revising loan estimates in the July 2017 trid modifications
Hi there, this is Jared Moyer with bankers compliance consulting. How are you coming along on the July 2017 trid modifications? Are you drowning or maybe you’re just struggling to tread water? Well, it wouldn’t be a surprise.
It took five hundred and sixty pages to discuss the modifications that were made to the original trid rule that we’ve been compliant with for almost the past two years.
Today I want to take a few minutes and talk to you a little bit about one of the items that was included within that final rule update and that is the revised loan estimates.
The rule prior to the amendment was actually referred to one type of revised loan estimate and that was a change circumstance that led to something that was affecting your tolerances. Unless it was related to write a rate lock, you had options.
Your options were to either ignore it and or you have to do a tolerance cure. Or maybe you’re within tolerance or you take the change circumstance and you redisclose and you reset tolerances. And then there was this “informal information only” discussion that went on with the CFPB through direct communication as well as the webinars that they delivered.
Well now with this modification in the final rule. The rule itself now addresses both revised disclosures related to resetting tolerances and those for information only purposes. Now you might be thinking what’s the big deal? Well they’ve added another thing which isn’t new, but it now connects the dots within trade between two things with any revised loan estimate, whether it’s for informational purposes or whether it’s in relation to a change circumstance that affects a tolerance.
All of them need to be delivered and completed based on good faith, which means the best information available to you at the time the disclosure goes out. Now that’s not just specific to the change circumstance. It’s specific to the entire form as a whole.
So let me illustrate. Let’s say you issued an original loan estimate and you you made a mistake by an undershot the appraisal fee. Let’s say it was undershot by $200. You get the bill and it’s going to be $500. Well, that’s a zero percent tolerance item, which on the surface appears to be a $300 cure and that that is what it will be. But, let’s say you go along after you issued the original loan estimate now you encounter a legitimate change circumstance for something.
Maybe the loan amounts going to go up from a hundred thousand to 150 thousand and you do a percentage based origination fee. So you want to make sure that you capture the additional income that would present. You’re going to issue this revised loan estimate that shows the increased loan amount and it also is going to show the increase in the origination fee. You can reset that tolerance well before you can hit send or you can deliver that revised loan estimate to accommodate the updated origination fee and loan amount.
You also know at this point that you made a mistake in the appraisal you had originally disclosed 200 and now it’s gonna be 500. Now you can’t fix that, but what the rule says is good faith says you now need to update the appraisal fee on your loan estimate and show that it’s gonna be $500.
So you deliver that loan estimate and we go to closing and now you’ve got this closing disclosure that’s gonna represent a $500 appraisal fee. Well for tolerance purposes, you have to actually go back to the original loan estimate and not the most recent loan estimate because that’s gonna show that you’re in balance. Because it’s good faith, you had to update it.
Well, for tolerance purposes, you have to go back to the original. I know I’m trying to do a lot here in a short window, but if that confuses you or you want more information on that or any of the other trid requirements; and trust me there’s a lot there. Like I said, five hundred and sixty pages worth of discussion on things that we’re supposed to simply be modifications. We think we have some solutions to provide you.
We’ve got two different ways you can get in front of this. First off, in September we’re kicking off our three City live event tour for our Fall conferences. If you want to check more about that, then go to our website, banker’s compliance
and get registered there for those live events or tread and several other things that are hotspot areas. Updates will be identified during those two day conferences. The other way you’re going to be able to get in front of the trid training solutions that we’re providing is on November 2nd we’re going to be doing a two-hour webinar that’s all about the trid updates from the July 2017 final rule.
So, whichever one of those or maybe both work out for you and your team, we’d love to see you at both again. You can go to our website here at bankerscompliance.com
or the training section and get registered today. I hope to see you at one of our events, Good Luck!