preparing for closing & final...

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Preparing for Closing & Final Disclosures

Final DisclosuresClosing DisclosureInitial Escrow Account Statement (if applicable)PMI Notice of Borrower Rights (if applicable)HOEPA High Cost Loan Disclosure (if applicable)

Homeownership Counseling Certification (if applicable)Right of Rescission (if applicable)Post-ConsummationEscrow Cancellation NoticePartial Payment Notice from new Servicer

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CLOSING DISCLOSURE – H-25Creditor is required to ensure the Consumer receives the CD no later than 3 business days before the Consummation of the loan

Consummation may not occur until on or after the 7th business day following the LE being delivered or placed in the mail

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Business Day Definition3 Business Days prior to Closing

A business day is all calendar days except Sundays and the legal public holidays specified in 5 USC 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.


Actual Deliveryvs


Assumed DeliveryPage 2

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When the CD is not provided in person, the consumer is

assumed to have received it 3 business days after it is

delivered or mailedA business day is all calendar days except Sundays and legal public holidays


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E-Sign Compliant EmailFrom the Commentary to the Rule (emphasis)

Page(s) 16912. Electronic delivery. The three-business-day period provided in § 1026.19(e)(1)(iv) applies to methods ofelectronic delivery, such as email. For example, if a creditor sends the disclosures required under § 1026.19(e) via email on Monday, pursuant to § 1026.19(e)(1)(iv) the consumer is considered to have received the disclosures on Thursday, three business days later. The creditor may, alternatively, rely on evidence that the consumer received the emailed disclosures earlier. For example, if the creditor emails the disclosures at 1 p.m. on Tuesday, the consumer emails the creditor with an acknowledgement of receipt of the disclosures at 5 p.m. on the same day, the creditor could demonstrate that the disclosures were received on the same day. Creditors using electronic delivery methods, such as email, must also comply with § 1026.37(o)(3)(iii), which provides that the disclosures in § 1026.37 may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. For example, if a creditor delivers the disclosures required under § 1026.19(e)(1)(i) to a consumer via email, but the creditor did not obtain the consumer’s consent to receive disclosures via email prior to delivering the disclosures, then the creditor does not comply with § 1026.37(o)(3)(iii), and the creditor does not comply with § 1026.19(e)(1)(i), assuming the disclosures were not provided in a different manner in accordance with the timing requirements of § 1026.19(e)(1)(iii).

Link: http://files.consumerfinance.gov/f/201311_cfpb_final-rule_integrated-mortgage-disclosures.pdf


E-Disclosures

The E-Disclosure process must comply with all requirements of the E-Sign Act, including demonstration of access, consent, receipt, and acceptance

As a “best practice” all of which should be logged with a time and date stamp for each event


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Waiving 3 Day Waiting Period


- Extension of credit is needed to meet a bona fide personal financial emergency- Consumer has received Closing Disclosure- Consumer gives dated written statement describing the emergency with signatures of all consumers primarily liable- Creditor may not provide preprinted form

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Creditor is Responsible for the Closing Disclosure

Creditor may contract with settlement agents to have the settlement agent provide the Closing Disclosure to consumer’s on the Creditor’s behalf


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After Closing Disclosure is ProvidedIf the actual terms or costs change prior to consummation, Creditor must provide a corrected Closing Disclosure, but not necessarily require an additional 3 business day waiting period


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New 3 Business Day Waiting PeriodPrior to consummation, an additional 3 business day waiting period applies when there are changes to the Closing Disclosure resulting in:- A change in the APR making it inaccurate- Addition of a Prepayment Penalty- Changes to the Loan Product


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1026.22 Determination of APRRegular Transactions(a)(2) As a general rule, the APR shall be considered

accurate if it is not more than 1/8 of 1 percentage point above or below the APR determined in accordance with paragraph (a)(1).

Irregular Transactions(a)(3) In an irregular transaction, the APR shall be

considered accurate if it is not more than ¼ of 1 percentage point above or below the APR determined in accordance with paragraph (a)(1).

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(a)(4) 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 (a)(3) of this section, the disclosed annual percentage rate shall be considered accurate if:(i) the rate results from the disclosed finance charge; and(ii) the disclosed finance charge would be considered accurate under 1026.18(d)(1) or 1026.38(o)(2)


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1026.18 Content of Disclosures(d) Finance charge. The finance charge, using that term, and a

brief description such as “the dollar amount the credit will cost you.”

(1) Mortgage loans. In a transaction secured by real property or a dwelling, the disclosed finance charge and other disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge:

(i) Is understated by no more than $100; or

(ii) Is greater than the amount required to be disclosed.

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1026.38 Content of disclosures for certain mortgage transactions (Closing Disclosure)(o) Loan calculations. In a separate table under the heading “Loan Calculations”:

* * * * * (2) Finance charge. The “Finance Charge,” using that term and expressed as a dollar amount, and the following statement: “The dollar amount the loan will cost you.” The disclosed finance charge and other disclosures affected by the disclosed financed charge (including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge:

(i) Is understated by no more than $100; or

(ii) Is greater than the amount required to be disclosed.


No New 3 Day Waiting PeriodOther Changes before consummation provide the updated revised Closing Disclosure to the Consumer at or before consummation

Consumer has the right to inspect the revised Closing Disclosure at least one business day prior to Consummation


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ConsummationOccurs when consumer becomes

contractually obligated to the creditor on a loan, not for example,

when a consumer becomes contractually obligated to a seller

on a real estate transaction


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Rescindable TransactionsClosing Disclosure must be provided separately to each person having the right to rescind

In addition, at consummation each person having the right to rescind will each receive 2 copies of the right of rescission


When can the Right to Rescindby Exercised?

The right can be exercised until midnight of the third business day following:

ConsummationDelivery of Right to Rescind Notice

Delivery of the Closing Disclosure

Whichever occurs last


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Transactions involving a SellerSettlement Agent must provide H-25(I) Closing Disclosure to the Seller no later than the day of consummation

Settlement Agent may also provide Seller with a separate disclosure that only includes the Sellers information but the Creditor must receive a copy of this separate disclosure


ClosingDisclosure

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Closing Information, Transaction Information, Loan Information

Loan TermsProjected PaymentsCosts at Closing

Closing Information


Date Issued is the date the CD is deliveredClosing DateDisbursement DateSettlement AgentFile #, the settlement agent’s file number Property address or locationFor the property securing the loan: Sale Price,

Appraised Prop. Value, or Estimated Prop. ValueThe Appraised Prop. Value of the property securing the loan is disclosed for transactions without a seller. The Estimated Prop. Value of the property securing the loan is disclosed if the creditor has not obtained an appraisal for transactions without a seller.

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Common Errors

Incorrect completion or the omission of the issue date of the CD, the settlement agent name, File #, the seller’s address for a purchase transaction, and MIC#


Incorrect CD issue date, could lead to the appearance that the initial CD was

not provided to the consumer with sufficient time prior to consummation.

If a revised CD is issued after the initial CD, the issue date of the

revised CD must be updated to reflect the date it was actually issued.

Estimated Taxes, Insurance& Assessments

The HOA dues estimate should be identified on the initial application and be included as “Other” in this section of the Loan Estimate - If more than one item is being included under “Other,” identify

one item in the description, followed by the phrase “and additional charges”


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ESTIMATED TAXES, INSURANCE & ASSESSMENTSDisclose the total monthly amount due for Property Taxes, Homeowner’s Insurance, charges imposed by a coop, condo or HOA; ground rent; leasehold payments; and certain insurance premiums or charges if required by the lender. Disclose Estimated Taxes, Insurance & Assessments as a rounded number.

Include these amounts as Estimated Taxes, Insurance & Assessments even if an escrow account will not be established under the terms of the legal obligation.

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The “In escrow?” section must always be completed as YES, NO, or SOME for each checked item depending on the escrow disposition of the particular item

Make sure this is updated!Page 8

ClosingDisclosure

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Closing Cost Details

Loan CostsOther Costs

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0%

0% OR 10%If provider on written

list is used

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Non-creditor required items, such as a Home Inspection fee, should not appear in Section C

These items should be included in Section H - Other


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Both lines hard-coded.No additional lines

Other: Max 5

All costs less lender credits(Blanket credit)

Prepaid Interest with pennies4 lines hard-coded.Max 3 additional lines

Show pennies3 lines hard-coded.Max 5 additional linesNow Use aggregate adjustment.

10%0%

0%

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E. Taxes & Other Government Fees


An itemization of Transfer Taxes paid by the consumer and the seller is disclosed under the heading Taxes and Other Government Fees, instead of the sum total of Transfer Taxes to be paid by the consumer.

Recording fees must all be shown as a bundled charge on Line 01; however, only the recording fees for the deed, if any, and mortgage must be shown itemized in the description.

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Items to be paid by the consumer in advance of the first scheduled payment of the loan. Prepaids are:

Homeowner’s Insurance Premium, Mortgage Insurance Premium,Prepaid Interest,Property Taxes, and (max of 3 additional items)

Omitting the time period covered by the amount collected is a common error.

F. Prepaids

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G. Initial Escrow Payment at Closing


Property Taxes paid during different time periods can be disclosed as separate items. For example, general property taxes assessed for January 1 to December 31 and property taxes to fund schools for November 1 to October 31 can be disclosed as separate items. The last item disclosed in the Initial Escrow Payment at Closing is the Aggregate Adjustment. The Aggregate Adjustment is calculated under Regulation X.

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H. Other


Items are disclosed as Other to reflect costs incurred by the consumer or seller that were not required to be disclosed on the Loan Estimate. These costs include:

Real estate brokerage fees,HOA or Condo fees paid at consummation,Home warranties,Inspection fees, andOther fees paid at closing that are not required by the creditor or otherwise required to be disclosed elsewhere on the CD.

The amount of an earnest money deposit does not affect the amount of real estate commissions paid by the consumer or seller on the Closing Disclosure, even if the earnest money deposit is held by the real estate brokerage. Page 9

Closing Disclosure

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CalculatingCash to Close

Summaries of Transactions

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Common ErrorsPage 3 of the CD includes the Calculating Cash to Close

table, common completion errors, include:

• The Loan Estimate column not reflecting the figures as disclosed on the last issued Loan Estimate

•Missing explanations in the “Did this change?” column when a change did occur, as indicated by the word YES

•Not identifying where a change resulted in a tolerance cure shown as a Section J. Total Closing Costs lender credit

•Using the wrong format for calculating cash to close so that it is inconsistent with the format used for the Calculating Cash to Close table in the Loan Estimate


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For Transactions without a Seller, a Payoffs and Payments Table may be substituted for the Summaries of Transactions table and placed before the Alternative Calculating Cash to Close table

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Closing Disclosure

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Additional Information About this Loan

Loan Disclosures, Escrow Account,AP and AIR Tables (when applicable)

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Escrow AccountWhen an escrow account will not be

established, the questions in the Escrow Account section concerning the reasons for not having an escrow

account are commonly left blank


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Closing Disclosure

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Loan Calculations, Other Disclosures, Contact Information, Confirm Receipt

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Separation ofConsumer & Seller Information

H-25(I) Seller Closing Disclosure

Settlement Agent must provide Closing Disclosure to the Seller no later than the day of consummation

Settlement Agent may also provide Seller with a separate disclosure that only includes the Sellers information but the Creditor must receive a copy of this separate disclosure


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Pg - 807

Initial Escrow Account Statement

(if applicable)


Disclosure must be provided at settlement or within 45 calendar days of settlement for escrow accounts that are established as a condition of the loan

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Appendix G-1 Published at 60 FR 24734 May 9, 1995

Initial Escrow Account Disclosure Statement - Format[Servicer's name, address, and toll-free number]

INITIAL ESCROW ACCOUNT DISCLOSURE STATEMENTThis is an estimate of activity in your Escrow Account during the coming year based on payments anticipated to be made from your account.

Month Payments to Payments from Description Escrow AccountEscrow Acct. Escrow Acct. Balance

Initial Deposit.................................................................................................................……........$

[A filled-out format follows]

(PLEASE KEEP THIS STATEMENT FOR COMPARISON WITH THE ACTUAL ACTIVITY IN YOUR ACCOUNT AT THE END OF THE ESCROW ACCOUNTING COMPUTATION YEAR.)

Cushion Selected by Servicer: $[Your monthly mortgage payment for the coming year will be $ of which $ will be for principal and interest and $

will go into your escrow account, and$ will be for discretionary items (such as life insurance, disability insurance) that you chose to be included with your monthly payment.]

[Your first monthly mortgage payment for the coming year will be $ of which$ will be for principal and interest, $ will go into your escrow account, and $ will be for discretionary items (such as life insurance, disability insurance) that you chose to be included with your monthly payment. The terms of your loan may result in changes to the monthly principal and interest payments during the year.]

[INSTRUCTIONS TO PREPARER: The servicer is to use the appropriate option above describing the principal and interest payments for the coming year. The reference to payments for discretionary items should be omitted if there are no such payments included with the monthly payment. This instruction paragraph should not appear on the form.]

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PMI Notice of Borrower Rights(if applicable)

Required at loan closing for transactions for purchase or refinance of primary residence –which require Mortgage Insurance


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The Homeowner’s Protection Act of 1998 was signed in to law by the

President on July 29, 1998 and the requirements of this law are

mandatory as of July 29, 1999. It requires full disclosures to

consumers concerning cancellation and/or termination of private

mortgage insurance.


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Homeownership Counseling List &

Notice of Information


Effective January 10, 2014

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Pre-loan Closing – HOEPAHomeownership Counseling

Certification is RequiredCreditors shall not extend high cost mortgage

to a consumer unless creditor receives written certification that consumer received

HUD-Approved counseling after being provided up-front disclosures by creditor


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All RESPA TransactionsMust be provided a list of Counseling(list must be obtained no earlier than 30 days prior)

No later than 3 business days after the lender receives an application, unless the lender denies the application before the

end of the 3 day periodReverse Mortgages & Timeshares are Exempt


All Open-End HELOC’s (1026.40)Must be provided a list of Counseling(list must be obtained no earlier than 30 days prior)

No later than 3 business days after the lender receives an application, unless the lender denies the application before the

end of the 3 day period


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HOEPA “High Cost Mortgage Disclosure (if applicable)Timing: Not later than 3 business days prior to

consummation


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Notice 3 Business Days Prior to Closing Annual Percentage Rate Amount of Borrower’s Monthly Payments Max Payment Increase if Interest Rates can Rise “Statements to Borrower” – They could lose their

home and any money they have put into it shouldthey be unable to repay the obligation

SECTION 1026.32HIGH COST MORTGAGE LOANS


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Rescindable TransactionsClosing Disclosure must be provided separately to each person having the right to rescind

In addition, at consummation each person having the right to rescind will each receive 2 copies of the right of rescission


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When can the Right to Rescindby Exercised?

The right can be exercised until midnight of the third business day following:

Consummation Delivery of the Right to Rescind Notice Delivery of the Material TILA/RESPA

Closing Disclosure

Whichever occurs lastCopyright © FIC Conferences, Inc. www.ficconferences.com

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Note or Promissory NoteThe Note is the legal document the borrower(s)

sign to agree to repay the loan. The Note will provide the details regarding the loan, including the amount owed, the interest rate, the dates when payments are to be made, the length of time for repayment, and the place where payments are to be sent. The Note also explains the consequences of failing to make required payments.


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Mortgage/Security InstrumentThis document may be called the Mortgage, Security

Instrument, or Deed of Trust. When a borrower(s) signs this document, he/she is giving the lender the right to take their property by foreclosure if the borrower(s) fails to pay the mortgage/security instrument according to the terms agreed upon. The document restates the basic information contained in the Promissory Note, as well as explaining the responsibilities and rights as a borrower. The mortgagee refers to the lender or the “recipient of the mortgage/security instrument.” The mortgagor refers to the borrower(s).


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Post-Consummation DisclosuresEscrow Cancellation Notice

Notice must be provided no later than 3 business days before the escrow account is canceled

Partial Payment NoticeIf the Creditor is required to provide a Mortgage Servicing Transfer Notice under Regulation Z, the notice must also include information related to the partial payment policy that will apply to the mortgage loan


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Page 4 of the Closing Disclosure illustrates the Partial Payment Disclosure that should also be included in the Mortgage Transfer Disclosure

Page 4 of the Closing Disclosure illustrates the Partial Payment Disclosure that should also be included in the Mortgage Transfer Disclosure.

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QUIZOnce you have completed the Quiz for this “Boot Camp 360” Webcast Training, that is included in the workbook, the Answer Key along with your Certificate of Completion have also been provided for you records.If you have questions or need assistance please email [email protected]

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