a table calculating cash to close that includes showing the consumer how the amount of cash needed at closing is calculated. For transactions with adjustable monthly payments, an Adjustable Payment Table with relevant information about how the monthly payments will change is provided. Likewise for transactions with adjustable interest rates, an Adjustable Interest Rate Table with relevant information about how the interest rate will change is provided.
- #17 Finally, Page 3 of the Loan Estimate contains contact information, a comparisons table, an other considerations table, and, if the lender requires, a signature statement for the consumer to sign acknowledging receipt of the LE. Keep in mind that acknowledging receipt of the LE does not translate into stating the borrower wishes to proceed with the loan.
- #18 Before we leave page 3 a quick tip on TIP or Total Interest Payment. This shows up on page 3 of the LE. I have grabbed this screen shot from the CFPB’s website where they have an example of a completed LE. This essentially replaces the Total Payments from the initial truth-in-lending and shows the total amount of interest rate a borrower would pay over the life of the loan. It used to be a huge dollar amount and now it is a huge interest amount. You want to prepare your borrower for this and if doing this presentation for Realtor audience, I’d suggest preparing them for it to in case the borrower goes to them with a question about it.
- #19 So a term we heard and used a lot with the LE is Good Faith. Whether or not a Loan Estimate was made in good faith is determined by calculating the difference between the estimated charges originally provided in the Loan Estimate and the actual charges paid by or imposed on the consumer in the Closing Disclosure. Generally, according to the CFPB, if the charge paid by or imposed on the consumer exceeds the amount originally disclosed on the Loan Estimate it is not in good faith, regardless of whether the creditor later discovers a technical error, miscalculation or underestimation of a charge. However, a Loan Estimate is considered to be in good faith if the creditor charges the consumer less than the amount disclosed on the Loan Estimate.
- #20 And a creditor may charge the consumer more than the amount disclosed in the Loan Estimate in specific circumstance. This include: Certain variations between the amount disclosed and the amount charged are expressly permitted The amount charged falls within explicit tolerance thresholds (and the estimate is not for a zero tolerance charge where variations are never permitted) or Changed circumstances permit a revised Loan Estimate or a Closing Disclosure that permits the charge to be changed
- #21 Let’s go into this a little more. Three items to know about when revising a LE. Charges that can change with no tolerance restriction, a 10% tolerance restriction and finally items that have a zero tolerance which means if a valid change of circumstances happens that permits a change need to issue a new LE and the waiting periods that apply come into effect. First changes without tolerance. For certain costs or terms, creditors are permitted to charge consumers more than the amount disclosed on the Loan Estimate without any tolerance limitation. These charges are: Prepaid interest; property insurance premiums; amounts placed into an escrow, impound, reserve or similar account. Services required by the creditor if the creditor permits the consumer to shop and the consumer selects a third-party service provider not on the creditor’s written list of service providers. Okay, what is this list of service providers I mentioned? Well, in addition to the Loan Estimate, if the consumer is permitted to shop for a settlement service, the creditor must provide the consumer with a written list providers of services for which the consumer can shop. This written list of providers is separate from the Loan Estimate, but must be provided within the same time frame—that is, it must be provided to the consumer no later than 3 business days after the creditor receives the consumer’s application. The list must identify at least one available settlement service provider for each service, and state that the consumer may choose a different provider of that service. So in this case if the borrower went with a provider not on the creditor’s list, no tolerance restriction The other change without tolerance is charges paid to third-party service providers for services not required by the creditor. This is true even if the payment is paid to affiliates of the creditor.
- #22 Some charges for third-party services and recording fees paid by or imposed on the consumer are grouped together and subject to a 10% cumulative tolerance. This means the creditor may charge the consumer more than the amount disclosed on the Loan Estimate for any of these charges so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than 10%. These charges include recording fees and charges for third-party services required by the creditor where: The charge is not paid to the creditor or the creditor’s affiliate and The consumer is permitted by the creditor to shop for the third-party service, and the consumer selects a third-party service provider on the creditor’s written list of service providers. Notice the difference here. If the service wasn’t required by the lender it can change even if it is an affiliate provider. If it was required it can fall into this 10% rule as long as it is not an affiliate.
- #23 If it is an affiliate and required it will fall into the zero tolerance area. This zero tolerance area includes all other charges and creditors are not permitted to charge consumers more than the amount disclosed on the Loan Estimate. These zero tolerance charges are: Fees paid to the creditor, mortgage broker or an affiliate of either Fees paid to an unaffiliated third party if the creditor did not permit the consumer to shop for a third-party service provider for a settlement service or Transfer taxes
- #24 So what changed circumstances permit a revised LE? A valid change in circumstance falls into a couple categories. Extraordinary event beyond control of any interest party (think Act of God clauses…hurricane, earthquake, etc.) Inaccurate or changed information specific to consumer or transaction (similar to RESPA today). New information specific to the consumer or transaction. Change affecting eligibility where the borrower is now ineligible because of change circumstance such as creditworthiness or value of security.
- #25 Other categories include if the consumer requests revisions, the rate wasn’t locked or the LE expired before the borrower confirmed wish to proceed. Recall the borrower has 10 days from the time the LE is delivered or mailed to indicate wish to proceed. Finally, a delayed settlement date on construction loan also fits this category.
- #26 Keep in mind, a revised LE cannot be issued on the same day or after the Closing Disclosure. So that means that the last day to issue a revised LE is 4 days prior to closing, because it has to be issued before the CD and the CD has to be received by the borrower 3 days before closing.
- #27 Okay, so that is a revised LE. We are in the home stretch now. Time to look at the Closing Disclosure. Page 1 again contains general information, the Loan Terms table, the Projected Payments table and the Costs at Closing table.
- #28 On Page 2 the Loan Costs and Other Costs tables are disclosed under the heading Closing Cost Details. The number of items in the Loan Costs and Other Costs tables can be expanded and deleted. However, items that are required to be disclosed even if they are not charged to the consumer (such as Points) cannot be deleted. The Loan Costs and Other Costs tables can be disclosed on 2 separate pages of the Closing Disclosure, but only if the page cannot accommodate all of the costs required to be disclosed on one page.
- #29 If we pull up the example on the CFPB’s website of a completed CD, we see then on Page 2 under Other Costs, this is where the real estate commission is going to be found. So if you are going to do this presentation for a Realtor audience, or create your own, I’d suggest point this out.
- #30 On Page 3 of the Closing Disclosure, you’ll see the Calculating Cash to Close table and Summaries of Transactions tables. For transactions without a seller, such as a refi, a Payoffs and Payments table may be substituted for the Summaries of Transactions table and placed before the alternative Calculating Cash to Close table.
- #31 On Page 4 we have Loan Disclosures, Adjustable Payment and Adjustable Interest Rate tables.
- #32 Then on Page 5, Loan Calculations, Other Disclosures, Contact Information, and, if desired by the creditor, Confirm Receipt area.
- #33 Now the CFPB, which has been pretty vocal that TRID will cause very few delays, has a timeline example on their website. I’m not going to use theirs, though it is worth taking a look at. Interestingly, at least to me, in their example the application is received on August 3, and the closing is 87 days later on October 29. Of course this example was based on the original August 1 date. Let’s look at an example using the October 1st effective date.
- #34 …and walk through a calendar so we can recap some of the important dates and time periods. We will assume that the lender, or creditor, is closed on Saturdays, so for LE purposes this is not a business day. Remember the CD uses a different definition where only Sundays and federal holidays are not business days, so for the CD Saturday is a business day even though the lender is closed in our example.
- #35 So let’s say we receive the application on October 6th of this year. Recall that means we have all 6 pieces of information that trigger the LE. So the creditor has 3 business days to deliver or mail the LE to the borrower. After doing this, the creditor is now able to request verifying information from the borrower.
- #36 Keep in mind that also means that 7 days from the delivery of the LE is the first eligible closing date. Again, we said the lender was closed on Saturdays so that wasn’t a business day. Remember here we are talking really the first eligible date. 7 days is probably not realistic to get title insurance ordered, appraisal, etc.
- #37 So let’s assume we are not closing on the 19th. And let’s also assume, like in the CFPB’s example on their website, that we will have some changes that happen along the way.
- #38 So the creditor puts the LE in the mail, the borrower receives it and indicates a wish to proceed. Remember, just signing the LE is not indicating to desire to proceed.
- #39 Now there are a lot of things for the sake of time I am going to skip over. But you are going to get a copy of the contract, home inspection, order title insurance, the appraisal, lock the rate if it hasn’t yet, etc. Let’s say that we get the appraisal back on November 6th and now instead of 250,000 it comes in at 240,000. And because of that the LTV is adjusted and now the borrower needs MI or needs a higher coverage level to meet agency requirements. Revised LE is permitted in this case and you have 3 business days to make that happen. In this example though we have Veteran’s Day which is one of two federal holidays this month and not a business day.
- #40 Let’s say the loan is scheduled to close on Friday, November 27th. Black Friday for those shoppers out there. So the customer needs to receive the Closing Disclosure 3 days before closing, not counting our federal holiday of Thanksgiving of course. But here is the other part to keep in mind. This is when the borrower has it, which means if the lender is going to use the mailbox rule, they would need to mail it 3 days before this. Remember, the CD has a different definition for business day than LE does. Here even if the lender is closed on Saturdays, it will still count as a business day.
- #41 You may have noticed that the CD has to be received by the borrower in many cases before the final walk through occurs. What happens if the dish washer is broke or something comes up? Issuing a new CD will not automatically require a new 3-day waiting period. A corrected disclosure can be provided at or before closing, unless the change occurred for 1 of 3 reasons. The APR increase more than an eighth on fixed-rate loans, or a fourth on variable loans, there is a change to the loan product or a prepayment penalty is added. Again, the borrower needs a bona-fide emergency to waive this 3-day waiting period. Not…”But I still want to close on that day.”
- #42 Here, in my opinion, is the biggest take away on TRID. Communication throughout the entire process will be vital. Between the borrower and lender, between the lender and real estate agent and the real estate agent and borrower.
- #43 Here are some of our social media sites. Those of you on Twitter and LinkedIn, I’d love to have you follow MGIC. Not only get the latest changes that happen to stay informed but we put out a lot of great information all designed to help loan officers be more successful and earn more business. Tips on marketing to realtors, TRID, social media, etc. Our blog features a weekly update on different items happening in the industry that can help build your success as well. Articles on HFA, market and economic trends, thought pieces on what should happen with the GSEs, articles on first-time homebuyers and a lot more.
- #44 We also have our mobile app to help loan officers as they are out and about hunting down business. Available for both Apple and Anroid gives you instant rate quotes that you can e-mail and share with your underwriter. You can compare different MI programs and contact your local account manager.