tila-respa integrated disclosures setting the stage – understanding changes, managing expectations...

TILA-RESPA Integrated Disclosures

Setti ng the Stage – Understanding Changes, Managing Expectati ons and Creati ng Opportuniti es

TILA/RESPA Integrated Disclosure Overview

Speakers

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• Overview• Pre-Application• Application• Timing• Waiting Periods• Business Days• Consummation

AGENDA

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OVERVIEW

EFFECTIVE DATE

August 1st

What Properties Does it Affect?

• All closed-end consumer mortgage loans except Reverse Mortgages

• Includes owner occupied, second-homes and investment properties

• Includes condos, townhomes rural

OLD INTO NEW

• The GFE and the Initial TIL now become the Loan Estimate.

• The HUD-1 and the Final TIL now become the Closing Disclosure.

Loan Estimate

GFE

Initial TIL

Closing Disclosure

HUD-1

Final TIL

August 1, 2015

DETAILS OF NEW FORMS

Closing Disclosure: Page 2 – Lists Real Estate Commission

PRE APPLICATION

PRE-APPLICATION

Prior to receiving the 6 specific items of information, lenders may provide consumers with written estimates, but any pre-

application written estimate must contain a disclaimer that it is not an official Loan Estimate.

APPLICATION

APPLICATION

• The Lender or Broker must provide the Loan Estimate within 3 business days of a loan application being submitted, even if this is not a formal written application.

• This means that even if you take an application online, on the phone, on a napkin or on Facebook you have to give the borrower the Loan Estimate within 3 days.

6 ITEMS THAT TRIGGER APPLICATION

A – Address

L – Loan Amount

I – Income

E – Estimated Value of the Property

N – Name

S – Social Security Number

TIMING

TIMING - APPLICATION

Form Trigger Days Who can complete Special Notes

Loan Estimate

Application 3 BrokerLenderCreditor/Wholesale Lender

Loan Estimate may be delivered In-personElectronically Must use secure electronic method (must follow all e-sign rules, including opt in).You CANNOT just email the disclosures to the borrower from your email account! This is NOT a change either! This is how it is done now.MailMust follow the 3 business day rules for mail just like we do now on the GFE.

TIMING – CHANGE OF CIRCUMSTANCEForm Trigger Days Who can complete Special NotesLoan Estimate

Change of Circumstance

3 LenderCreditor/Wholesale Lender

Must provide an updated Loan Estimate to the borrower by the end day 3 of becoming aware of the change. This means if you become aware of anything, loan amount change, program change, fee change, etc. you have to the end of the 3rd day to send the borrower an updated Loan Estimate. If a series of changed circumstances contributes to the need for increased fees, the due date of the revised disclosure is determined a little differently. In such case the last of the events increasing the disclosed and estimated fee over the 10% limit would be the triggering event for re-disclosure.

TIMING – RE-DISCLOSUREForm Trigger Days Who can complete Special NotesLoan Estimate

Initial Disclosure/Re-disclosure

7 days before consummation

Broker (Initial LE only)Lender (Initial LE and re-disclosureCreditor/Wholesale Lender (Initial LE and re-disclosure)

As with the initial disclosure, a revised Loan Estimate must be delivered or placed in the mail seven business days before closing is scheduled. The Loan Estimate may not be received by the borrower after or contemporaneously with the Closing Disclosure, which must be received three (3) business days prior to closing, a revised Loan Estimate must be received, or considered to have been received by the borrower no later than four (4) business days prior to closing. The revised estimate may be given in person or mailed. If mailed, the disclosure estimate will be considered received three (3) days after it is placed in the mail.

TIMING - CLOSING

Form Trigger Days Who can complete Special NotesClosing Disclosure

Closing 3 days prior to consummation

LenderCreditor/Wholesale Lender

Consummation is defined at the state level. This means you follow the laws in your state. The definition of consummation is the day in which the borrower becomes contractually obligated to the creditor, not the seller.

NEW 3 DAY WAITING PERIOD ON RE-DISCLOSURE OF CLOSING DISCLOSURE

There are three changes to disclosures that require a new waiting period if they become inaccurate before consummation. They are:

1. The annual percentage rate (APR) disclosed becomes inaccurate. If the lender makes changes to the APR greater than 1/8 of a percent for most loans and 1/4 of a percent for loans with irregular payments or periods, changes the loan product, or adds a prepayment penalty to the loan, the borrower must receive a new Closing Disclosure and an additional three business day waiting period after receipt of the new form.

2. The loan product changes. The loan product is considered to have changed if any of the “Product” information required to be disclosed changes—generally, any rate or payment feature (e.g., an adjustable rate, step rate, fixed rate, negative amortization, interest only, step payment, balloon payment or seasonal payment schedule).

3. A prepayment penalty is added that causes the required prepayment penalty statement to become inaccurate.

LOAN ESTIMATE

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Must be sent within 3 business days after the lender or broker receives the consumer’s application

3 Business Days 7 Business Days

Must be sent no later than 7 days before consummation

Consummation

A transaction is consummated when the consumer becomes contractually obligated to a creditor.

State Law

State law prevails so this means follow your state definition of consummation.

REVISED DISCLOSURES

3 business days of receiving information that would cause a

revision.

Something has Changed!

WAITINGPERIODS

7 DAY WAITING PERIOD

• Revised Loan Estimate Must Be Delivered Seven Business Days BEFORE Closing/Consummation

• 7 Business Days from the LAST Revised Loan Estimate

WAIVER OF WAITING PERIOD?

• Rare, rare, very, very RARE!• a bona fide personal financial emergency• Must waive this timing requirement in writing• A pre-printed form may not be used for this

purpose• Preventing the loss of the consumer’s home to

foreclosure would be an example of a bona fide personal financial emergency.

NEVER SHALL THE TWO MEET

3 Days Before Closing• The borrower must receive the Closing Disclosure 3

business days prior to closing or consummation.

7 Days Before Closing• A revised Loan Estimate must be received, or

considered to have been received by the borrower no later than 7 business days prior to closing. The revised estimate may be given in person or mailed. If mailed, the disclosure estimate will be considered received 3 days after it is placed in the mail.

EXAMPLE

7 Day Final Loan Estimate Timing

3 Day Closing Disclosure Timing In-person and Electronic

3 Day Closing Disclosure Timing Mailed

BUSINESS DAYS

DEFINITION OF BUSINESS DAY

Closing Disclosure• A “business day” for this and other purposes in the

regulations is all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year’s Day, the Birthday of Martin Luther King, Jr., Washington’s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.

CONSUMMATION

WHAT IS CONSUMMATION?

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• Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan.

• Depends on applicable state law. • For example, in California,

consummation occurs when the borrower signs the closing documents.

• Loan Estimate or revised Loan Estimate must be provided 7 days prior to signing and the Closing Disclosure must be provided 3 days prior to signing.

Wrap Up

• Effective Date Applications taken on and after August 1, 2015

• Applies to all closed-end mortgage loans except Reverse Mortgages

• Adds 3 days onto closings• If revisions to the Loan Estimate can add additional 7

days onto closings• Work with a professional Mortgage Advisor who is

experienced

Thank You

• (Contact Information)