Know Before You Owe (KBYO or TRID)

Yes. The revised disclosures may reflect increased charges only to the extent that the reason for revision, as identified in §1026.19(e)(3)(iv)(A) through (F), actually increased the particular charge. For example, if a consumer requests a rate lock extension, then the revised disclosures may reflect a new rate lock extension fee, but the fee may be no more than the rate lock extension fee charged by the creditor in its usual course of business, and other charges unrelated to the rate lock extension may not change.

Yes. APR tolerances are not changing under this rule.

If the creditor permits the consumer to shop for a settlement service, Regulation Z requires the creditor to provide a SSPL identifying at least one available provider of that service and stating that the consumer may choose a different provider for that service. The settlement service providers identified on the SSPL must correspond to the settlement services for which the consumer may shop. The creditor also may identify on the SSPL services for which the consumer is not permitted to shop, provided that the creditor clearly and conspicuously distinguishes those services from the services for which the consumer is permitted to shop. This may be accomplished by placing the services under different headings. For example, if the SSPL identifies providers of lender’s title insurance and surveys, but the consumer may select a provider other than those identified on the list for only the survey, then the list must specifically inform the consumer that the consumer is permitted to select a provider, other than a provider identified on the list, for only the survey. §1026.19(e)(3)(ii) provides that if the creditor requires a service and permits the consumer to shop for that service, but the consumer either does not select a settlement service provider or chooses a settlement service provider identified by the creditor on the list, then good faith is determined pursuant to §1026.19(e)(3)(ii) (10% Category), instead of § 1026.19(e)(3)(i) (0% Category). For example, if a creditor discloses an estimated fee for an unaffiliated settlement agent and permits the consumer to shop for that service, but the consumer either does not choose a provider or chooses a provider identified by the creditor on the SSPL, then the estimated settlement agent fee is included with the fees that may, in aggregate, increase by no more than 10%. If, however, the consumer chooses a provider that is not on the written list, then good faith is determined according to §1026.19(e)(3)(iii) (Fees that can change category).

Yes, there are some variance differences effective on 10/3/15 for applicable loans under the new rule. Here are the new variances:

Variance Categories

• Zero % Variance Category
  • Fees paid to creditor or mortgage broker
  • Fees paid to affiliate of creditor or mortgage broker
  • Fees paid for services for consumer not permitted to shop
  • Transfer Taxes
  • Lender Credits
• 10% Variance Category (Aggregate Variance)
  • Recording Fees
  • Fees paid for 3rd-party services consumer permitted to shop for
• Charges that Can Change
  • Prepaid interest
  • Property insurance premiums
  • Amounts placed into escrow
  • Fees paid to 3rd-party service providers selected by consumer not on list provided by creditor
  • Fees paid for 3rd-party services not required by creditor. These fees may be paid to affiliates

To conduct the good faith analysis required under §1026.19(e)(3)(i) and (ii), Regulation Z requires the creditor to use unrounded numbers to compare the actual charge paid by or imposed on the consumer for a settlement service with the estimated cost of the service. It is recommended that you develop a method for performing these calculations either by customizing a solution using your Loan Origination System (LOS) or in a manner separate from the LOS.

The creditor should provide a revised Loan Estimate within 3 business days of receiving information sufficient to establish that one of the reasons under §1026.19(e)(3)(iv)(A) through (C), (E) and (F) has occurred. For example:

Assume a creditor receives information on Monday that, because of a changed circumstance under §1026.19(e)(3)(iv)(A), the title fees will increase by an amount totaling 6% of the originally estimated settlement charges subject to §1026.19(e)(3)(ii).

The creditor had received information three weeks before that, because of a changed circumstance under §1026.19(e)(3)(iv)(A), the pest inspection fees increased by an amount totaling 5% of the originally estimated settlement charges subject to §1026.19(e)(3)(ii). Thus, on Monday, the creditor has received sufficient information to establish a valid reason for revision and must provide revised disclosures reflecting the 11% increase by Thursday to comply with §1026.19(e)(4)(i).

Tolerances/variances are slightly different under the TILA/RESPA Integrated Mortgage Disclosure Rule. There are additional amounts applied to the “zero” variance category.

Variance Categories

• Zero % Variance Category
  • Fees paid to creditor or mortgage broker
  • Fees paid to affiliate of creditor or mortgage broker
  • Fees paid for services for consumer not permitted to shop
  • Transfer Taxes
  • Lender Credits
• 10% Variance Category (Aggregate Variance)
  • Recording Fees
  • Fees paid for 3rd-party services consumer permitted to shop for
• Charges that Can Change
  • Prepaid interest
  • Property insurance premiums
  • Amounts placed into escrow
  • Fees paid to 3rd-party service providers selected by consumer not on list provided by creditor
  • Fees paid for 3rd-party services not required by creditor. These fees may be paid to affiliates.

Inaccurate APR is defined under Regulation Z (§1026.18 & §1026.22) and depends on whether the loan is a “regular” (.125%) or "irregular" (.25%) transaction.

No, we have no information on the potential of such an event at this time.

The new disclosure rule did not change any APR calculations.

See variance categories in the following question.

Fees can decrease for all categories except for Lender Credits. Lender Credits can change only under specific circumstances.

The actual total amount of lender credits, whether specific or non-specific, provided by the creditor that is less than the estimated “lender credits” is an increased charge to the consumer for purposes of determining good faith. Comment 19(e)(3)(i)–5 provides illustrations of these requirements as well as §1026.19(e)(3)(iv)(D) and comment 19(e)(3)(iv)(D)–1. With respect to whether a changed circumstance or borrower-requested change can apply to the revision of lender credits, the Bureau stated in the Section-by-Section Analysis of the Final Rule that “a changed circumstance or borrower-requested change can decrease such credits, provided that all of the requirements of § 1026.19(e)(3)(iv) are satisfied.” Without a valid changed circumstance, the Bureau declined to provide a specific exemption that would allow the amount of lender credits to decrease so that the creditor would be able to stay within guidelines under streamlined refinancing programs that limit the amount of cash that the creditor could pay the consumer at closing. The CFPB stated in the Section-by-Section Analysis of the Final Rule that “lenders are not permitted to reduce the lender credits they provide to the borrower under current Regulation X. See HUD RESPA FAQs p. 27, # 4 (“GFE-Block 2”). Under current Regulation X, the loan originator may only apply the amount of the excess lender credits to additional closing costs previously not anticipated to be included in the loan, apply the excess to a principal reduction to the outstanding balance of the loan, pay the consumer the excess in cash, or reduce the interest rate and the credit accordingly. Creditors will be able to take the same actions with respect to lender credits in streamlined refinancing programs under this final rule.”

We recommend you discuss this issue with your in-house compliance experts or outside legal counsel.

It would require a valid reason for denial. 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:

1. Changed circumstance affecting settlement charges. Changed circumstances cause the estimated charges to increase or, in the case of estimated charges identified in paragraph (e)(3)(ii) of this section, cause the aggregate amount of such charges to increase by more than 10%. For purposes of this paragraph, “changed circumstance” means:
   1. An extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction;
   2. Information specific to the consumer or transaction that the creditor relied upon when providing the disclosures required under paragraph (e)(1)(i) of this section and that was inaccurate or changed after the disclosures were provided; or
   3. New information specific to the consumer or transaction that the creditor did not rely on when providing the original disclosures required under paragraph (e)(1)(i) of this section.
2. Changed circumstance affecting eligibility. The consumer is ineligible for an estimated charge previously disclosed because a changed circumstance, as defined under paragraph (e)(3)(iv)(A) of this section, affected the consumer's creditworthiness or the value of the security for the loan.
3. Revisions requested by the consumer. The consumer requests revisions to the credit terms or the settlement that cause an estimated charge to increase.
4. Interest rate dependent charges. The points or lender credits change because the interest rate was not locked when the disclosures required under paragraph (e)(1)(i) of this section were provided. On the date the interest rate is locked, the creditor shall provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section to the consumer with the revised interest rate, the points disclosed pursuant to §1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms.
5. Expiration. The consumer indicates an intent to proceed with the transaction more than ten business days after the disclosures required under paragraph (e)(1)(i) of this section are provided pursuant to paragraph (e)(1)(iii) of this section.
6. Delayed settlement date on a construction loan. In transactions involving new construction, where the creditor reasonably expects that settlement will occur more than 60 days after the disclosures required under paragraph (e)(1)(i) of this section are provided pursuant to paragraph (e)(1)(iii) of this section, the creditor may provide revised disclosures to the consumer if the original disclosures required under paragraph (e)(1)(i) of this section state clearly and conspicuously that at any time prior to 60 days before consummation, the creditor may issue revised disclosures. If no such statement is provided, the creditor may not issue revised disclosures, except as otherwise provided in paragraph (f) of this section.

Yes, if the APR falls within the definition of an “inaccurate” APR for a mortgage loan. Regulation Z states:

“As a general rule, the annual percentage rate shall be considered accurate if it is not more than 1/8 of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.

In an irregular transaction, the annual percentage rate shall be considered accurate if it is not more than ¼ of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.

For purposes of paragraph (a)(3) of this section, an irregular transaction is one that includes one or more of the following features: multiple advances, irregular payment periods, or irregular payment amounts (other than an irregular first period or an irregular first or final payment).

Mortgage loans. If the annual percentage rate disclosed in a transaction secured by real property or a dwelling varies from the actual rate determined in accordance with paragraph (a)(1) of this section, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, the disclosed annual percentage rate shall also be considered accurate if:

The rate results from the disclosed finance charge; and the disclosed finance charge would be considered accurate under §1026.18(d)(1) or §1026.38(o)(2), as applicable; or for purposes of rescission, if the disclosed finance charge would be considered accurate under §1026.23(g) or (h), whichever applies.”

If the APR becomes "inaccurate" under section §1026.22 of Regulation Z (“regular” (.125%) or "irregular" (.25%) transaction), then the three business day waiting period applies.

When a consumer chooses to use a service provider on the list of “services the consumer can shop for” provided by the creditor, the service provider becomes one in which the consumer did not shop. In this case, the fee is under the category of a 10% variance for purposes of the Closing Disclosure. Therefore, you should have documentation to identify this shift in category for analysis regarding variance violations in preparing the Closing Disclosure. Also, see the previous question regarding service providers that are selected by the consumer from the list of services in which the consumer cannot shop for as well (falling into the zero variance category). In addition, if a service provider is an affiliate of the creditor it would then fall into the zero tolerance category, rather than the 10% category.

Yes. Refund of fees paid in excess of actual amount may be shown on the closing disclosure as lender credit. In addition, a statement regarding the differences with a reference to the variation compared to the Loan Estimate must be prominently displayed identifying the section in which the consumer can identify this difference.

If amounts paid by the consumer exceed the amounts specified in the loan estimate, the creditor complies with the good faith estimate requirements if the creditor refunds the excess to the consumer no later than 60 days after consummation, and the creditor complies with the closing disclosure requirements if the creditor delivers or places in the mail corrected disclosures that reflect such refund no later than 60 days after consummation.

Regulatory citations regarding the curing of violations under the rule are found under §1026.19(f)(2)(iii), (iv) & (v).

Changes due to events occurring after consummation. If during the 30-day period following consummation an event in connection with the settlement of the transaction occurs that causes the disclosures required under paragraph (f)(1)(i) of this section to become inaccurate, and such inaccuracy results in a change to an amount actually paid by the consumer from that amount disclosed under paragraph (f)(1)(i) of this section, then the creditor shall deliver or place in the mail corrected disclosures not later than 30 days after receiving information sufficient to establish that such event has occurred.

Changes due to clerical errors. A creditor does not violate paragraph (f)(1)(i) of this section if the disclosures provided under paragraph (f)(1)(i) contain non-numeric clerical errors, provided the creditor delivers or places in the mail corrected disclosures no later than 60 days after consummation.

Refunds related to the good faith analysis. If amounts paid by the consumer exceed the amounts specified under paragraph (e)(3)(i) or (ii) of this section, the creditor complies with paragraph (e)(1)(i) of this section if the creditor refunds the excess to the consumer no later than 60 days after consummation, and the creditor complies with paragraph (f)(1)(i) of this section if the creditor delivers or places in the mail corrected disclosures that reflect such refund no later than 60 days after consummation.

The answer depends on whether the consumer is permitted to shop for, or cannot shop for the specific service. The creditor may identify on the written list providers of services for which the consumer is not permitted to shop, provided that the creditor clearly and conspicuously distinguishes those services from the services for which the consumer is permitted to shop. This may be accomplished by placing the services under different headings. For example, if the SSPL identifies providers of pest inspections and surveys but the consumer may select a provider other than those identified on the list for only the survey, then the list must specifically inform the consumer that the consumer is permitted to select a provider other than a provider identified on the list for only the survey. In this example, the pest inspection fee would fall under the “zero” variance bucket, and the survey fee would be in the “10% variance bucket” if the provider selected is on the list. If the provider of the survey fee is not on the list, it would move to the “Can Change variance bucket”.

Yes. §1026.37(f)(2) requires an itemization of each amount, and a subtotal of all such amounts, the consumer will pay for settlement services for which the consumer cannot shop in accordance with §1026.19(e)(1)(vi)(A) and that are provided by persons other than the creditor or mortgage broker.

See response to previous question regarding when the APR becomes inaccurate. You should additionally seek legal counsel or your compliance expert’s policy guidance regarding this scenario.