What if no lender credits are decided until the loan closing, does a new Loan Estimate need to be provided to reflect this?

There are a number of items to address with such a question. Let’s take the issues one at a time:

1. The final Loan Estimate must be received by the consumer no later than four business days prior to consummation, and cannot be provided on or after the date the Closing Disclosure is received.

2. Lender Credits would have to be determined prior to the loan consummation, due to the fact that the Closing Disclosure, which must be received by the consumer a minimum of three business days prior to closing, must reflect the actual terms of the credit transaction. Therefore, applying a Lender Credit at the time of loan closing would not be recommended. Commentary 17(c)(1)-19 additionally states in part, “if the creditor is legally obligated to provide the premium or rebate to the consumer as part of the credit transaction, the disclosures should reflect its value in the manner and at the time the creditor is obligated to provide it.”

3. When an interest rate is locked between the consumer and the creditor, a revised Loan Estimate must be provided within three business days from the date of rate locking. If there are revisions to interest rate dependent charges (meaning: the revised interest rate, the points disclosed pursuant to §1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms), this must be reflected on the revised Loan Estimate. That being said, there is no prohibition on increasing or adding a Lender Credit upon delivery of the Closing Disclosure (rather than the Loan Estimate).

4. Increasing (or in this case adding) a Lender Credit is allowable under Regulation Z which states in part, “For example, if the creditor discloses a $750 estimate for ‘‘lender credits’’ pursuant to §1026.19(e), but only $500 of lender credits is actually provided to the consumer, the creditor has not complied with §1026.19(e)(3)(i) because the actual amount of lender credits provided is less than the estimated ‘‘lender credits’’ disclosed pursuant to §1026.19(e), and is therefore, an increased charge to the consumer for purposes of determining good faith under §1026.19(e)(3)(i). However, if the creditor discloses a $750 estimate for ‘‘lender credits’’ identified in §1026.37(g)(6)(ii) to cover the cost of a $750 appraisal fee, and the appraisal fee subsequently increases by $150, and the creditor increases the amount of the lender credit by $150 to pay for the increase, the credit is not being revised in a way that violates the requirements of §1026.19(e)(3)(i) because, although the credit increased from the amount disclosed, the amount paid by the consumer did not. However, if the creditor discloses a $750 estimate for ‘‘lender credits’’ to cover the cost of a $750 appraisal fee, but subsequently reduces the credit by $50 because the appraisal fee decreased by $50, then the requirements of §1026.19(e)(3)(i) have been violated because, although the amount of the appraisal fee decreased, the amount of the lender credit decreased.”

5. In disclosing Lender Credit’s in “good faith,” Regulation Z additionally states, “For purposes of conducting the good faith analysis required under §1026.19(e)(3)(i) for lender credits, the total amount of lender credits, whether specific or non-specific, actually provided to the consumer is compared to the amount of the ‘‘lender credits’’ identified in §1026.37(g)(6)(ii). The total amount of lender credits actually provided to the consumer is determined by aggregating the amount of the ‘‘lender credits’’ identified in §1026.38(h)(3) with the amounts paid by the creditor that are attributable to a specific loan cost or other cost, disclosed pursuant to §1026.38(f) and (g).”

6. If a Lender Credit is used to offset an excess limitation on a fees, Commentary ¶38(h)(3)-2 states that if a Lender Credit is used to offset fees in violation of stated limitations they, “are disclosed pursuant to §1026.38(h)(3), along with a statement that such amount was paid to offset an excess charge, with funds other than closing funds.” Additionally, Commentary ¶38(h)(3)-1 identifies that an excess amount and any credit to the consumer, “requires a statement that an increase in closing costs exceeds legal limits by the dollar amount of the excess and a statement directing the consumer to the disclosure of lender credits….”

Citation(s): Commentary ¶19(e)(3)(i)-5 & -6; Commentary ¶19(e)(3)(iv)(D); Commentary ¶19(f)(1)(i)-1; Commentary ¶38(e)(2)(iii)(A); Commentary ¶38(h)(3)-1 & -2
Disclaimer: The above information is intended for general information purposes with the goal of assisting Ellie Mae’s customers in complying with the new KBYO regulations. This information is provided as a courtesy to Ellie Mae’s customers and Ellie Mae makes no representation or warranty regarding the accuracy of the information set forth herein, and you may not rely on this information to ensure your company’s compliance with the KBYO regulations. This FAQ should not be construed as legal advice or opinion on any specific facts or circumstances, including the application of the KBYO regulations. You are advised to consult your own compliance staff or attorney regarding your specific residential mortgage lending questions or situation to ensure your compliance with all applicable laws and regulations.
lender credits revised Loan Estimate locked interest rate three day rule 3-day rule Closing Disclosure Regulation Z

CFPB announcement regarding the delay of TRID

The Consumer Financial Protection Bureau is delaying until October 3, 2015, the effective date of the TILA-RESPA Final Rule and the related TILA-RESPA Amendments. In light of certain procedural requirements under the Congressional Review Act (CRA), the TILA- RESPA Final Rule and the TILA-RESPA Amendments cannot take effect on August 1, 2015, as originally provided by those rules. To comply with the CRA and to help ensure the smooth implementation of the TILA-RESPA Final Rule, the Bureau is extending the effective date of both the TILA-RESPA Final Rule and the TILA-RESPA Amendments beyond the additional minimum period required by the CRA to October 3, 2015, as proposed. The Bureau is also making certain technical amendments to the Official Interpretations of Regulation Z to reflect the new effective date and technical corrections to two provisions of Regulation Z adopted by the TILA-RESPA Final Rule.

The full statement from CFPB Director Richard Cordray can be viewed here

Popular KBYO questions

When do the new disclosures become effective and for which transactions? Part 1: Rule Applicability What happens in October when your final forms are new but initials are old? Part 4: Loan Estimate – Timing & Consumer Receipt For electronic delivery of disclosures, after a borrower agrees to accept electronic delivery in compliance with the ESIGN Act must all disclosures be sent through an ESIGN compliant system, or can a lender email a scanned copy of a document through normal email? Can the borrower return the document by email as an attachment? Part 3: Loan Estimate – Miscellaneous Questions If an application is received prior to October 3, 2015 and a Good Faith Estimate was provided to a consumer should a HUD-1 Settlement Statement and Final TIL Disclosure Statement or a Closing Disclosure be provided to the consumer when the consummation date is on or after October 3, 2015? Part 1: Rule Applicability Do you define “exempt” to mean we are not “allowed” to use the new forms or not “required” to use them? Can we send the new forms on a HELOC for example in lieu of the old? Can we use the new disclosures on all transactions? Part 1: Rule Applicability Can you confirm coops are excluded from the new disclosures since they are not secured by real property? Part 1: Rule Applicability Are transactions with 25 acres and more exempt? Part 1: Rule Applicability When can we start the new disclosures? Part 1: Rule Applicability What if no lender credits are decided until the loan closing, does a new Loan Estimate need to be provided to reflect this? Part 9: Revised Loan Estimate – Revisions/Re-Disclosure (including Timing & Delivery) If loan amount changes, then can the lender credits change? Part 9: Revised Loan Estimate – Revisions/Re-Disclosure (including Timing & Delivery)