- Business Rules
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
CFPB announcement regarding the delay of TRID
The full statement from CFPB Director Richard Cordray can be viewed here