Voluntarily revising Loan Estimates under TRID
TRID research and implementation continues ... please continue to send in comments and tips that you're comfortable sharing with the NE lending community.
So here's an issue that keeps popping up--the TRID Rule says that we're permitted to issue a revised Loan Estimate only in certain circumstances. For example, the CFPB's small entity guide says that lenders "are permitted to provide the consumer revised Loan Estimates ... only in certain specific circumstances." Does that mean you'd be in trouble for issuing a revised Loan Estimate (if only to show more accurate fees) in all other cases? No. As we'll show below, what the CFPB's guide is trying to communicate, is that revised Loan Estimates will only be effective in resetting the tolerance levels in those specific cases. Otherwise, we're free to issue revised Loan Estimates--just know that doesn't help us-or hurt us- with the tolerance limitations.
General Rule
In most cases, a revised Loan Estimate is only required where there is an increase that exceeds the tolerance limitations. For example, let's assume that a changed circumstance causes recording fees (which are subject to a 10% tolerance) to increase from $100 to $105 and there is no tolerance violation. For this example, assume there are no other fees in the 10% category.
A revised loan estimate reflecting $105 is not required here. The lender may simply reflect the $105 payment on the Closing Disclosure. When the Loan Estimate ($100) is compared to the Closing disclosure ($105), the tolerance review will reveal that the increase was within the permissible 10%.
Voluntary Revisions
But what if, for any number of reasons, a lender wishes to issue a revised Loan Estimate even where not required to do so? Simply said, yes, that is allowed. Regulatory comment 1026.19(e)(3)(iv)(A)-1.ii clearly states that "the rule does not prohibit the creditor from issuing revised disclosures for informational purposes."
So, in the example from above, if the lender wished to issue a revised Loan Estimate reflecting the $105, that is permissible.
But don't go too far ... Just because the lender can revise the Loan Estimate, does not mean that this resets the Loan Estimate. To continue with our recording fee example: If the lender voluntarily issued a revised Loan Estimate to reflect an increase mid-transaction to $105, this would not reset the Loan Estimate fee. The fee shown on the Closing Disclosure would still have to be compared to the original $100 (and not to $105).
Final Note
How often will this be helpful? I'm not sure ... you don't want to have a hundred Loan Estimates per transaction. And actually, issuing a revised Loan Estimate when not required to may complicate your QC process (e.g. "which one of these Loan Estimates has the fees that we actually need to check?"). But we didn't want readers to feel hamstrung in every direction--this is an area where you have some flexibility, if you want to disclose updated Loan Estimates even where there is no tolerance violation, feel free to do so.
In other news:
The Massachusetts Clean Energy folks are still looking for feedback on their proposed program to encourage solar energy lending to Massachusetts residents. To put your 2 cents in, please view the Request For Information available here and respond to MassCEC or us here at Spillane directly.
Looks like a small Texas bank has been given a green light to challenge the CFPB's constitutionality. Still very much a long shot, but a federal appellate court last week ruled that the bank at least has the right to have its argument heard
Want your voice to be heard as the Mass. Division of Banks as they take a look at their regulations to see if there's anything they should revise? Well, they're doing it now, so time is of the essence. I've agreed to help... my job will be gathering your comments on Mass. MLO Licensing and Recordkeeping regulations. If you have any comments on those issues, we're having a conference call through the Mass. Mortgage Bankers next Thursday from 10:00 to 11:00. Contact Debbie Sousa for details.
Ever struggle getting comfortable in front of a large audience? Here's a tip from a famous trial lawyer (has never lost a criminal trial). This man, Gerry Spence, recommends saying something completely honest to start, even if it's a little unorthodox. From his book, How to Argue and Win Every Time (c) 1995: "So how does one gain rapport, a positive connection with [someone]? Why not tell the truth? To an audience with whom I want to get close, I have said, 'I don't know most of you and most of you don't know me. I wish we were old friends. I wish we had known each other for years. I wish I knew your kids and had shared important times in your lives. Then it would be so easy for us to talk together. But before I am through here I hope we will know each other a lot better, and we will become friends." In his book, he also recounts the story of how he started off his argument to the jury in a very public trial (Randy Weaver) simply by saying to the jury, "I wish I weren't so afraid. ... I wish after all these years in the courtroom I didn't feel this way. You'd think I would get over it." That was enough to break the ice, make a connection with the audience, and continue to deliver a winning presentation.
"I say, to be liked, one must be respected.To be respected, one must be believed. To be believed, one must be believable. To be believable, one must be who one is. No masks. No nice smiles when one does not feel like smiling. To be accepted, one must simply tell the truth. Just tell the plain old truth!
- Gerry Spence
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