Replacing both the GFE and initial Truth in Lending Disclosure, the Loan Estimate summarizes contemplated loan terms, estimated loan and closing costs, and additional application disclosures. Although it may also be prepared by either a mortgage broker, the creditor is responsible for complying with all Loan Estimate requirements.
The requirement of providing a Loan Estimate is triggered by a "loan application submission" consisting of the consumer's name, income, Social Security number, property's address and estimated value, and the loan's amount. Prior to receiving these specific items, lenders may provide consumers with a pre-application written estimate containing a disclaimer that it is not an official Loan Estimate.
The Disclosure Rules require providing a Loan Estimate within three (3) business days of the application's submission and at least seven (7) business days before the loan's closing.
The Loan Estimate is three (3) pages long, the first of which contains information identifying the borrower and loan, loan terms, projected monthly payments, total estimated closing costs, and total estimated cash needed to close. The second page breaks down the closing costs including prepaid and escrowed amount information and cash needed to close. The third page summarizes five (5) years of loan costs (for comparison with other loan products) and required disclosures regarding the appraisal's delivery, whether the loan is "assumable", it's servicing may be transferred and homeowner's insurance is required, and late payment fee information.
Closing Disclosure
Replacing both the HUD-1 and final Truth in Lending Disclosure, the Closing Disclosure provides a summary of the actual loan terms, the loan costs, other settlement costs, and additional closing disclosures.
The Closing Disclosure must be provided to the consumer at least three (3) business days before the loan's closing. If "changes" occur between issuance and closing, an updated Closing Disclosure must be provided within another three (3) business days or at closing. "Changes requiring an updated Closing Disclosure" include APR changes of greater than .125% (or .25% for loans with irregular payments or periods), changes to the loan product, or the addition of a prepayment penalty.
The Closing Disclosure is five (5) pages long, the first of which mirrors the Loan Estimate's first page identifying the borrower and loan, the loan terms, the projected monthly payments, the total closing costs and total cash needed to close. The second page contains a closing costs itemization including whether each particular cost is paid by the borrower, seller, or a third party. The third page includes a calculation of the cash needed to close and a summary of the borrower's transaction and seller's transaction. The fourth and fifth pages contain additional loan disclosures (including whether loan is assumable, has demand or negative amortization features, escrow requirements, late payment information, and whether servicing may be transferred) and the creditor, brokers, and settlement agent's contact information.
The fifth page also includes a calculation of the total payments, finance charges, amount financed, and total interest percentage over the loan's terms.
Closing Costs Increase Restrictions
The Disclosure Rules limit the circumstances in which borrowers may be required to pay more for settlement services than the amount stated on the Loan Estimate.
Unless an exception applies, the following service charges for cannot increase: (1) creditor's or mortgage broker's services charges; (2) charges for services provided by creditor or mortgage broker's affiliate; and (3) charges for services for which the creditor or mortgage broker does not permit the consumer to shop for a provider.
Charges for other "creditor required services" may increase but not by more than 10% percent unless: (1) consumer asks for a change; (2) consumer chooses a service provider that was not identified by creditor; (3) information provided at application was inaccurate or becomes inaccurate; or (4) the Loan Estimate expires.
Recordkeeping
The Disclosure Rules require creditors to retain records evidencing compliance with Loan Estimate and Closing Disclosure requirements for three (3) years from the later of the closing or when the disclosure was required.
Consistent with existing RESPA requirements, a creditor must retain the Closing Disclosure and all related documents for five (5) years after closing.
No comments:
Post a Comment