TRID 2.0 construction loans: So, you’re doing a construction loan. That means the loan purpose you disclose on the TRID disclosure is “construction”, right? While that seems quite logical, it’s not always the case. Even for what you consider to be a construction loan, you still have to work through the TRID loan purpose hierarchy. You must first determine that it’s not a purchase and not a refinance before you get to construction.
You may recall that the TRID rules and construction loans didn’t necessarily get off on the right foot with each other. And, we still see that construction loans seem to be extra challenging for financial institutions. One such challenge is when you have a construction or permanent loan (one closing) where you will not have an escrow account in connection with that initial construction phase, but will set up an escrow account in connection with the permanent financing.
TRID Guidelines -The CFPB has updated its TRID FAQs with five questions related to housing assistance loans.
TRID Guidelines: The FAQs describe the criteria and disclosure requirements for two different “partial” exemptions:
1. Regulation Z exempts subordinate-lien, interest-free loans which:
Are for homebuying assistance (downpayment, closing costs, etc.); property rehabilitation; energy efficiency; or avoiding foreclosure;
Defer or forgive at least a portion of the loan for a set period or until/upon meeting certain conditions [see §1026.3(h)(4)]; and,
Limit borrower-paid costs to recording fees, transfer taxes, application and counseling fees. (The total amount of application and counseling fees must be bona fide, reasonable, and less than 1% of the loan amount.)
For applications meeting these criteria, creditors can provide the Loan Estimate and Closing Disclosure or the “old” Truth in Lending Disclosure. These applications are also exempt from the Special Information Booklet requirements.
2. The Build Act, which went into effect earlier this year, provides a separate but somewhat similar exemption from the requirements to provide a Loan Estimate and Closing Disclosure. This exemption is available to nonprofits that offer interest-free mortgage loans where only bona fide and reasonable fees are charged. Such creditors may provide an “old” Truth in Lending Disclosure in place of the Loan Estimate and Closing Disclosure. Applications under The Build Act exemption; however, must also be provided a Good Faith Estimate and Settlement Statement, if the TRID disclosures (i.e., Loan Estimate and Closing Disclosure) are not provided. A Special Information Booklet is also still required.
As experts in TRID Guidelines, we understand, these are not exemptions that many of you will likely be able to utilize; however, we did want to alert you as to what was packed into the CFPB’s latest FAQ update.
TRID compliance and following TRID guidelines isn’t easy! We have a huge library of TRID-related training that’s available now OnDemand. We also have TRID webinars coming up. There’s something for everyone! Check it out today!
It’s normal for changes to occur during the loan process. If the loan is subject to TRID, however, you have to be careful. Knowing whether you have a valid changed circumstance is very important and it dictates whether you can reset tolerances. Are you handling changed circumstances correctly?
Below are a few questions we’ve received related to changed circumstances:
Question: If we switch from a third-party appraisal in Section B to an internal evaluation fee in Section A that will ultimately cost less, do we need to re-disclose?
Answer: Assuming the change is being made due to new or changed information (i.e. a valid changed circumstance), you will want to re-disclose the change in services within three business days, even though the cost is ultimately being reduced. Otherwise, you take the risk that someone will see the new service in Section A as though you’re adding a service, even though it’s replacing the appraisal that was disclosed in Section B.
Question: Can we change or even lock a rate after delivering a Closing Disclosure and if so, would we need to re-disclose?
Answer: There’s nothing that prohibits the rate from changing after a Closing Disclosure has been delivered and nothing that prohibits you from locking a rate after the Closing Disclosure has been provided. Remember, though, you could trigger a new three-day waiting period. A revised Disclosure would be required if anything on the prior Disclosure became inaccurate.
Do you have more questions? If so, be sure to JOIN US for our webinar, “TRID: Changed Circumstances & Revised Disclosures”.
Sales Price v. Estimated Property Value v. Appraised Property Value
Page one of the TRIDClosing Disclosure provides a lot of different information about a loan transaction. When it comes to the Closing Information section (top, left-hand side) there is a field where you are required to enter either the “Sales Price”, the “Estimated Property Value” OR the “Appraised Property Value”. So, which one do you disclose?
When it comes to TRID closing disclosure, the answer is, it depends on a variety of factors.