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”.
TRID: Sales Price vs. Estimated Property Value vs. Appraised Property Value
Page one of the Closing 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?
The answer is, it depends of a variety of factors.
When you encounter a changed circumstance, what information are you required to update on a revised Loan Estimate? What information are you not required to update? How soon must you re-issue disclosures? Today’s rules (TRID 2.0) for changed circumstances are quite different than they were when TRID first took effect. Are you handling them correctly?
You may remember that the TRID requirements and construction loans didn’t exactly start off on the right foot. While the CFPB has taken some steps to reduce the challenges over the years, we see there’s still a lot of confusion out there! One such area has to do with escrow accounts.
The TRID Rule tells us that these disclosures should reflect whether an escrow account will be established at or before consummation.
If you remember a TRID and construction loans didn’t necessarily get off on the right foot with each other. Hi, I’m Diane Dean with Bankers Compliance Consulting.
Maybe that’s at least part of the reason why construction loans still seem extra challenging yet today. For example, on a construction or permanent loan with 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, how are these disclosures on page four of the closing disclosure to be completed? Well, the TRID Rule tells us that these disclosures should reflect whether an escrow account will be established at or before consummation. So if the initial construction phase will not have an escrow account, these disclosures should reflect the loan will not have an escrow account. If you don’t offer an escrow account option in connection with construction loans, you’re further going to say that the lender does not offer one.
Now this may all be a bit confusing, especially when in six to 12 months you go to set up an escrow account. For that reason, you might want to make sure your lenders are explaining to your borrowers, that those disclosures only reflect what will happen with the initial construction phase. Once we get to the permanent phase, an escrow account will be established and in some cases required, if you’re still having construction loan headaches, we can help. I would recommend our All About Construction Loans webinar. Not only does Jerod walk you through completing the disclosure step-by-step, we also give you sample disclosures that allow you to tie it all together. We want to help you with those construction loan challenges.
If you are new to TRID loans, one of the most important things you need to know is when you have a complete TRID application. The regulation says that once you have six specific pieces of information your clock for issuing a Loan Estimate starts.