Close That Loan!:Originating and Processing Residential Real Estate Loan Applications
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A consumer's request for a float-down or relock would likely fall under this category. The bank may choose any time zone. The regulation says that the "creditor must provide the date and time including applicable time zone when that period ends. The regulation is not clear on whether a revised disclosure is required when the rate that is locked is the same rate that was originally disclosed. The regulation does not explicitly state that a revised loan estimate needs to be provided if there is a rate lock that does not change any of the charge information, but arguably that is the implication.
As the rules are not clear on this matter, it is best to consult with a legal professional for guidance. Technically, a lender can always send a revised disclosure that contains new origination fees. However, in this situation, whatever charge is changed cannot be used for purposes of resetting a good faith tolerance. This means that if a lender a sends a revised disclosure because of a rate lock, and it adds new origination fees to the disclosures, then the revised disclosures can be used to calculate some good faith tolerances, but not others.
When calculating good faith, the updated interest rate dependent charges that were listed on the revised disclosure may be used. If a lender also adds an additional origination fee that is unrelated to the rate lock, then that unrelated origination fee cannot be used to reset the base tolerances. While the Bureau allows a lender to provide a revised disclosure outside of a triggering event situations, doing so may make the good faith tolerance calculations more complicated because instead of comparing the most recent revised loan estimate to the closing disclosure, the lender will have to compare some fees from the initial loan estimate and some fees from revised loan estimates to the final fees as shown on the closing disclosure.
The TRID rule does rely on the mailbox rule for purposes of determining when disclosures delivered by mail or electronically are considered received by the consumer. Pursuant to this rule, disclosures placed in the mail or delivered electronically are considered received 3 business days after delivery.
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The Commentary to section 12 CFR The creditor may, alternatively, rely on evidence that the consumer received the disclosures earlier than three business days. For example, if the creditor sends the disclosures via overnight mail on Monday, and the consumer signs for receipt of the overnight delivery on Tuesday, the creditor could demonstrate that the disclosures were received on Tuesday. Note Comment 2 addresses electronic delivery and is similar to Comment 1; however, it also addresses consumer consent to electronic delivery and compliance with the E-Sign Act.
That being said, it would be wise to insure that your policies and procedures state your practices for determining when disclosures are received by the consumer i. Also, make sure your disclosures accurately reflect the date they are placed the mail or delivered electronically. If you retain consumer confirmations received after the mail box rule expiration period, be sure to document, that for purposes of disclosure timing, you relied on the mail box rule and not the date of the confirmation. Yes, However, creditors using electronic delivery methods, such as email, must also comply with the Electronic Signatures in Global and National Commerce Act E-Sign Act which was signed into law on June 30, This Act provides a general rule of validity for electronic records and signatures for transactions in or affecting interstate or foreign commerce.
The E-Sign Act allows the use of electronic records to satisfy any statute, regulation, or rule of law requiring that such information be provided in writing, if the consumer has affirmatively consented to such use and has not withdrawn such consent. The consumer can indicate an intent to proceed with the transaction in any manner that the consumer chooses after the Loan Estimate has been delivered, unless a particular manner of communication is required by the creditor. The creditor must document the intent to proceed communication to satisfy the record retention requirements of 12 CFR If there are multiple applicants, it appears the rules under 12 CFR When two consumers are joint obligors with primary liability on an obligation, the disclosures may be given to either one of them.
If one consumer is merely a surety or guarantor, the disclosures must be given to the principal debtor Presumably this would be the same consumer who received the Loan Estimate. The regulation is clear that for transactions where the application is received prior to October 3rd, , creditors will still need to follow the current disclosure requirements under Regulations X and Z, and use the existing forms Truth-in-Lending disclosures, GFE, HUD That being said, institutions may want to set a target date, prior to October 3rd, , for testing actual transactions against the new disclosures.
Test disclosures should not be provided to the consumer but rather used to verify compliance. As a tool for consumer credit shopping, it is important that potential borrowers are comparing comparable disclosure models. It also has published a Guide to Forms that contains information on how to complete the Loan Estimate and the Closing Disclosure.
The rules on providing appraisals and other valuations can be found under Regulation B at 12 CFR None of the provisions under this section require any kind of an acknowledgment of receipt. Pursuant to individual policies and procedures, some lenders may choose to use an acknowledgement of receipt of appraisal to help document the actual receipt of the appraisal by the applicant, but again this is not required by law. Pursuant to Regulation Z section The TRID provisions do not override or replace the adjustable rate mortgage disclosures required by section The Compliance Guide also states that creditors are required to provide a copy of the toolkit booklet.
The CFPB responded by stating:. By simply making a special information booklet, also known as the toolkit, available on its web site, a creditor does not satisfy the rule's delivery requirement. Yes — the separate Appraisal Disclosure document is still needed for covered transactions that are outside the scope of the Loan Estimate. Please recall that the Loan Estimate is required for closed-end consumer credit secured by real property. The scope of the Appraisal Disclosure is complicated, since it is required under two different regulations with different scope.
Here are the regulations:. Required for any application for credit secured by a first lien on a dwelling including commercial purpose loans. Required for a consumer purpose closed-end loan secured by the principal dwelling in which the Higher Price Mortgage Loan HPML thresholds have been exceeded. No with one exception. Under the RESPA reg amendments, the servicing disclosure as a separate document will only be required for reverse mortgages. Under the TRID rule, an application consists of the submission of the following six pieces of information: Outside of exceptions contain under this provision, a business day means: For example, the preamble to Regulation Z states: The final rule requires that disclosures be provided before consummation of the transaction.
Why did the definition of an application change? Are land loans subject to TRID? For a transaction to purchase vacant land with intent to construct a personal residence in the future, what disclosures apply? I made a loan to purchase a residential lot in March for one year payable interest only.
Are extensions of maturity using the same loan terms allowed or must I now follow all the TRID rules and redisclose to renew this loan for a 6 month period until the Borrower is ready for his construction loan? My concerns are the additional costs that will need to be charged to the customer if I must make a new loan using the new regs, plus filing a new mortgage, etc. Reg Z defines a refinancing as follows: We have a customer who has an owner financed modular home it is his primary residence that he is wanting to combine with his acre agricultural loan, so that he can lower the rate on both loans.
His source of income is cattle and construction. Would this be considered a TRID loan? In determining whether credit to finance an acquisition—such as securities, antiques, or art—is primarily for business or commercial purposes as opposed to a consumer purpose , the following factors should be considered: The relationship of the borrower's primary occupation to the acquisition. The more closely related, the more likely it is to be business purpose.
The degree to which the borrower will personally manage the acquisition. The more personal involvement there is, the more likely it is to be business purpose. The ratio of income from the acquisition to the total income of the borrower. The higher the ratio, the more likely it is to be business purpose.
The size of the transaction. The larger the transaction, the more likely it is to be business purpose. The borrower's statement of purpose for the loan. I'm still a little foggy regarding coverage. How does rental property fall into this? If credit is extended to acquire, improve, or maintain rental property that is or will be owner-occupied within the coming year, different rules apply: Is a loan secured by vacant land subject to the TRID rule?
Does the integrated disclosure rule apply to home equity loans? Our shop does only commercial and agricultural loans. Will these new regulations impact us? What if we did a rental loan on a family residence? Loan on farm ground that includes a residence? What about a loan where we take the borrower's residence as an AOC or as dependent collateral? Loan Estimate Disclosures Q: How often do you have to send the Settlement Service Providers List?
I know you need to send it with the initial LE, but do you send it with each subsequent LE change in circumstance as well? What do you do if you do not send the disclosure package including the LE within 3 business days. The CFPB defines a refinance as: In the past, if someone wanted to refinance a home they own free and clear, we processed this as a Cash-Out refinance with the purpose being to pay off other debt, make home improvements or to purchase other property.
Am I understanding correctly that the CFPB is saying we must process the refinance of a home owned free and clear as a home equity and not a cash-out refinance? To me, a Refinance and a Home Equity loan are two very different products with a home equity loan being much more limited in loan amount and term. A refinance is defined in another section of Reg Z as follows: Do we need to re-disclose if someone decides to get life insurance, and the payment goes up?
Can an Loan Estimate LE be given to the borrower before all of the time consuming application disclosures are given to the applicant?
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It would make sense to me that the LE is a borrower tool for shopping for a loan and requiring a lender to submit complete application disclosures which involve 80 pages would be cumbersome and confusing to the borrower who is merely shopping. I ask because this seems to be our understanding at present time. TheTRID rule defines an application as the submission of the following pieces of information: In regards to a new Loan Estimate LE with a new application - if a property falls through and the borrower selects a new property I would think this would be a case to issue a brand new LE to go along with that new application?
But could a COC also be acceptable in this case? In regards to a new LE with a new application - if a property falls through and the borrower selects a new property I would think this would be a case to issue a brand new LE to go along with that new application? On loans that are secured by rental property and land only, are we required to disclose the escrow information even though we are not escrowing?
Does the Your Home Loan Toolkit apply also to the construction only loans we have? They are not permanent loans. They are just interim construction only loans. Such transactions, include, but are not limited to, the following: Closed-end loans secured by a subordinate lien; and Reverse mortgages I saw where the Loan Estimate now replaces the right to receive an appraisal form. Do we need to have a form that the customer signs acknowledging? When disclosing fees to the consumer from the purchase agreement, shouldn't we be disclosing on the proper columns i.
I believe the Loan Estimate should reflect as close as possible cash to close from buyer. In the "Comparisons" box, it lists "loan costs" as part of the total that you will have paid in the first five years. If all loan costs are paid before closing and NOT financed, should they be still included in this figure and would that also affect the APR box? In disclosing the loan product, how does the TRID rule defined the phase seasonal payment? Would an annual payment be considered seasonal A: With respect to seasonal payments, the TRID rule states: Keep in mind that if a seasonable payment is part of the transaction, that feature would also need to be disclosed in the adjustable payment table under section ,37 i 4 which states: We offer a variety of closed-end fixed rate 1st TD loan products.
Since this fee is collected and retained by us, the lender, we have disclosed as an Origination Charge. Are we interpreting this correctly? The Forms Guide goes on to state: What if after the LE is delivered the consumer requests a new loan product, do we issue a revised LE or start over with a brand new Loan Estimate for that product? What happens if the closing is delayed maybe they did not sell their current home , and the rate expires.
We would re-lock the rate, which could also mean they would have to now pay points. Are the following statements about rounding, correct? All whole number percentages must be truncated at the decimal point e. The APR must be displayed to 3 decimals, unless it is a whole number e. Non-APR, non-whole-number decimals must be displayed to 3 decimals, unless the 3rd decimal is a 0 e. Non-APR, non-whole-number decimals must contain at least 2 decimals e. Correct, All 4 rounding statements are true. We understand that when we indicate on the Loan Estimate our intent not to sell servicing of the loan, we are reflecting only our current intent at time of closing.
We are not restricted from changing our intent later and selling the servicing. When a survey is required by the sales contract, but not by the creditor, how should this be disclosed on the Loan Estimate? How should state grants be disclosed on the Loan Estimate? Does a change in term count as a loan product change and therefore require a new disclosure? If there are fees for services that the bank did not require upfront but that the borrower opted for as part of the sales contract such as termite inspection and the bank required review of the documentation prior to approving the loan, is there a requirement to disclose the fee on the Loan Estimate?
That being said, the CFPB clarifies that a: Regarding appraisal fees, tax service fees, etc. Can we over-estimate the fee and then lower the amount? How is this affected by Tolerance limits? Does an owner of the property who is not a borrower need to sign the CD. They are on the deed, but not a borrower. According to the new TRID guidelines a corrective Closing Disclosure can be provided to the borrower within 30 days of closing.
What if it exceeds the 30 days? Can anything else be done to remedy the issue? Is the closing date the same as the disbursement date? Do adjustments and other credits include money that the consumer gets from the proceeds of subordinate financing, local or State housing assistance grants or other similar sources? What is the length of time to make a refund after closing?
Length of time to make correction? Are signatures required on the Closing Disclosure? How should state grants be disclosed on the Closing Disclosure? For an escrow state such as California, the term consummation means when the borrower signs the note. The note does not have a date field.
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Can we assume the date the note is signed will be used to determine if the 3-day waiting period expired? Is the requirement to provide the Closing Disclosure 3 days before consummation based on the funding date or the recording date i. On a refinance loan, we quoted title as a fee that the borrower could not shop for. They didn't understand and ordered their own title and set up closing.
We wanted to go ahead and allow them to use theirs. So it becomes a fee we didn't allow them to shop for that they shopped for. As long as we guarantee the fee that we quoted and don't charge any more even if it's more with the company they shopped at , will we be in compliance or is there a change needed in any forms that initially said they "could not shop" but then we allowed them to since they did or is it just the fee itself that is tied to the "could shop" or "could not shop"?
When we were preparing a Closing Disclosure, the Tax Stamps increased but they became a seller cost. Do we still need to cure the tolerance even though the seller is now paying them? Unfortunately, it appears the answer to your question is Yes. If you determine that the filing fees on the closing disclosure issued to the borrower prior to loan closing increase due to the addition of more pages to the deed of trust, does the lender have to credit the increase back to the borrower since a lower amount was originally disclosed? How should we disclose a settlement service where there is only one provider in our community — would that be a service that cannot be shopped for?
When the creditor identifies providers on the "Written List", is the list of providers specific by location or for example if company has multiple offices can you simply list the name of the provider and not specify the location? I really want to eliminate the extra work and training around the Written Provider List. For a zero tolerance item, if we charge less on the closing disclosure than what was disclosed on the Loan Estimate, do we still meet the good faith standard or are we somehow out of tolerance? On the Service Provider List we name our affiliate as the tax service provider.
Because we cannot require use of our affiliate, the Provider List advise the borrower that use of the affiliate is optional. If the borrower chooses not to use the affiliate, then we will require use of a non-affiliate tax service provider that we specify.
I am starting a refi with my original lender. The closing costs estimate show fees for lenders title insurance and endorsements. Why do they need this when I am using the same lender as my present mortgage? So you really do have to consider loan amount to determine if the origination fee is expensive or not. You can always see what else is out there. Thanks for the prompt reply. A fee of 2.
Have I read this wrong? I told them I was not willing to pay the appraisal fee upfront without any review beforehand to make sure I am eligible for loan. I received a response stating that they would pay the appraisal fee and I am still waiting to hear back from them because I want something a little more concrete in writing than a Loan Estimate. The broker told me that a new regulation for is that the borrower HAS to pay the appraisal fee upfront and have the appraisal before the underwriter reviews the loan.
Is loan origination fee refunded if deal falls apart, due to low appraisal or inspection issues etc.? I have 2 Lenders that I Place loans thru. Plus we can do Borrower Paid as well as Lender paid. This means more savings to the Buyers and Refinance customers. I can beat out the Best Banks in the US. I just took a Loan from Chase and the Buyer had 7 million dollars in that Bank. I still beat out their Rate and Fees to their Prime Borrower. Colin, I am divorcing and husband is keeping the house. Cma done at , He is going to refinance. His attorney said fees to refi were 13, How can these fees be so high?
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However according to him a 4. See if any credits can be used elsewhere to get use out of the money. I recently closed on my house this week. What does that mean? She told me that the lock on my rate had a discount point of. Does this mean I will be getting some money back?
Or maybe a rehab loan where repairs are included in the mortgage. Good day Colin Is it possible to take out a larger mortgage loan then the actual price of the property? For the above average credit score first time buyer. I have a closing in six days.
Powered by the lovely Wordpress platform. What Is a Mortgage? What Is the Loan-to-Value Ratio? How Does Refinancing Work? When to Refinance a Mortgage Vs. ARM Cash Out vs. Conventional Loan Home Prices vs. Mortgage Rates Pre-Qualification vs. Pre-Approval Mortgage Brokers vs. Banks Mortgage Rate vs.
What Are Loan Origination Fees? These are the fees paid to obtain a mortgage That represent the commission earned By the loan officer or mortgage broker In exchange for funding your loan The fees associated with the origination of a home loan are called, you guessed it, loan origination fees. Are They Just Junk Fees? Colin Robertson Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 12 years.
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Colin Robertson November 21, at Corri November 21, at 6: Colin Robertson June 13, at 6: Pete June 13, at Sandra Vizcarra June 6, at 4: Colin Robertson May 30, at 2: Scott May 29, at 1: Colin Robertson May 26, at 4: Aimee May 25, at 1: Colin Robertson May 20, at 7: Joni, Thanks for a nice comment! Joni May 19, at 7: Colin Robertson May 1, at Ken, You may want to check your paperwork, but it sounds like something they should refund because they screwed up. Ken schwenk April 26, at Colin Robertson March 18, at 2: Jim, Some lenders charge an outright origination fee while others might charge you itemized fees for application, processing, etc.
Jim March 18, at Im putting down k on an k home. I have FICO no long or short term debt. Should I be required to have escrow collected by my lender? Colin Robertson February 23, at John, What fees did you feel were high? John L February 22, at Hi Colin, I am purchasing a home in California. Thank you for your input. Colin Robertson December 13, at Shanta, On a small loan balance a higher percentage could actually equate to less in fees. Shanta December 12, at Colin Robertson December 9, at Danie, I doubt any lender would talk you out of using them. Danie December 8, at Ginger November 12, at Ruben November 1, at 9: Colin Robertson October 26, at 8: Kevin October 26, at 1: Colin Robertson October 4, at Ofelia October 3, at 6: Colin Robertson September 23, at 1: Nicole September 23, at Hi Colin, Currently doing a refinance and locked in at 3.
Colin Robertson August 28, at 8: Mark August 26, at 7: Colin Robertson August 15, at Jean August 10, at Colin Robertson July 28, at Cindy, Closing costs can be pretty high with prepaid items like taxes and insurance, along with what is needed to set up the escrow account. Cindy July 25, at Colin Robertson July 18, at 9: Jeff, I have an article dedicated to that very topic on the right sidebar menu of this page.
Colin Robertson July 18, at Chris July 15, at 3: Does this sound right? All other factors aside, the higher the DTI ratio, the less likely the borrower will be able to afford a monthly payment, hence the more risky it is for the lender. Pricing policy varies a great deal. While one probably can't influence the pricing policy of a given financial institution, one can:. Many of the customer identification and due diligence requirements of loan origination are common to new account opening of other financial products.
The next step is to have a Real Estate appraiser appraise the borrower's property that he wishes to have the loan against. This is done to prevent fraud of any kind by either the borrower or the mortgage broker. This prevents fraud like "equity stripping" and money embezzlement. The amount that the appraiser from either the borrower's side or the lender's side is the amount that the borrower can loan up to. This amount is divided by the debt that the borrower wants to pay off plus other disbursements i. This ratio determines the type of loan and risk the lender is put up against.
The lender also may put a limit to how much the LTV can be — for example, if the borrower's credit is bad, the lender may limit the LTV that the borrower can loan. However, if the borrower's credit is in Good condition, then the lender will most likely not put a restriction on the borrower's LTV.
The appraisal would take place on location of the borrower's property. The appraiser may take pictures of the house from many angles and will take notes on how the property looks. The is the standard appraisal form used by appraisers nationwide. Document Preparation or Doc Prep is the process of arranging and preparing the borrowers closing contracts.
These documents vary from industry to industry but generally contain a note, disclosures, and other documents describing and detailing the agreement between the borrower and lender. An underwriter is a person who evaluates the loan documentation and determines whether or not the loan complies with the guidelines of the particular mortgage program. It is the underwriter's responsibility to assess the risk of the loan and decide to approve or decline the loan. A processor is the one who gathers and submits the loan documents to the underwriter.
Underwriters take at least 48 hours to underwrite the loan and after the borrower signs the package it takes 24 hours for a processor to process the documents. Lending is a highly regulated business, at both the Federal and State levels. Some of the main regulations that apply to lending are listed here.