The New Loan Estimate & Closing Disclosure Explained a · • The new form is 3 pages long • New...
Transcript of The New Loan Estimate & Closing Disclosure Explained a · • The new form is 3 pages long • New...
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© 2015 Fidelity National Title Group
a
Know before you close.
The New Loan Estimate &Closing Disclosure ExplainedA look at the different sections of each new form and explanations of each page.
Barry S. WolfinsohnRegional Counsel, Vice [email protected]
http://cfpb.fntic.com/
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© 2015 Fidelity National Title Group
Know before you close.
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• The new form is 3 pages long
• New form replaces the GFE and Early TILA
• The creditor is not allowed to revise and re-disclose if charges go up or down prior to the closing
• Creditor errors are not legitimate reasons for revising Loan Estimates
Loan Estimate| At-a-Glance
© 2015 Fidelity National Title Group
Know before you close.
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Five Things You Need to Know Before August 2015
• Basic Information
• Loan Terms
• Projected Payments
• Costs at Closing
Loan Estimate | pg.1
© 2015 Fidelity National Title Group11
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Basic Transaction Information
Basic Loan Terms
© 2015 Fidelity National Title Group
The Loan Estimate
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Information about the New Monthly Mortgage Payment
Estimates amount borrower will need at closing
The Loan Estimate
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Five Things You Need to Know Before August 2015
• Loan Costs
• Other Costs
• Calculating Cash to Close
Loan Estimate | pg.2
© 2015 Fidelity National Title Group14
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© 2015 Fidelity National Title Group
Alphabetical Order- Cost descriptions in each section must be listed in alphabetical order
Title Insurance and Settlement Charges- The description of each fee related to title insurance or settlement (escrow) must be preceded by “Title –”
Lender’s Title Insurance –Purchase Transactions- Must show the full Loan Policy Rate, NOT the simultaneous issue rate often charged when an Owner’s policy is also issued
The Loan Estimate
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© 2015 Fidelity National Title Group
Owner’s Title Insurance Rules- If to be paid by borrower, must show “(optional)”
in description
- Actual Charge not shown - for simultaneous issue, owner’s rate = Owner’s Rate + Simultaneous Issue Loan rate – Full Loan rate
The Loan Estimate
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Five Things You Need to Know Before August 2015
• Comparisons
• Other Considerations
• Confirm Receipt
Loan Estimate | pg.3
© 2015 Fidelity National Title Group 17
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Various specific Loan calculations, including APR, required under TILA, RESPA or Dodd-Frank
The Loan Estimate
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The Loan Estimate
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• Lender must deliver within three business days of the lender’s receipt of an “application”
• Application – automatically occurs when lender receives six pieces of information:
• Borrower(s) Name(s)• Income• Social Security Number(s)• Property Address• Estimated Value of Property• Mortgage Loan Amount
Receiving the Loan Estimate
© 2015 Fidelity National Title Group
The Loan Estimate
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• Except for credit report, no fees chargeable until after Loan Estimate is provided
• Lender must attach separate Provider List similar to that currently used with the GFE
• Must include all services which the borrower may need for the transaction (not just items for loan)
Receiving the Loan Estimate
© 2015 Fidelity National Title Group
The Loan Estimate
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The Loan Estimate
The Provider List
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Know before you close.
• The new form is 5 pages long
• New form replaces the TILA and HUD-1
• One closing disclosure is required for each loan
• Charge descriptions on both the loan estimate and closing disclosure must match
• HUD-1 line numbers are no longer used !
Closing Disclosure | At-a-Glance
© 2015 Fidelity National Title Group 23
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Know before you close.
• No roll-up of charges in any section – itemization required for all charges
• No disclosure of title agent / underwriter split
• No side-by-side itemized comparison of estimated charges to actual
• Loan charges can be charged directly to seller if seller agreed to pay per contract
• FHA/VA non-allowable charges can be charged directly to the seller
Closing Disclosure | At-a-Glance
© 2015 Fidelity National Title Group 24
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Five Things You Need to Know Before August 2015
• Basic Information
• Loan Terms
• Projected Payments
• Costs at Closing
© 2015 Fidelity National Title Group
Closing Disclosure| pg.1
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Basic Transaction InformationClosing Disclosure| pg.1
Close Disclosure
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Close Disclosure
Description of Basic Loan Terms
Closing Disclosure| pg.1
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Information about the New Monthly Mortgage Payment
Amount includes monthly obligations on property even if not included in impound amount
Closing Disclosure| pg.1
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Closing Disclosure| pg.1
Cash to Close – shows the buyer/borrower the amount necessary for closing
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Five Things You Need to Know Before August 2015
• Loan Costs
• Other Costs
© 2015 Fidelity National Title Group
Closing Disclosure| pg.2
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Alphabetical Order
“Title –” designation on all Title and Settlement Fees
Lender’s Title Rule
Cost DescriptionsMust be substantially similar to description on Loan Estimate
Closing Disclosure| pg.2
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© 2015 Fidelity National Title Group
Owner’s Title Rule
Closing Disclosure| pg.2
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Five Things You Need to Know Before August 2015
• Calculating Cash to Close
• Summaries of Transactions
© 2015 Fidelity National Title Group
Closing Disclosure| pg.3
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Comparison Table – shows the buyer/borrower a comparison of amounts from Loan Estimate v. Closing Disclosure
Closing Disclosure| pg.3
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Summary of Transactions –a summary of the transaction similar to page 1 of the HUD-1 Settlement form
Closing Disclosure| pg.3
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© 2015 Fidelity National Title Group
Loan Disclosures –contains various lender disclosures required under TILA, RESPA or Dodd-Frank
Closing Disclosure| pg.4
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© 2015 Fidelity National Title Group
Loan Calculations –Various specific Loan calculations, including Finance Charge and APR, required under TILA, RESPA or Dodd-Frank
Other Disclosures –Various lender disclosures required under TILA, RESPA or Dodd-Frank
Contact Information –
Confirm Receipt –
Closing Disclosure| pg.5
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Closing Disclosure
• The Lender is primarily responsible for the preparation and delivery of the Closing Disclosure
• The Lender may permit the Settlement agent some portions or all of the form and/or deliver the form
• Settlement Agent liability – for those portions prepared or delivered
• Lender remains responsible for all portions of the Closing Disclosure to “ensure the disclosures are provided” in accordance with the rule
Who prepares the new Closing Disclosure Form?
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• The 3-day right of rescission (“3-day rescission”) under TILA• Presently applicable to most refinance transactions• Not impacted by the Final Rule
• The 3-day waiting period (“3-day waiting”) after delivery of the Closing Disclosure, the Borrower has 3 days to review before a closing may occur
• The 3-day delivery period for delivery of the Closing Disclosure (“3-day delivery”) –
• Unless the Closing Disclosure is delivered personally, the Rule “deems” it delivered three business days later
• Period may be shortened by actual confirmation of receipt
Three different three-day periods in closing
© 2015 Fidelity National Title Group
Closing Disclosure
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Disclosure Delivery Timing
© 2015 Fidelity National Title Group
Closing Disclosure
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Only a few changes will require another 3-day waiting period –
• Change in the loan programExample – moving from fixed rate to an adjustable rate loan
• Changes to Annual Percentage Rate (APR) greater than 1/8 %Applies only to increases in APR items , other increases do not trigger a new disclosure with waiting period.
Caution – other increases may still cause tolerance violationsThe addition of a prepayment penalty fee after the initial disclosure But , all changes require a new Closing Disclosure to be prepared and delivered at or before “consummation”.
Changes to initial Closing Disclosure after delivery
© 2015 Fidelity National Title Group
Closing Disclosure
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Closing Disclosure to the SellerSettlement Agent is responsible for providing the Closing Disclosure to the Seller
• Closing Disclosure format for the seller may be either:
• The same format as for Borrower, but items related solely to borrower (i.e., loan disclosures) and using only seller data; or
• Use the separate CFPB seller’s disclosure form
• Disclosure must be delivered to the Seller on or before “consummation”; no 3-day waiting period
• 3-business day delivery period applies, except for personal delivery.
© 2015 Fidelity National Title Group
Closing Disclosure
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Seller’s Disclosure
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Seller’s Disclosure
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SettlementOr Closing StatementPage 1
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SettlementOr Closing StatementPage 2
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SettlementOr Closing StatementPage 3
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Tolerance Rule Changes• Both TILA and RESPA previously contained tolerance rules:
• TILA rules generally required a re-disclosure if finance charges or APR exceeded threshold
• RESPA actually provided penalties (“tolerance violations”) if an item, or series of items, exceeded a monetary threshold
© 2015 Fidelity National Title Group
Closing Disclosure
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Tolerance Rule Changes• Changes to tolerance rules
• Addition to “zero tolerance” category (may not change for numbers on Loan Estimate)
• Third Party Services where the provider is selected by the Lender
• Third Party Services provided by an affiliate of the Lender
© 2015 Fidelity National Title Group
Closing Disclosure
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The Rule vs. RealityOP Disclosure =
(OP Premium) (LP Simultaneous Premium) +
(Full LP Premium) -
OP Actually Charged = OP Premium
LP on Closing Disclosure =Full LP Premium
(no discount for Simultaneous Issue)
LP Actually Charged = LP Simultaneous Premium
Here is how the rule works when applied to a transaction in IllinoisEx: sales price is $350,000 and loan amount is $280,000
OP on Closing Disclosure = $ 992.00(OP Premium) $1,900.00(LP Simultaneous Premium) + $500.00(Full LP Premium) - $1,408.00
OP Actually Charged = $1,900.00
LP on Closing Disclosure = $1,408.00 LP Actually Charged = $500.00
*OP: Owner’s Title Insurance Policy*LP: Lender’s Title Insurance Policy
LP Simultaneous Premium: a discounted lender’s title insurance premium that is issued in accordance to published rates (or promulgated/filed rates) when both a lender’s and owner’s title insurance policies are simultaneous issued
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Certain Non-RESPA Loans Now Covered – new disclosure forms will now be used for these loans
• Vacant Land Loans
• Construction-Only loans
• “25+ -Acre” Loans
Other Rule Provisions
© 2015 Fidelity National Title Group
Closing Disclosure
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RESPA Loans Not Covered in Future – these loan will NOT be documented with the new forms
• Reverse mortgages
• Institutions originating 5 or fewer loans per year
• Loans will be documented using existing GFE and HUD-1 forms and rules
Software systems (and personnel) must be able to operate in both environments and recognize the differences
Other Rule Provisions
© 2015 Fidelity National Title Group
Closing Disclosure
56
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© 2015 Fidelity National Title Group
Know before you close.
Resources: www.Fidelitydesktop.comwww.consumerfinance.gov/regulatory-implementation/tila-respahttp://cfpb.fntic.com
Questions?
Barry S. WolfinsohnRegional Counsel, Vice [email protected]