Completing the Loan Estimate

CFPB rules for completing the loan estimate

For all closed-end federally-related mortgage loans, the Loan Estimate is required. It must be provided on the form created by the CFPB. Six different versions of this form (to be used based on the type of transaction) are included in Appendix H-24 of Regulation Z

Adjustable Payment (AP) Table/Adjustable Interest Rate (AIR) Table

Depending on the transaction, page two of the Loan Estimate may contain up to two additional tables: the Adjustable Payment (AP) Table and/or the Adjustable Interest Rate (AIR) Table. These tables are not required for loan transactions where the interest rate may not change after consummation (i.e., fixed-rate loans). The Adjustable Payment (AP) Table must be included if the periodic principal and interest payment may change after consummation, but the change is not based on an adjustment to the interest rate. This table is also required if the transaction is for a seasonal payment product. The table lists whether the loan involves certain types of payments, and includes a breakdown of monthly principal and interest payments applicable for the transaction The Adjustable Interest Rate (AIR) Table is required if the interest rate may increase after consummation.

Page One

The first page of the Loan Estimate contains four basic sections. These sections address general information about the transaction, a summary of loan terms, estimated projected payments, and estimated costs at closing ▪ Date issued: the date on which the disclosures are mailed or delivered to the consumer by the creditor ▪ Sale price: the price of the home (in a purchase transaction) or the estimated value of the property to secure the loan (in a refinance transaction) ▪ Purpose: the consumer's intended use for credit, using one of the following terms: o Purchase o Refinance o Construction o Home equity loan ▪ Product: indicates whether the loan has a fixed or adjustable rate and whether there are any features that may change the amount of the periodic payment. The product must be identified using one of the following terms: o Fixed-rate o Adjustable-rate o Step rate The product description must also refer to features that can change the amount of a periodic payment, such as: o Payments resulting in negative amortization o Interest-only payments o Step payments o Balloon payments o Seasonal payments ▪ Loan type: a check box used to indicate whether the loan is a conventional loan, an FHA loan, a VA loan, or another type (such as a Rural Housing Service loan or a loan that is insured or guaranteed by a state agency) ▪Loan Terms The next section of page one, the Loan Terms table, shows the loan amount, interest rate, and monthly principal and interest payments on the loan. The interest rate listed here should be the rate at the time of consummation. If the interest rate is adjustable, this must be the fully-indexed rate. More information about the fully-indexed rate is discussed in a later section of this course. ▪monthly principal and interest. Payments shown on the Loan Estimate must include mortgage insurance and amounts that the consumer is required to escrow for taxes and insurance. ▪prepayment penalty It is important to keep in mind that prepayment penalties are prohibited for most transactions, other than for fixed-rate qualified mortgages. If the transaction does permit a prepayment penalty, and one will be included and imposed, the disclosure must state its amount and the circumstance triggering a requirement to pay the penalty. This area of the Estimate also informs borrowers of the presence and amount of any balloon payment that may be included in the loan. ▪Projected Payments Table, creates a space for providing details regarding periodic payments. ▪Costs at Closing table summarizes the costs that a borrower will have to pay at closing. Information here is presented in two categories: "Estimated Closing Costs" and "Estimated Cash to Close." Creditors can provide these totals after calculating the closing costs and cash to close as required by law ▪ ▪

Estimated Closing Costs

are the sum of costs that are designated as "Loan Costs" and "Other Costs."

"Confirm Receipt" box,

at the discretion of the creditor. This box includes a line for the signature(s) of the borrower(s), and the following statement: "By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or received this form."

Loan Estimate Page 3

identifies the creditor and loan originator(s) involved in the transaction. The first table on this page lists NMLS unique identifiers and contact information for these individuals.

Comparisons Table

intended to help consumers shop for loans and settlement services by providing them with basic information that can be used to compare the loan products offered by different lenders. The Rule requires that the following information be presented: ▪ In 5 Years: the creditor must disclose the total principal, interest, PMI, and loan costs paid in the first 60 months of the loan term, and separately disclose the amount of principal that the consumer will have paid off during this period of time ▪ Annual Percentage Rate (APR): this line requires disclosure of the APR, along with the statement that this is not the interest rate for the loan ▪ Total Interest Percentage (TIP): the amount that the consumer will pay in interest over the life of the loan, expressed as a percentage of the amount of credit extended

Loan Costs table

itemizes all loan costs associated with the transaction. Information in this box is divided up among four subheadings: ▪ Origination Charges: itemizes each amount, and a subtotal of all amounts, that the consumer will pay for the loan. Points paid to reduce the interest rate are itemized separately and expressed as both a percentage of the amount of credit and as a dollar amount. ▪ Services You Cannot Shop For: itemizes each amount, and a subtotal of all amounts, that the consumer will pay for settlement services for which he or she was not permitted to shop and that are provided by persons other than the creditor or mortgage broker ▪ Services You Can Shop For: itemizes each amount, and a subtotal of all amounts, that the consumer will pay for settlement services for which he or she was permitted to shop and that are provided by persons other than the creditor or mortgage broker ▪ Total Loan Costs: lists the sum of the subtotals from each of the three preceding sections

Calculating Cash to Close table

lists the total amount of cash or other funds that are to be provided by the consumer at consummation. ▪ Total Closing Costs: adds together the totals from the Loan Costs and Other Costs tables, expressed as "D+I" and stated as a positive number ▪ Closing Costs Financed: the amount of any closing costs to be paid from loan proceeds, stated as a negative number ▪ Down Payment/Funds from Borrower: in a purchase transaction, the difference between the purchase price and the principal amount of the loan, stated as a positive number. In a transaction that is not a purchase, estimated funds from the consumer. ▪ Deposit: the amount paid to the seller or held in trust/escrow, as a negative number ▪ Funds for Borrower: the amount of funds for the consumer, calculated according to 12 C.F.R. §1026.37(h)(v) ▪ Seller Credits: the total amount that the seller will pay for total loan costs, stated as a negative number ▪ Adjustments and Other Credits: the amount of all loan costs and other costs paid by persons other than the originator, creditor, borrower, or seller, together with any other amounts required to be paid by the consumer at closing, stated as a negative number ▪ Estimated Cash to Close: the sum of all amounts listed in the table

Page two of Loan Estimate

provides Closing Cost Details, including an itemization of amounts listed more generally on page one.

Other Costs table

states all costs associated with the loan transaction that are in addition to the listed loan costs. This table uses six subheadings: ▪ Taxes and Other Government Fees: lists a sum of all recording fees and other government fees and taxes, and the sum of all transfer taxes paid by the consumer ▪ Prepaids: itemizes any amounts that the consumer will pay in advance of the first scheduled payments, accompanied by a statement of the number of days or months for which each item is paid ▪ Initial Escrow Payment at Closing: itemizes any amount that the consumer is placing into a reserve or escrow account for the payment of homeowner's insurance, mortgage insurance, and/or property taxes ▪ Other: itemizes any other amounts that the consumer is likely to pay or has contracted with a person other than the creditor to pay at closing. This is also where optional items, such as separate insurance products or warranty, are listed. ▪ Total Other Costs: lists the sum of the subtotals of all other headings on this table ▪ Total Closing Costs: lists the sum of the total loan costs and total other costs, labeled "D+I," as well as any lender credits. Lender credits are listed as a negative number.

Other considerations

▪ Appraisal: informs the borrower that the creditor may order an appraisal and that the borrower may be charged for it; that the creditor will provide the borrower with a copy of the appraisal, even if consummation does not occur; and that the borrower may elect to pay for an additional appraisal for their own use ▪ Assumption: indicates whether or not a subsequent purchaser of the property will be permitted to assume the loan on its original terms ▪ Homeowner's Insurance: states whether homeowner's insurance is required and that the borrower may choose the provider ▪ Late Payment: details any charge that may result from a late payment, listed as a dollar amount or a percentage ▪ Loan Acceptance: a statement that the consumer does not have to accept the loan offered simply because he or she has received the disclosure and signed a loan application ▪ Refinance: a statement that refinancing will depend on the borrower's future financial situation, property value, and market conditions, and that refinancing may not be possible ▪ Servicing: a statement of whether or not the creditor intends to service the loan or transfer servicing to another entity