REAL ESTATE FINANCE: UNIT 3

Notices of Error and Requests for Information

Loan servicers must respond to all written requests for information and loan modification requests promptly.

Texas Statewide Homebuyer Education Program (TSHEP)

Texas Statewide Homebuyer Education Program (TSHEP) is designed to work with local nonprofit organizations to teach the principles and applications of comprehensive pre- and post purchase homebuyer education, and to certify participants as homebuyer education providers.

RESPA Changes

As is the case with many laws and regulations, RESPA has been amended and modified several times since its original passage in 1974. Amendments and revisions to legislation generally arise from matters of interpretation, the need to make a law more stringent, the need to expand or reduce the scope of the statute, the need to deregulate some aspect covered by the original law, or changing conditions in the industry the law seeks to regulate. It is also common for laws to be amended because people find loopholes in the legislation that open new avenues of abuse. 1976: Minor revisions 1983: Minor revisions 1992: Extended to cover "affiliated business arrangements". Allows realty companies to create affiliations or partnerships with such allied services as mortgage lenders and title insurance companies and to give consumers discounts for using the service packages. These business affiliations must be disclosed to consumers full and in writing BEFORE a referral from one company to the other is made. Permits the use of computer loan originations by real estate brokers to assist consumers in choosing and applying for a mortgage loan. 1996: Final RESPA rule issued by HUD Compensation by employers of employees for marketing the settlement services of affiliate company is no longer permitted Reduced the number of exemptions allowed for an employer to pay its management staff and other employees who do not provide actual services in transactions Clarified that it is permissible for an employer to pay "bona fide" employees for generating business for the employer Revised requirements regarding several controlled business disclosures Reversed previous exemptions for consumer payments for computer loan origination services Policy statement on computer loan originations Policy statement on office space, lockouts, and retaliation Policy statement on sham-controlled business arrangements 2001: In response to two court decisions (Culpepper v. Irwin Mortgage Corp. and Echevarria v. Chicago Title and Trust Co.) the Secretary of Housing and Urban Development issued a clarification of the policy regarding lender payments to mortgage brokers characterized as YSPs, and to overcharges by providers of settlement services. 2002: The Secretary of Housing and Urban Development proposed the "Homebuyer's Bill of Rights." The intention was to reform the regulatory requirements in the statute. The Secretary issued the proposal in response to a perceived need for additional disclosure to homebuyers. The key elements of the proposal were: Change the way lender payments to brokers are recorded and reported to consumers Improve the "Good Faith Estimate" of settlement cost disclosure created by HUD Allow the market and competition to provide greater choice for consumers by permitting guaranteed packages or the "bundling" of settlement services and mortgage loans Called for greater emphasis on enforcement of RESPA and prosecution of violations. 2004: Due to the very large number of concerns voiced by the real estate industry and by consumer groups, the reform proposal was withdrawn. HUD is currently reviewing responses to the proposals and plans to draft a new reform proposal. Until further action is taken by HUD, the 1996 revised version of RESPA still applies to the industry.

What does 'consummated' mean?

Consummated is defined by the new rule as the date the borrower signs the loan documents.

Due from Seller at Closing

Disclose the amount Due from Seller at Closing as the sum of: Any Excess Deposit, Closing Costs Paid at Closing by the Seller, Existing Loan(s) Assumed or Taken Subject to by the consumer, Payoff of First Mortgage Loan, Payoff of Second Mortgage Loan, Payment of other seller obligations, Seller Credit, Adjustments, and Adjustments for Items Unpaid by Seller due to the consumer pursuant to the terms of the real estate sale contract.

Which loans are not covered?

Reverse Mortgages Home Equity Lines of Credit (HELOCs) Mobile Home only loans Creditors ho originate less than 5 loans in a calendar year The portions of TILA and RESPA that govern reverse mortgages are not deleted or replaced. A 2010 HUD-1 Settlement Statement will be used to close these types of loans.

HOMEbuyer Assistance Program (HOME HBA)

The HOMEbuyer Assistance Program provides funds to eligible entities which offer down payment assistance for homebuyers earning up to 80 percent area median family income, and may help fund modifications to make home more accessible. This assistance is offered through TDHCA's federally funded Texas HOME Program.

How long does a consumer have to notify the lender they intent to proceed?

10 Days. The Loan Estimate expires 10 business days after the Loan Estimate was delivered or placed in the mail. If this time period expires the lender may issue a revised Loan Estimate which may be different than the original. No justification is required for the change to the original estimate of a charge other than the lapse of 10 business days.

Page 5: Loan Calculations

Loan Calculations, Other Disclosures, Questions, Contact Information, and, if desired by the creditor, Confirm Receipt tables are found on page 5 of the Closing Disclosure. Page 5 lists loan calculations similar to the TIL form. This includes the new TIP calculation. It also provides other disclosures as well as contact information for the Lender, Real Estate Professionals and the Settlement Agent. Disclosure of the Total of Payments, the Finance Charge, the Amount Financed, the APR, and the Total Interest Percentage (TIP) is found in the Loan Calculations table. The APR and TIP amounts should be updated from the amounts disclosed on the Loan Estimate to reflect the terms of the legal obligation at consummation.

Single Family Development for Community Housing Development Organizations (CHDOs)

Provides funds to Community Housing Development Organizations (CHDOs) for the acquisition, rehabilitation, or reconstruction of single family housing for households earning up to 60 percent area median family income. Offered through TDHCA's federally funded Texas HOME Program.

Which loans are covered under the new disclosure rules?

Purchase money loans Refinances Loans secured by 25 acres or less Loans secured by vacant land Construction-only-loans Timeshare loans The new forms must be offered in both English and Spanish.

Force-Placed Insurance

RESPA is amended to prohibit a servicer of a federally related mortgage loan from obtaining force-placed insurance unless there is a reasonable basis to believe the borrower has failed to comply with the loan contract's requirement to maintain property insurance. It also establishes mandatory processes servicers must follow before obtaining force placed insurance. The borrower must be sent two written notices over a 45-day period and must terminate the force-placed insurance and refund to borrower's force-placed insurance premiums and fees during the time which both the borrower's insurance and force-placed insurance are in force. It also requires the servicer to accept any reasonable written confirmation of the borrowers existing insurance coverage is in effect.

Early Intervention

Servicers are required to establish or make good faith efforts to establish live contact with a borrower not later than the 36th day of a borrower's delinquency and inform the borrower about the availability of loss mitigation options. It also requires a servicer to provide written notice to borrowers not later than the 45th day of the delinquency.

Comparisons

The Comparisons table discloses information related to the costs of the loan In Five Years, the Annual Percentage Rate (APR), and the Total Interest Percentage (TIP).

Receipt

The Loan Estimate must be delivered or placed in the mail to the consumer no later than the third business day after the creditor receives the consumer's application for a mortgage loan. If the Loan Estimate is not provided to the consumer in person, the consumer is considered to have received the Loan Estimate three business days after it is delivered or placed in the mail.

Confirm Receipt

The creditor, at its option, may include a line for the signatures of the consumers to Confirm Receipt. If the creditor includes a signature line to Confirm Receipt, the creditor must also include a statement that the signature only signifies receipt of the Closing Disclosure. If the creditor does not include statement line or the consumer's signature, add a statement to the Other Disclosures concerning Loan Acceptance that states: "You do not have to accept this loan because you have received this form or signed a loan application."

What is the general timing requirement for providing a revised Loan Estimate?

The general rule is that the creditor must deliver or place in the mail the revised Loan Estimate to the consumer no later than three business days after receiving the information sufficient to establish that one of the reasons for the revision has occurred.

Integrated Mortgage Disclosures: Loan Estimate

This form lists all of the potential costs for the consumers loan. This includes title insurance, percentage rates and closing costs. The form will also include the estimated monthly loan payment. Creditors are responsible for calculating the best estimates possible for the services which will be checked against the actual costs listed in the closing disclosure form when the loan is consummated. The creditor has three (3) days to deliver the loan estimate and should include a list of providers for services that the consumer can use to shop around with. Unlike the former forms creditors can no longer revise and re-disclose to consumers if charges go up or down prior to closing. At the conclusion of this section the student will be able to: Identify the various requirements for delivery of the Loan Estimate form Discuss the proper completion of the form Explain the purpose of the form to consumers

Cash to Close to or from Borrower

Under a subheading of Calculation: The CD will Disclose the Total Due from the Borrower at Closing as a positive number. The CD will Disclose the Total Paid Already by or on Behalf of the Borrower at Closing as a negative number. The CD will Disclose the sum of Total Due from the Borrower at Closing and the Total Paid Already by or on Behalf of the Borrower at Closing. The sum will be Cash to Close From Borrower when the sum is a positive number, and the sum will be Cash to Close To Borrower when the result is a negative number. The sum is disclosed as a positive number in either event.

Adjustments and Other Credits

is the total amount of all items in the Loan Costs and Other Costs tables that are paid by persons other than the loan originator, creditor, consumer, or seller, together with any other amounts that are required to be paid by the consumer at closing pursuant to the contract of sale (if any), disclosed as a negative number. Examples of items that are paid by persons other than the loan originator, creditor, consumer, or seller include: Gifts from family members, and Credits from a developer or home builder to be applied to items in the Loan Costs and Other Costs table. Adjustments and Other Credits includes funds provided to the consumer from the proceeds of subordinate financing, local or State housing assistance grants, or other similar sources.

Know Before You Owe

On November 20, 2013, the Consumer Financial Protection Bureau (CFPB) issued a 1,887 page rule requiring mortgage lenders to use two new disclosures when making mortgage loans to consumers. The new forms are a "Loan Estimate," which replaces the preliminary Truth-in-Lending Disclosure Statement and Good Faith Estimate, and a "Closing Disclosure," which replaces the final Truth-in-Lending Disclosure Statement and HUD-1 Settlement Statement. Mortgage lenders must use the forms for loans with an application date beginning October 1st, 2015. Any mortgage application submitted on or after October 1st, 2015 will fall under the new CFPB mortgage disclosure rules. Three forms will no longer be used after this date for most transactions. These forms are: The Good Faith Estimate The Truth in Lending Disclosure The HUD-1 Settlement Statement Along with new forms the real estate industry will be faced with a new set of rules that have the potential to do two things. First, consumers of lending services will have an opportunity to review the disclosures in detail and have any questions answered prior to signing for the loan they are seeking. Second, the industry will have to adapt to new time frames associated with the disclosures being made and how those timelines will affect the closing of a transaction.

Page 3: Cash to Close

On page 3 of the Closing Disclosure, the Calculating Cash to Close table and Summaries of Transaction table are disclosed. The Calculating Cash to Close table has nine items listed in the table. The table has three columns to disclose the amount for each item as it was disclosed on the Loan Estimate, the Final amount for the item, and an answer to the question — "Did this change?" Generally, the amount disclosed in the Loan Estimate column is the same as the amount disclosed on the Loan Estimate or a revised Loan Estimate. The amounts in the Final column are calculated using the same methods that were used for the Calculating Cash to Close table on the Loan Estimate, except that the amounts used to determine the amounts are the amounts disclosed on the Closing Disclosure or determined at consummation. When the answer to the question "Did this change?" is Yes, the CD will indicate where the consumer can find the amounts that have changed on the Loan Estimate. For example, if the Seller Credit amount changed, the creditor can indicate that the consumer should "See Seller Credits in Section L." In the Final column, Total Closing Costs is the same amount as the amount disclosed as Total Closing Costs (Borrower-Paid) on page 2 of the Closing Disclosure.

Page 2: Closing Cost Details - Loan Costs

Page 2 of the CD breaks out the closing costs in detail and identifies who is paying for the charges. Page 2 also identifies when charges are to be paid if they are required before closing. The amounts paid by the consumer, seller and others for each item are disclosed. For items paid by the consumer or seller, the amount that is paid at or before closing is also entered into the applicable columns. To the extent that an individual item is paid by different parties to the transaction and both at and before closing, the amounts associated with an item can be entered in multiple columns. The Loan Costs and Other Costs tables can be disclosed on two separate pages of the Closing Disclosure. When used, these pages are numbered page 2a and 2b. The items to be disclosed in the Loan Costs table should generally be the same as they were disclosed on the Loan Estimate (see section 2.3.1 above), updated to reflect the terms of the legal obligation at consummation, except as specifically discussed below.

Page 4: Disclosures

Page 4 discloses loan features such as assumption rights, late payments and escrow account information. If applicable, there will be details that describe the terms for an adjustable-rate or adjustable-payment mortgage on this page as well. In the Loan Disclosures table, disclose: Information concerning future Assumption of the loan by a subsequent purchaser, Whether the legal obligation contains a Demand Feature that can require early payment of the loan, The terms of the legal obligation that impose a fee for a Late Payment including the amount of time that passes before a fee is imposed and the amount of such fee or how it is calculated, Whether the regular periodic payments can cause the principal balance of the loan to increase, creating Negative Amortization, The creditor's policy in relation to Partial Payments by the consumer, A statement that the consumer is granting a Security Interest in the Property (along with an identification of the Property), and Information related to any Escrow Account held by the servicer (or a statement that an Escrow Account has not been established with a description of estimated property costs during the first year after consummation).

RESPA

RESPA is legislation that regulates closing costs and settlement procedures in real estate transactions. RESPA requires that certain disclosures be provided to consumers (buyers) at various times in the transaction. RESPA prohibits the payment or receipt of any kickbacks or referral that increase the costs related to settlement services. The Purpose of RESPA The purpose of RESPA is to provide consumer protection and to assist home buyers in making informed decisions regarding mortgage loans and the fees and services associated with them. RESPA requires that lenders fully inform consumers about all escrow account practices. RESPA requires that lenders fully explain lender servicing practices to consumers. RESPA requires that all relationships between closing service providers and any other individuals or companies involved in the transaction be explained to the home buyer.

RESPA History

RESPA was written and proposed by the U.S. Department of Housing and Urban Development (HUD) to protect consumers and to regulate the processing of mortgage loans and the related activities and costs. Abusive practices in the lending and closing of mortgage loans in at least some areas of the country led to the writing and enactment of this statute. Questions had arisen and abuses had been identified in loan servicing in several areas. These included: Lack of information for both buyers and sellers regarding the settlement costs involved in the transactions Charges for kickbacks and referral fees that were being included in the settlement costs, inflating the cost to consumers of certain services Requirements that excessive sums be deposited in escrow accounts during loan processing Failures of lenders to pay real estate taxes and insurance premiums in a timely manner from escrow funds Lack of consistency in paperwork, recordkeeping and land title information at the local level. The first section of the RESPA statute of 1974 outlines the reasons RESPA was needed and the purpose the statute was expected to achieve: § 2601. Congressional findings and purpose The Congress finds that significant reforms in the real estate settlement process are needed to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country. The Congress also finds that it has been over two years since the Secretary of Housing and Urban Development and the Administrator of Veterans' Affairs submitted their joint report to the Congress on "Mortgage Settlement Costs" and that the time has come for the recommendations for Federal legislative action made in that report to be implemented It is the purpose of this chapter to effect certain changes in the settlement process for residential real estate that will result In more effective advance disclosure to home buyers and sellers of settlement costs In the elimination of kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services; in a reduction in the amounts home buyers are required to place in escrow accounts established to insure the payment of real estate taxes and insurance; and In significant reform and modernization of local recordkeeping of land title information.

Seller Credits

Seller Credits is the total amount that the seller will pay for items included in the Loan Costs and Other Costs tables, to the extent known, disclosed as a negative number.

Continuity of Contact

Servicers must maintain policies and procedures that are reasonably designed to achieve certain objectives regarding continuity of contact.

How does a consumer indicate an intent to proceed with a transaction?

A consumer indicates intent to proceed with the transaction when the consumer communicates, in any manner, that the consumer chooses to proceed after the Loan Estimate has been delivered, unless a particular manner of communication is required by the creditor. (§ 1026.19(e)(2)(i)(A)) This may include: Oral communication in person immediately upon delivery of the Loan Estimate; Oral communication over the phone, written communication via email, or signing a pre-printed form after receipt of the Loan Estimate. A consumer's silence is not indicative of intent to proceed. (Comment 19(e)(2)(i)(A)-2) The creditor must document this communication to satisfy the record retention requirements of the rules.

National Housing Act (1934)

A reaction to the Great Depression, this legislation was designed to combat problems such as lack of housing, excessive foreclosures and a defunct building industry. The Act authorized the creation of the Federal Housing Administration (FHA). The FHA was later included as a part of HUD (Department of Housing and Urban Development) when it was established in 1976. FHA's purpose is to insure mortgage loans against default to protect lending institutions in case the borrower cannot pay. HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes: utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business. Up until the Consumer Financial Protection Bureau (CFPB) was created, HUD was responsible for the oversight of RESPA and created the HUD-1 closing disclosure form. We'll cover this in more detail later in the course.

In what case would there not be a seller?

A refinance or other loan taken out after the original purchase would not have a seller.

Closing Costs

All the anticipated costs associated for the projected loan closing must be included in this disclosure. These charges are included in the GFE. The HUD Guide for Home Buyers, a pamphlet describing the buying process, must be provided with the GFE and TIL. If the loan has an adjustable feature, the Consumer Handbook on Adjustable Rate Mortgages must also be included with the TIL and GFE. The lender is also required to provide a final Truth-in-Lending at closing. This document will list the actual finance charges and annual percentage rate for the specific transaction.

Electronic Signatures

An electronic signature, or eSignature, is defined in the U.S. Federal ESIGN Act as an "electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record."

Late Payment

An increase in the interest rate triggered by a Late Payment is a charge for late payment. The following are not charges for Late Payment: The right of acceleration; Fees imposed for actual collection costs; Referral and extension charges; or Interest charged at the contract rate after the payment due date.

PATRIOT Act

As a response to the terrorist act on September 11th, 2001, congress enacted the PATRIOT Act. This is an acronym meaning: Providing Appropriate Tools Required to Intercept and Obstruct Terrorism. This bill seeks to restrict money laundering to help fund terrorists. To this end, any regulated financial institution must track ownership of all accounts, deposits, and transactions. Since most mortgages are provided by, sold to, or serviced by federally regulated financial institutions that also accept deposits, lenders are required to obtain photo identification of each applicant. Section 358 of the PATRIOT Act amended the Right to Financial Privacy Act to permit the disclosure of financial information to any intelligence or counterintelligence agency in any investigation related to international terrorism. At times, companies may have to provide this information without customer notification or without a warrant.

E-Sign

As mentioned, in 2000 Congress enacted the Electronic Signatures in Global and National Commerce Act (E-Sign). E-Sign overlaps with UETA, but it is not identical to UETA. E-Sign specifies the legal effect and enforceability of electronic contracts and electronic signatures, but it does not address how to establish the authenticity or validity of those signatures. Under E-Sign, if a state has adopted UETA, the state's law will preempt E-Sign and will govern electronic transactions.

What does 'substantially open for business' mean?

Business function test. Activities that indicate that the creditor is open for substantially all of its business functions include the availability of personnel to make loan disbursements, to open new accounts, and to handle credit transaction inquiries. Activities that indicate that the creditor is not open for substantially all of its business functions include a retailer's merely accepting credit cards for purchases or a bank's having its customer-service windows open only for limited purposes such as deposits and withdrawals, bill paying, and related services.

TIP

Dodd-Frank amended TILA to add a new section that requires that in the case of a residential mortgage loan the creditor must disclose the total amount of interest that the consumer will pay over the life of the loan as a percentage of the principal of the loan. TILA also requires that the amount be computed based on the assumption that the consumer makes each monthly payment in full and on time, and does not make any overpayments. This calculation is the "Total Interest Payment," or "TIP." Simply stated, TIP is the total amount of interest that a consumer will pay over the loan term as a percentage of the loan amount. Calculating the TIP requires algorithms that utilize the assumptions set forth in the requirement to disclose the total interest percentage found on the Loan Estimate disclosure. There is also guidance for lenders for calculating TIP for adjustable rate loans, Step Rate loans and negative amortization loans. TIP is controversial and many commented during the rulemaking period that this would confuse borrowers. In the end, the CFPB commissioned a report that concluded that participants used the TIP as a measure of what they would pay in interest. Participants were also surprised at how much interest they would pay over the life of a mortgage and appreciated the disclosure for this reason. For real estate professionals, being prepared to answer questions about the TIP is no different than answering questions about the Annual Percentage Rate, or APR.

Definitions

Due to this rule, enacted in 2013 and implemented beginning October 3rd, 2015, residential real estate transactions will require the use of the disclosure for almost all transactions. Definitions It is important to understand that there are definitions assigned to the new disclosure rules that may not be the same terminology currently used in the real estate lexicon. The rules ask those in the industry to use terms that may not be common. Closing: The day the borrower would be obligated to the loan note. Business Days: The day the US Postal Service is delivering mail, including Saturday.

Combined TIL GFE

Effective January 10, 2014 the mortgage loan disclosures required under the Truth in Lending Act will be combined with the Good Faith Estimate (GFE) required RESPA. There are several disclosures that need to be given at time of application. Warning regarding negative amortization features. Disclosure of State law anti-deficiency protections. Disclosure regarding creditor's payment policy. Disclosure regarding mandatory escrow impound accounts. Disclosure regarding waiver of escrow account prior to consummation. Disclosure regarding cancellation of escrow accounts after consummation. Disclosure of monthly payment, including escrow at both initial and fully-indexed accrual rate (FIAR) for variable-rate mortgage loan transactions. Repayment analysis disclosure to include amount of escrow payments for taxes and insurance. Disclosure of aggregate amount of settlement charges, amount of charges included in the loan and the amount of such charges the borrower must pay at closing, the approximate amount of the wholesale rate of funds, and the aggregate amount of other fees or required payments in connection with a residential mortgage loan. Disclosure of aggregate amount of mortgage originator fees and the amount of fees paid by the consumer and the creditor. Disclosure of total interest as a percentage of principal. Optional disclosure of appraisal management company fees. Disclosure regarding notice of reset of hybrid adjustable rate mortgage. Loan originator identifier requirement. Consumer notification regarding appraisals for higher-risk mortgages. Consumer notification regarding the right to receive a copy of the appraisal.

Transaction Information

For Transaction Information, disclose the name of the consumer as Borrower, the name of the seller as Seller, and the name of the creditor as Lender. The name and address of each consumer and seller in the transaction must be disclosed. If there is not enough space to show the name and address of all consumers and sellers in the transaction, an additional page may be used and appended to the end of the Closing Disclosure.

Closing Disclosure

For loans entered prior to October 1st, 2015 the mortgage industry has been accustomed to the Lender providing the closing details to a Settlement Agent who would then prepare the HUD-1 form. The Lender would prepare the final Truth in Lending, or TIL, form. Since October 1, 2015 there is only one document, the Closing Disclosure, or CD. The TRID rules make the Lender responsible for both the information and well as the delivery of the Closing Disclosure to the borrower. Many mortgage companies have made the decision to take on both of these responsibilities instead of relying on the settlement agent, but real estate professionals are encouraged to discuss this in advance with the lenders to make certain all parties are communicating properly. The Closing Disclosure has 5 pages. At the completion of this unit the student will be able to: Identify where information is found in the Closing Disclosure Explain the form to clients and customers Determine what information must be provided by the real estate professional in order to complete the form

Agricultural Lending: TAFA/TDAs Role

Funds allocated to TAFA/TDA for the use of the ALG program are used to support the lenders capital and add protection against reasonable risk associated with the loan by honoring a percentage of debt. TAFA is not involved with the negotiation of interest rates, maturity or collateral. TAFA/TDA reviews applications to ensure credibility and eligibility.

Page 1

General information, the Loan Terms table, the Projected Payments table, and the Costs at Closing table are disclosed on the first page of the Closing Disclosure. At the top of page 1 of the Closing Disclosure, disclose Closing Information, Transaction Information, and Loan Information. For Closing Information, disclose the following information: Date Issued is the date the Closing Disclosure is delivered to the consumer, The Closing Date, The Disbursement Date, The name of the Settlement Agent, As File #, the settlement agent's file number, The Property address or location, and For the property securing the loan: Sale Price, Appraised Prop. Value, or Estimated Prop. Value. (§ 1026.38(a)(3)) The Appraised Property Value of the property securing the loan is disclosed for transactions without a seller. The Estimated Property Value of the property securing the loan is disclosed if the creditor has not obtained an appraisal for transactions without a seller. For Transaction Information, disclose the name of the consumer as Borrower, the name of the seller as Seller, and the name of the creditor as Lender. The name and address of each consumer and seller in the transaction must be disclosed. If there is not enough space to show the name and address of all consumers and sellers in the transaction, an additional page may be used and appended to the end of the Closing Disclosure.

What if the consumer amends the application and the creditor can now proceed?

If a consumer amends an application and a creditor determines the amended application may proceed, then the creditor is required to comply with the Loan Estimate requirements, including delivering or mailing a Loan Estimate within three business days of receiving the amended or resubmitted application.

The Home Mortgage Disclosure Act

Immediately after the ECOA the Home Mortgage Disclosure Act (HMDA) was enacted by Congress in 1975 and was implemented by the Federal Reserve Board's Regulation C. On July 21, 2011, the rule-writing authority of Regulation C was transferred to the Consumer Financial Protection Bureau (CFPB). Regulation C, requires lending institutions to report public loan data. In this section of the website, you can find out more about the regulation and its interpretation. Click the icon to watch an additional video regarding the Home Mortgage Disclosure Act. This regulation provides the public loan data that can be used to assist: In determining whether financial institutions are serving the housing needs of their communities; public officials in distributing public-sector investments so as to attract private investment to areas where it is needed; and in identifying possible discriminatory lending patterns. This regulation applies to certain financial institutions, including banks, savings associations, credit unions, and other mortgage lending institutions. Using the loan data submitted by these financial institutions, the Federal Financial Institutions Examination Council (FFIEC) creates aggregate tables for each metropolitan statistical area (MSA) or metropolitan division (MD) (where appropriate), and individual institution disclosure reports.

In 5 Years

In 5 Years includes the following information: The total amount the consumer will have paid in principal, interest, mortgage insurance, and loan costs paid through the end of the 60th month after the due date of the first periodic payment; and The amount of principal paid through the end of the 60th month after the due date of the first periodic payment.

Contact Information

In the Contact Information table, disclose the following information for the Lender, the Mortgage Broker, the consumer's Real Estate Brokerage, the seller's Real Estate Brokerage, and the Settlement Agent in a columnar format: Name, Address, The NMLS or State license ID, as applicable, The Contact name of an individual (and the NMLS or State license ID), Email, and Phone number. Unused columns may be removed and columns may be added for additional parties. EXAMPLE: If there are two real estate brokers representing the seller, a column may be added to identify that party and a column for a party not involved in the transaction may be deleted.

Integrated Mortgage Disclosures: Application

It is important to understand that application is a defined term under the new Rule and the definition explaines what information triggers a creditor's obligation to provide a consumer with a Loan Estimate. Application is defined at § 1026.2(a)(3) and contains six specific pieces of information. They include: The consumer's name The consumer's income The consumer's social security number to obtain a credit report The property address An estimate of the value of the property, and The mortgage loan amount sought This is essentially the same as the existing RESPA definition of application minus what is considered the final catch-all element that is any other information deemed necessary by the loan originator. INSTRUCTOR COMMENT: The Loan Estimate and Closing Disclosure found in the next few sections represent a complete case study and transaction process. The forms are the completed sample documents. Alternative situations are also covered separately throughout the remainder of this unit.

Specific Charges

Loan originator compensation is disclosed as Origination Charges, even though loan originator compensation is not disclosed on the Loan Estimate. Compensation from the consumer to a third-party loan originator is designated as Borrower-Paid At Closing or Before Closing on the Closing Disclosure. Compensation from the creditor to a third-party loan originator is designated as Paid by Others on the Closing Disclosure. Compensation to individual loan originators is not calculated or disclosed on the Closing Disclosure. Items that the consumer could have shopped for, but did not, are disclosed in the Services Borrower Did Not Shop For subheading, regardless of where the item was disclosed on the Loan Estimate. When a consumer chooses a provider that was on the Written List of Providers for a service, that service is listed as Services Borrower Did Not Shop For in the Closing Disclosure Loan Costs table.

Mortgage Servicing

Loan servicers must establish and maintain servicing policies, procedures, and requirements that give the borrower reasonable access to timely and accurate information. This must also include properly evaluating loss mitigation applications; Facilitating oversight of and compliance by service providers, Facilitating transfer of information during servicing transfers, and Informing borrowers of written error resolution and information request procedures.

Does the creditor have to disclose an itemization of the amount financed with the Loan Estimate?

No, the creditor would not disclose an itemization of the amount financed. Some disclosures are required to be made only on the Closing Disclosure and not the Loan Estimate. These include some of the Fed Box disclosures such as the amount financed and the finance charge. These disclosures are required to be on the Closing Disclosure pursuant to § 1026.38(o)(2) and (o)(3). But they're not required to be included on the Loan Estimate. Note, however, that even for the Closing Disclosure, the amount financed is not itemized. Section 1026.38(o)(3) and Comment 38(o)(3)-1 require only the amount financed itself, which is calculated in accordance with § 1026.18(b) and its associated commentary. The itemization of amount financed, which currently may be required pursuant to § 1026.18(c) is not required for transactions disclosed with the Loan Estimate and Closing Disclosure.

Can the designation "N/A" be used where no value is to be disclosed on the Loan Estimate?

No. the designation "N/A" cannot be used where no value is to be disclosed. As the Rule makes clear, the term "N/A" may not be used on the Loan Estimate. In general, when a disclosure is not applicable, that disclosure is either omitted from the Loan Estimate, or left blank.

Ability to Repay

On January 13, 2013 the CFPB issued their final rule regarding "Ability to Repay (ATR)". This rule covers virtually all closed end mortgages with application dates on or after January 10, 2014. There are eight required underwriting guidelines that must be followed. These are: Current or reasonably expected income or assets (other than the value of the property that secures the loan) that will be used to repay the loan. Current employment status if relying on this income to qualify. Monthly mortgage payment for this loan. If it is an adjustable rate mortgage, the qualifying will be based on the higher of the introductory rate or the fully indexed rate. Monthly payment on any simultaneous loan(s) secured by the subject property. Other expenses related to the property including private mortgage insurance, hazard insurance, property taxes, HOA fees, ground rent, etc. Other debts including, but not limited to alimony, maintenance, child support, installment loans, student loans, and credit card payments. Monthly debt-to-income ratio using the total of the housing expense and other monthly obligations as a ratio of gross monthly income. Credit history. Lenders can use other factors in their underwriting decision in addition to these eight items, but they must use these eight factors in making the credit decision. Verification can be obtained using accepted underwriting standards. Lenders are considered in compliance by originating "Qualified Mortgages (QM)". A loan is considered a "qualified mortgage" if it: Provides regular periodic payments Does not allow negative amortization, balloon payments, interest only payments, or terms exceeding 30 years. Total points and fees do not exceed 3% of the loan amount (loans smaller than $100,000 have greater limits). With adjustable loans, lenders must use the maximum interest rate that is allowed during the first five years must for qualifying purposes. All monthly obligations including, but not limited to, current debt obligations, alimony, maintenance, and child support must be used to determine the total debt to income ratio. The total debt to income ratio (often referred to as the "back ratio") does not exceed 43%. The bureau has issued temporary rules that give the lender "Safe Harbor" from the 43% debt-to-income ratio if the loan is eligible for purchase by Fannie Mae, Freddie Mac, VA, FHA, or the USDA. However, these loans must not have an APR that exceeds the Average Prime Offer Rate (APOR) as published by Freddie Mac by more than 1.5% for a first mortgage and 3.5% for subordinate financing. Loans that are exempted from the ATR rule include Home Equity Lines of Credit (HELOCs), Reverse Mortgages, Time shares, construction, or bridge loans. Also non-standard loans such as loan modifications, no cash out refinances (if the monthly payment decreases by at least 10%), and loans made in Rural Area are exempt. Appraisals: Lenders must provide borrowers with a free copy of any written appraisal or valuation used in the lending decision.

NFIP (1968)

The 1968 National Flood Insurance Act identified high hazard flood- prone areas and made federally backed flood insurance available for the first time, strictly on an optional basis. Before 1968, flood insurance was not available from either the public or private sector. Standard homeowners insurance has never covered flood damage. The National Flood Insurance Reform Act of 1994, which amended the 1968 act, mandated the purchase of flood insurance for any property in a designated flood hazard area that is financed by a federally regulated lending institution. Almost all real estate loans are originated by, sold to, or serviced by federally regulated institutions. Therefore, the purchase of flood insurance is almost always required when a property is in the flood plain. Although the purpose of this act was to get homeowners to purchase flood insurance, there was no requirement (or penalty) that made them do so. This act specifically penalizes lenders who violate this provision. This is why lenders are so inflexible on their requirement to purchase flood insurance. A lender "does not" have the right to waive the flood insurance requirement under any circumstances. Flood insurance will be covered later this course. On July 6th President Obama has signed the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 into law. The new law finally creates a long term extension of the National Flood Insurance Program (NFIP) for five years to 2017. The law also requires changes and reforms to the program. FEMA has announced that more technical guidance will be provided over the next couple of month, and we will post that information as it comes out. The Senate and House passed the legislation on June 29 as part of a conference report package along with the Surface Transportation Act of 2012 and an extension of the Federal Direct Stafford Student Loan program. The legislation that will extend the NFIP for five years, until Sept. 30, 2017, It calls for changes that include phasing out subsidies for some properties, raising the cap on any mandated annual premium increases and allows multifamily properties to purchase NFIP policies. Some changes were also made in response to the programs lingering debt that resulted from the horible hurricane year of 2005 that included hurricane Katrina. These include imposing minimum deductibles for flood claims, requiring the program administrator to develop a plan for repaying the approximately $19 billion in debt the NFIP currently holds, and establishing a mapping advisory council. The new law will also require a study on the prospect of adding business interruption and additional living expenses coverage to the program. The Federal Insurance Office (FIO) will also study and submit a report to Congress on natural disaster insurance issues and possible legislative solutions. These will all be completed during the five year extension approved under the law.

CFPB

The Consumer Finance Protection Bureau (CFPB) was created by the Dodd-Frank Finance Reform Act. The Bureau has broad regulatory authority and jurisdiction over banks, credit unions, securities firms, payday lenders, debt collectors, mortgage servicing operations, foreclosure relief services, and other financial companies. It consolidates responsibilities from other federal regulatory agencies, including the Federal Reserve, Federal Trade Commission, Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration, and the Department of Housing and Urban Development. The bureau is an independent unit of the United States Federal Reserve that is charged with rulemaking, research, congressional testimony, enforcement, and litigation powers. The objective is to have a single federal agency to respond to complaints, unfair or deceptive practices, abusive acts, and discrimination. Effective on Jul 21, 2011, the Dodd Frank Act transferred rulemaking authority for the Truth in Lending Act (TILA) (Regulation Z), the Real Estate Settlement Procedures Act (RESPA) (Regulation X), the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), and the Home Ownership and Equity Protection Act of 1994 (HOEPA). There are many new requirements that affect mortgage origination and loan servicing.

Contract for Deed Conversion Initiative

The Contract for Deed Conversion Initiative is available to residents who are currently purchasing residential property within 150 miles of the Texas-Mexico border and reside in a colonia identified by the Texas Water Development Board or meet the Department's definition of a colonia are eligible to apply for conversion assistance. The Department is currently accepting applications from residents interested in converting their contract for deed into a traditional note and deed of trust.

Costs at Closing

The Costs at Closing section again will reflect the same information as on the final LE, and will be updated to include any changes in calculations. The Costs at Closing table discloses: The total amount disclosed as Total Closing Costs in the Other Costs table disclosed on page 2 of the Closing Disclosure. Total Closing Costs are also itemized to show the Total Loan Costs, the Total Other Costs, and Lender Credits from the Total Closing Costs subheading disclosed on page 2 of the Closing Disclosure, and The estimated amount of cash the consumer will pay at, or receive from, closing as Cash to Close. This amount is the same as the Cash to Close calculated in the Calculating Cash to Close table on page 3 of the Closing Disclosure. Disclose the Alternative Costs at Closing table for transactions without a seller where the Alternative Estimated Costs at Closing table was disclosed on the Loan Estimate. Check boxes are used in order to indicate whether the amount of cash is due from or paid to the consumer at consummation. If the Alternative Costs at Closing table is used, then the Alternative Calculating Cash to Close on page 3 of the Closing Disclosure must also be used.

Integrated Mortgage Disclosures: Costs at Closing

The Costs at Closing table shows the Estimated Closing Costs which are calculated in the same manner as the Total Closing Costs disclosed on page 2 of the Loan Estimate. The Total Closing Costs are also itemized to show from page 2 of the Loan Estimate the following items: The total of the Loan Costs table, The total of the Other Costs table, and Lender Credits in the Total Closing Costs subheading. (§ 1026.37(d)(1)(i)) The estimated amount of cash the consumer will be expected to pay at closing is also shown as Estimated Cash to Close. This amount is the same as the Estimated Cash to Close, from the Calculating Cash to Close table on page 2 of the Loan Estimate.

Colonia Self-Help Centers (SHC)

The Department was given a legislative directive to establish SHC's in Cameron/Willacy, El Paso, Hidalgo, Starr, and Webb counties; two additional centers opened in Maverick and Val Verde County. SHC's provide on-site technical assistance to low and very low-income individuals / families on housing, and community development activities, infrastructure improvements, and outreach and education. Operation is carried out through a local nonprofit organization, local community action agency, or local housing authority that has demonstrated the ability to carry out the functions of a SHC.

ECOA (1974)

The Federal Equal Credit Opportunity Act (ECOA) (1974) seeks to prevent discrimination in the loan process by requiring that financial institutions make loans on an equal basis to all creditworthy customers without regard to discriminatory factors. The ECOA first enabled consumers to: Obtain a copy of their own credit report. Require credit reporting for married women. Prohibit discrimination on the additional basis of race, religion, sex, age or public assistance income.

HTF Homebuyer Assistance Program (HTF HBA)

The Housing Trust Fund's Homebuyer Assistance Program provides funds to eligible entities which offer down payment, closing cost and/or gap financing for purchase of a principal residence for homebuyers earning up to 80 percent area median family income. This assistance is offered through TDHCA's state funded Housing Trust Fund(since discontinued).

Integrated Mortgage Disclosures: Projected Payments

The Projected Payments table shows estimates of the periodic payments that the consumer will make over the life of the loan. Creditors must disclose estimates of the following periodic payment amounts in the Projected Payments table: Principal & Interest; Mortgage Insurance; Estimated Escrow; Estimated Total Monthly Payment; and Estimated Taxes, Insurance, & Assessments, even if not paid with escrow funds. The Projected Payments table also describes whether taxes, insurance, and other assessments will be paid with funds in the consumer's escrow account. The instructions for this section tell lenders to disclose the initial periodic payment in one column for each of Principal & Interest, Mortgage Insurance, and Estimated Escrow. Depending on the features of the loan, subsequent periodic payments also may be required to be disclosed. The Periodic Payment is the regularly scheduled payment of Principal & Interest, Mortgage Insurance, and Estimated Escrow. Subsequent Periodic Payments may be different than the initial payment amount. This is based on what are known as triggering events. If any of these events occur during the life of the loan then an additional column is entered showing the amount of the periodic payments after the triggering event. Mortgage Insurance includes any mortgage guarantee that provides coverage similar to mortgage insurance (such as a United States Department of Veterans Affairs or United States Department of Agriculture guarantee), even if not technically considered insurance under State or other applicable law. In the table on this page, the mortgage insurance (MI) is removed after 7 years. This is because the lender is obligated to remove the MI at that time. Even if a borrower can ask for MI to be removed earlier, this table will show only the lenders obligations. Estimated Escrow In this section the amount the borrower will pay each month, and if an item will go into an escrow account, are disclosed. Note that if an escrow account will not be established there will be a "0" in this space. You will see a "-" symbol here if there will be an escrow account but it will be closed during the time-frame attributable to the applicable periodic payment. Fun Fact: The maximum number of columns the periodic payments table may contain is four. If a loan has more than four triggering events, the lender will show a range of payments in the fourth column that reflects all remaining periodic payments not shown in the first three columns.

RFPA (1978)

The Right to Financial Privacy Act of 1978 protects the confidentiality of personal financial records by creating a statutory Fourth Amendment protection for bank records. The Act was passed in response to a U. S. Supreme Court decision in 1976 where the court found that bank customers had no legal right of privacy relating their personal financial records held by financial institutions.

Agricultural Lending: Agricultural Loan Guarantee Program

The Texas Agricultural Finance Authority (TAFA) Agricultural Loan Guarantee Program (ALG) provides financial assistance to establish or enhance farming or ranching operations or to establish an agricultural-related business. This program provides assistance in the form of guarantees based on a tiered structure, not to exceed $500,000 or 80% of the loan amount, whichever is less.

Texas Mortgage Credit Certificate Program

The Texas Mortgage Credit Certificate Program allows qualified buyers to claim a credit of up to $2,000 against federal taxes based on a percentage of annual mortgage interest paid. It increases a family's disposable income by reducing its federal income tax obligation. The tax credit is valid for the term of the mortgage loan as long as the borrower occupies the property as their primary residence.

Right to Rescind

The Three Day Right of Rescission: It is intended to protect the homeowner from losing a home to unscrupulous sellers of home improvements, appliances, or furniture, who secure the credit advance by taking a second mortgage on the purchaser's home. Any loan entered into in one's home (if the transaction takes place in one's home), or using a primary residence for security for a loan, must include three or more business days in which the transaction can be cancelled. This requirement does not apply when the mortgage is used for the purchase or construction of the borrower's residential real estate. It also does not apply for a refinance of a rental or commercial property, or a second home. It does apply for a refinance of a primary residence. The right of rescission in a consumer credit transaction is three business days. Sundays and holidays are not counted as business days. If the lender fails to notify the borrower of the right to rescind, the right continues for three years or until the property is sold. If the borrower exercises the right to rescind, any money or goods received must be returned within three days; for this reason, creditors usually delay funding until this period has expired. The three day right of rescission cannot be waived under any circumstances. If the borrower rescinds the transaction, all monies paid, including up front application and appraisal fees, must be returned.

TIL/ Reg Z

The Truth-In-Lending Law is part of the Federal Consumer Credit Protection Act of 1969. TIL empowered the Federal Reserve Board to draft and implement regulations known as Regulation Z (Reg. Z). REG Z became mandatory in 1982. The Federal Trade Commission (FTC) enforces Regulation Z for the real estate industry, as well as the, auto and most other industries. The Office of Thrift Supervision (OTS) enforces Reg. Z for savings and loans. The Federal Reserve Board enforces it for banks. Reg. Z ensures that borrowers are given meaningful information with respect to the cost of consumer credit. Through this disclosure, consumers may compare "apples to apples" and avoid the uninformed use of credit. All lenders are required to compare their total charges to an equivalent interest rate, referred to as the Annual Percentage Rate (APR). There are many methods for computing interest. The most common is the simple interest method. With simple interest, the interest is recalculated periodically based on the remaining principle. The payment stays the same, but the interest portion decreases the same amount as the principle portion increases. For instance, a $5,000 loan for five years at 10% would have a monthly payment of $106.24. Another way to calculate interest is with an 'add on interest' loan. With this loan, the entire interest is calculated up front. A $5,000 five year loan at 10% has a yearly interest of $500.00. The total interest of $2500 ($500 times five years) is added to the original $5,000 loan for a total payoff of $7500. Since the loan is for five years, the monthly payments would be $125.00. Both these loans can promise the same interest rate, but the second costs significantly more. In this example, the lender could offer a 5.5% rate that would have the same payments ($106.25) as the 10% simple interest loan. The uninformed customer, however, would see the 5.5% rate and assume it was a much better deal. The law requires disclosure for residential real estate only. The law does not establish any minimum or maximum interest rates nor require any charge for credit.

Federal Uniform Commercial Code Bulk Transfer Act (1966)

The Uniform Commercial Code (UCC) Bulk Transfer Act protects creditors (sources of supply) in the event that transfer of stock in trade is in bulk. Creditors in this situation are in a particularly unsecured position. Many businesses buy on consignment - especially those that deal in seasonal merchandise(e.g., bikinis & fertilizer - consumers all buy on same weekend). The manufacturer will sell his product to the storeowner and give him up to 90 days to pay for the merchandise. The storeowner could then sell the business and inventory, leaving the manufacturer holding the (empty) bag. Compliance with the UCC code is mandatory in commercial bulk sales. Provisions of the Bulk Transfer Act A complete list of existing creditors and an identifiable schedule of property (inventory) must be compiled and affirmed by the seller. (Affidavit should be completed even if there are no existing creditors.) List and schedule must be made available for 10 days prior and six months after the transfer. Notice of the proposed transfer must be prepared and delivered to all listed creditors. Seller (or the seller's agent) is responsible for the completeness and accuracy of the list. The UCC also includes regulations relating to sales of commercial paper, bank deposits, accounts receivable, letters of credit, warehouse receipts, bills of lading, investment securities, and other documents of title.

UETA

The Uniform Electronic Transactions Act (UETA) was published by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1999. It was adopted in Texas in 2001 (effective 1/1/2002) and is codified as Chapter 43, Business and Commerce Code. UETA removes barriers to electronic commerce by establishing electronic records and signatures as the legal equivalent of paper writings and manual signatures. UETA is purely a procedural law that permits electronic records and signatures without changing existing substantive laws. UETA does not require the use of electronic signatures; it merely permits them and gives them equal footing with manual signatures. UETA defines an electronic signature as "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record." No specific format is provided. Both parties to a transaction must agree to conduct the transaction electronically. UETA also allows a person who has agreed to an electronic transaction to withhold his or her consent in connection with other transactions. This would apply specifically to a provision in an agreement that required a person to consent to using electronic signatures in future transactions.

Provisions of RFPA

The act states that no Government authority may have access to, or obtain copies of, or the information contained in, the financial records of any customer from a financial institution except for: Customer Authorization: A customer can authorize disclosure if he furnishes to the financial institution and to the Government authority a signed and dated disclosure. This disclosure is limited by the following provisions. Such authorization may not exceed three years. The customer may revoke this authorization at any time. This authorization must identify the financial records in question. Such authorization must not be required as a condition of doing business with any financial institution. Subpoena or summons. Qualified search warrant. Judicial subpoena. Formal written request. No financial institution, officer, employee, or agent of a financial institution may provide to any government authority access to, or copies of, or the information contained in, the financial records of any customer with the following exceptions. To give he name of an individual to a government authority in response to a possible violation of any statute or regulation. To use the information to prove a security interest, prove a claim in bankruptcy, or otherwise use the information to collect a debt with regard to a government loan, loan guarantee, etc. To provide information to a government authority to assist in processing a loan, a grant, or a guarantee administered by a federal authority.

Due From Borrower at Closing

The amount Due from Borrower at Closing is the sum of: Sale Price of Property, Sale Price of Any Personal Property Included in Sale, Closing Costs Paid at Closing, Other consumer charges, Adjustments, and Adjustments for Items Paid by the Seller in Advance, pursuant to the terms of the real estate sale contract. Personal Property is defined by State law, but could include such items as carpets, drapes, and appliances. Manufactured homes are not considered personal property for the Closing Disclosure. Closing Costs Paid at Closing is the amount designated as Borrower-Paid At Closing on page 2 of the Closing Disclosure.

RESPA Penalties

The consequences of RESPA violations are serious. They include: Criminal Prosecution and Penalties: Section 8 of RESPA says: Any person or persons who violate the provisions of this section shall be fined not more than $10,000, or imprisoned for not more than one year, or both, for each violation. There is no specification that the violation must be "willful" or "knowing" for criminal penalties to be imposed. Civil Prosecution and Penalties: RESPA permits individuals to bring civil suits to recover an amount that is three times the settlement service charge, plus legal fees. Both "Giver" and "Receiver" are Liable The CFPB will consider the "giver" (the party who offers a referral fee) and the "receiver" (the party who accepts the referral fee) to be equally liable and subject to the penalties outlined above. Fines for most RESPA violations begin at $2,000 per occurrence and go up from there. For business entities the Dodd-Frank Reform Act increased fines to $1,000,000 or 1% of the total net value of the business. In other words, a real estate brokerage that is found to improperly disclose their relationships with affiliated title companies could be fined $1,000,000 and be forced to demonstrate proper disclosure over a period of years before enforcement ends.

Consumer's Consent

The consumer must give consent in order to allow eSignatures. Consent to conduct the transaction electronically (and E-Sign) requires that consent itself be communicated electronically. Initial consent may be given in paper or electronically. Since the definition of an electronic signature is broad, it appears that consent could be established by any reasonable means. A court might hold that "reasonable means" could include the click of a mouse, or it might require a more sophisticated means of establishing consent. Until custom and practice develop with respect to electronic transactions involving signatures, most experts are suggesting that secure platforms involving verifiable signatures be employed (for example, VeriSign or Entrust). Under UETA, the consumer must be able to decline to use electronic means to transact. E-Sign specifically allows a consumer to withdraw his or her consent to the use of electronic records at any point in the transaction. If a consumer who initially gives consent to the use of electronic records withdraws that consent, the parties will need to complete the rest of the transaction in paper and ink format. Brokers will need to obtain the consent of both the buyer and the seller to conduct the transaction electronically. If only one consents, the broker may continue to have an electronic relationship with him or her; however, the relationship with the other party would need to be handled in paper format. Privacy is a critical issue. Many consumers are very wary of using electronic means to conduct business. Before relying on electronic signatures in a transaction, it seems prudent to; Obtain the necessary consents to the electronic transaction at the outset (both consent to the receipt of electronic records and consent to the use of electronic signatures), Disclose to consumers that they have the right to withdraw their consent at any point in the transaction, and Provide adequate means to withdraw the consent (providing notice of any ramifications, such as additional costs or a delay in the transaction because of switching to a paper system).

Other Disclosures

The creditor discloses in the Other Disclosures table: A statement related to the consumer's rights in relation to any Appraisal conducted for the property, A statement informing the consumer of consequences of nonpayment, what constitutes default, when a creditor can accelerate maturity, and prepayment rebates and penalties pursuant to Contract Details, A statement of whether State law provides for continued consumer responsibility for any Liability after Foreclosure, A statement concerning the consumer's ability to Refinance the loan, and A statement concerning the extent that interest on the loan can be included as a Tax Deduction by the consumer. Appraisal In both the LE and the CD, a statement concerning the Appraisal must be provided for: Higher-priced Mortgage Loans, and Loans covered by the Equal Credit Opportunity Act. If the loan is a Higher-priced Mortgage Loan, but is not covered by the Equal Credit Opportunity Act, the word "promptly" may be removed from the language provided on the model form.

Business Day

The definitions of what constitutes a business day under the TRID RUles reside in TILA. There are two different business day definitions. Many lending institutions still refer to one as "general" and the other as "precise". For delivery of the Loan Estimate they use the "general" definition, where you count Saturdays if you are "open to the public for carrying on substantially all of its business functions." For the most part the rest of the Integrated Disclosure business day references deal delays (for mailing or closing). These delays all use the "precise" definition, all calendar days except Sundays and Federal holidays. Both definitions work in the bank's favor. You don't have to count days you aren't open (i.e. Saturdays) in order to get disclosures prepared and delivered and you do get to count days you're not open (i.e. Saturdays) in order for a delay to expire (i.e. mail time, closing delay, etc.). So, Saturday counts as a business day as long as the lender is substantially open for business. Specific National holidays are spelled out in rule.

Finance Charges

The dollar total of all costs the consumer must pay as a condition of obtaining credit. Included are interest, service charges, carrying charges, some fees (loan, assumption, finder's), insurance premiums (if required by the creditor), and loan discount points (if paid by the borrower). Required flood insurance is also included in the finance charges. Any prepayment penalties must be disclosed. Late fees, including amount and grace period, must be stated. Bona fide real estate purchase costs that would be paid regardless of whether credit is extended (legal fees, surveys, title insurance, abstract of title, recording fees, title examination fees) are NOT included in the finance charge.

TIL Disclosure

The lender must provide the borrower with a disclosure statement, if the following two conditions both exist. Loan maker must be a creditor or an arranger of credit. A creditor arranges a consumer loan subject to finance charges (secured by a dwelling) more than five times during a calendar year; OR regularly makes installment loans, payable in more than four installments after the down payment, with or without interest. An arranger of credit regularly puts a loan package together between a moneylender and a borrower. For example, an arranger of credit would be a mortgage banker or broker. Loan must be a consumer loan. Regulation Z implies that all loans are consumer loans except: Loans made to partnerships, corporations, associations or government agencies. Commercial loans such as construction loans. Loans made to finance rental properties that are not owner occupied or not expected to be owner occupied within one year. Loans made to finance rental properties having five or more units, even if owner occupied. Loans for more than $25,000 (except loans for the purchase or refinance of one's personal residence, which are always considered consumer loans, regardless of amount). Disclosure must be made before the credit transaction is consummated (contractually obligated). This condition eliminates option-to-purchase contracts from disclosure (buyer is not at that time obligated to mortgage). The following disclosures must be provided by the lender within three days of application. These are all included in the Truth-in-Lending Disclosure (TIL) and the Good Faith Estimate (GFE).

Annual Percentage Rate (APR)

The total finance charge (nominal interest rate plus total finance charges, as determined above) divided by the total dollar amount of the loan calculated to the nearest 1/8 of 1 percent. APR will normally be slightly higher than the interest rate expressed in the mortgage note. If there are a lot of closing costs, this difference will be larger. A 6.5% loan with two points has an APR of approximately 6.75%. If a lender pays all closing costs, the APR will be identical to the note rate. If the lender also includes the prepaid items, the APR may be slightly lower than the note rate.

Graham-Leach-Bliley Financial Modernization Act of 1999

This act was designed to protect an individual's privacy by limiting how and what information can be shared or sold between businesses or corporations. Companies are required to give their customers privacy notices that explain the institutions information-sharing practices. In turn, consumers have the right to limit some, but not all, of the sharing of their information. This act applies to all financial institutions, or companies that obtain or use financial information. These include, but are not limited to, mortgage lenders, mortgage brokers, investment advisors, tax preparers, debt collectors, and providers of real estate settlement services. The Federal Trade Commission (FTC) has the authority to enforce these laws with respect to financial institutions that are not covered by banking regulations. This notice must be a clear, conspicuous, and accurate statement of the company's privacy practices. It should include what information the company collects, with whom it shares the information, and how it safeguards this information. It must include the following: Must be delivered annually. Delivery can be in person or by mail. It cannot just be posted. Must give the customer the ability to opt out. This can include a toll free number to call or a preprinted mail- in form. Must give the customer the ability to say no. Only Applies to Non-Public Information: Mortgage companies are free to release any information that is included on a deed or deed of trust that is recorded and becomes public information. Applies Only to Individuals: Business or commercial information is not covered by this act. Differentiates Between Consumers and Customers: A consumer is an individual who obtains or has obtained a financial product or service for personal, family, or household use. A customer is a consumer with a continuing relationship. Only customers are required to be notified of the institution's privacy policy. Consumers only need to be notified if an institution shares information with non-affiliated companies. Non-Opt-Out Provisions There are certain situations where the customer cannot opt out, such as when a company contracts for outside services. For instance, a financial institution can share information with companies that provide essential services, such as loan processing or document preparation services, and data processing. A lender may hire a company to mail out monthly mortgage statements. However, any company that receives information through a non-opt-out provision cannot share or sell the information to other organizations or use it for their own marketing purposes. This act also impacts how a company conducts business. For example, a financial institution cannot disclose their customers' account numbers to non-affiliated companies, even if the individuals have not opted out of sharing their information. It also prohibits "pretexting"-the practice of obtaining customer information from financial institutions under false pretenses.

Texas Bootstrap Loan Program

This is a self-help construction program to provide very low-income families an opportunity to help themselves through the form of sweat equity. Participants under this program are required to provide at least 65 percent of the labor necessary to build or rehabilitate the home. Nonprofit organizations can combine these funds with other sources; however, all combined loans cannot exceed $90,000 per unit. The program is administered through TDHCA's Colonia Self-help Centers and State Certified Owner-Builder Housing Programs across the state.

Four Main Categories

Up to four main categories of costs are disclosed on page 2 of the Loan Estimate. These are; A good-faith itemization of the Loan Costs and Other Costs associated with the loan. A Calculating Cash to Close table that shows how the amount of cash needed at closing is calculated. For transactions with adjustable monthly payments, an Adjustable Payments (AP) Table with relevant information about how the monthly payments will change. For transactions with adjustable interest rates, an Adjustable Interest Rate (AIR) Table with relevant information about how the interest rate will change. Loan Costs Loan Costs are disclosed in three subheadings, each of which is subtotaled. These are: Origination Charges, Services You Cannot Shop For, and Services You Can Shop For. The sum of these three subtotals is disclosed as the Total Loan Costs.

Adjustable Payments (AP) Table

When adjustable payments are a loan feature then page 4 will also include the AP Table. The AP Table will be disclosed when the period principal and interest payment may change after consummation, but not because of a change to the interest rate, or the loan is a seasonal payment product. This same information would be disclosed in the LE if these features exist. The Adjustable Interest Rate (AIR) Table will be disclosed when the loan's interest rate may increase after consummation.

Escrow Account

When an Escrow Account is established, the disclosure will include: The amount of Escrowed Property Costs over Year 1 with a list of the costs that will be paid by the Escrow Account, The amount of Non-Escrowed Property Costs over Year 1 with a list of the costs that will not be paid by the Escrow Account (to the extent there is room to list the costs in the space provided), Initial Escrow Payment, and Monthly Escrow Payment. When an Escrow Account is not established, disclose: The amount of Estimated Property Costs over Year 1, and The amount of any Escrow Waiver Fee imposed for waiving the creation of an Escrow Account with the loan. Property Costs include: Property Taxes, Homeowner's Insurance, Charges imposed by a cooperative, condominium or homeowners association, Ground rent, Leasehold payments, and Certain insurance premiums or charges if required by the lender. The Initial Escrow Payment is the same amount disclosed as the subtotal of the Initial Payment at Closing on page 2 of the Closing Disclosure

TILA-RESPA Integrated Disclosures (TRID)

When it comes to the delivery and receipt of the two new disclosures, the Loan Estimate should have less of an impact on the overall transaction than the Closing Disclosure. As long as the lender issues the LE within three days after receiving all six of the required elements of an application, that timeline should be met easily. Issues may arise if there is a change and a new LE must be issued. Of larger concern is the requirement that a Closing Disclosure be delivered to the borrower 3 days prior to consummation (closing) and settlement. Concerns relating to delivery method and the borrowers acknowledgement of receipt could alter the closing timeline. Here we look at two methods of delivery and when the three-day clock will start before closing. Email: If the closing disclosure is sent via email and no confirmation of receipt is received you must assume that the email will be opened in three days. This means that unless a read receipt is returned you will start a three day clock before the three day disclosure requirement is met. This means that a closing disclosure sent via email with no read receipt requires a six day window prior to closing. Overnight Delivery: if the Closing Disclosure is sent via overnight delivery (UPS, FedEx, USPS or other) the receipt that the package was delivered is not sufficient to assume that the buyer got the package. The receipt that it was signed for or left at the door does not confirm that the buyer received the disclosure at that time. At this time the three day rule is not aspirational but instead is a firm requirement. Here again you would start a three day clock prior to the three day notice requirement being met, or six days. Waiver of Three Day Rule Under no circumstance can the lender, seller, agent or title company receive a waiver of the three day requirement. Buyers can only get a waiver if there is a bona fide personal financial emergency. What constitutes an emergency is narrowly defined to a foreclosure.

Are there any restrictions on how many days before consummation a revised Loan Estimate may be provided?

Yes. The creditor may not provide a revised Loan Estimate on or after the date it provides the Closing Disclosure. The creditor must ensure that the consumer receives the revised Loan Estimate no later than four business days prior to consummation. If the creditor is mailing the revised Loan Estimate and relying upon the 3 business day mailbox rule, the creditor would need to place in the mail the Loan Estimate no later than seven business days before consummation of the transaction to allow 3 business days for receipt. (§ 1026.19(e)4 ; Comment 19(e)(4)(i)-2) As discussed in section 11.2 below regarding the Closing Disclosure, when a revised Loan Estimate is provided in person, it is considered received by the consumer on the day it is provided. If it is mailed or delivered electronically, the consumer is considered to have received it three business days after it is delivered or placed in the mail. (§ 1026.19(e)(1)(iv) and commentary). However, if the creditor has evidence that the consumer received the revised Loan Estimate earlier than three business days after it is mailed or delivered, it may rely on that evidence and consider it to be received on that date. (Comments 19(e)(1)(iv)-1 and -2) (See also discussion above in section 11.3 of this guide on similar receipt rule under § 1026.19(e)(1)(iv) and commentary regarding the Closing Disclosure.)

Closing Costs Financed

(Paid from Your Loan Amount) is calculated by subtracting the estimated total amount of payments to third parties not otherwise disclosed in the Loan Costs and Other Costs tables from the Loan Amount disclosed on page 1 of the Loan Estimate. If the result of the calculation is a positive number, Closing Costs Financed (Paid from Your Loan Amount) is that amount, disclosed as a negative number, but only to the extent that it does not exceed the amount of Lender Credits. If the result of the calculation is zero or negative, then Closing Costs Financed (paid from Your Loan Amount) is $0.

FIRREA (1989)

A comprehensive law sometimes referred to as the "savings and loan bailout bill," the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) (1989) provides guidelines for the regulation of financial institutions. FIRREA created such bodies as the Savings Association Insurance Fund (SAIF), the Bank Insurance Fund (BIF), and the Resolution Trust Corporation (RTC). This bill was passed to help the economy recover from the many Savings and Loan failures of the mid 1980s.

Paid to the Seller

Adjustments due from the consumer to be paid to the seller are disclosed in two places. First, amounts owed by the consumer that are neither disclosed on Closing Disclosure page 2 nor specifically required to be disclosed as Due from Borrower at Closing. Examples of these amounts include: A balance in a seller's reserve account transferred to the consumer in connection with an assumed loan, Rent that the consumer will collect after closing for a period of time prior to the closing, and The treatment of any tenant security deposit. Second, additional adjustments are disclosed along with the time-period associated with the adjustment. Examples include: Taxes paid in advance for an entire year when the closing occurs prior to the expiration of the year, Flood or hazard insurance premiums when the consumer is being substituted as an insured under the same policy, Mortgage insurance in connection with an assumed loan, Planned unit development or condominium association assessments paid in advance, Fuel or other supplies on hand purchased by the seller which the consumer will use when the consumer takes possession of the property, and Ground rent paid in advance by the seller.

Adjustments for Items Unpaid by Seller

Adjustments for items unpaid by Seller are amounts due to the consumer to be paid by the seller and are disclosed in two places. First, items are disclosed along with the time-period associated with the item. EXAMPLE: Taxes paid in arrears for an entire year when the closing occurs prior the start of the year, Flood or hazard insurance premiums when the consumer is being substituted as an insured under the same policy, Mortgage insurance in connection with an assumed loan, Planned unit development or condominium assessments not yet paid, and Ground rent not yet paid by the seller. Second, additional amounts owed by the seller that are not disclosed on page 2 or specifically included as Due from Seller at Closing. Examples of these amounts include: Utilities used but not paid for by the seller, Rent collected in advance by the seller for a period extending beyond the closing date, and Interest on loan assumptions.

Lender Credits

All general lender credits, regardless of their reason or source, are included as Lender Credits. However, if the lender credit is attributable to a charge listed on Closing Disclosure page 2, then the amount should be listed with the item and designated as Paid By Others. A designation of (L) can be listed with the amount to indicate that the creditor pays the item at consummation. The creditor should include the amount of any offset to resolve an excess charge by the creditor as Lender Credits. A statement that such an amount is paid by the creditor to offset an excess charge, with funds other than closing funds, is also included as part of Lender Credits.

TDHCA

Commonly referred to as the TDHCA, the Texas Department of Housing and Community Affairs' mission is to help Texans achieve an improved quality of life through community development. To accomplish this mission the TDHCA acts as a conduit for grants and funds from the state and federal level as well as partnerships with private investors and lenders. The TDHCA also operates as a housing finance agency. For Texans who qualify for assistance based on their incomes, the TDHCA serves as a financial and administrative resource to help provide essential services as well as affordable housing opportunities. The Department's funds are administered to local residents through partnerships with one or more of the following: Public Housing Authorities Private Developers Cities and counties that do not receive federal funds directly Non-profit and community-based organizations The TDHCA is responsible for affordable housing, housing related and community service programs in Texas. The TDHCA is also responsible for the regulation of the state's manufactured housing industry. The TDHCA certifies Community Housing Development Organizations (CHDOs) and licenses manufactured housing retailers, brokers and salespersons. Manufactured housing licenses are handled through the Manufactured Housing Division or MHD. As you can see from the information here the MHD has its own board and executive director responsible for carrying out and directing the functions of the agency.

Due to Seller at Closing

Disclose the amount Due to Seller at Closing as the sum of: The Sale Price of the Property, Sale Price of Any Personal Property Included in Sale, Adjustments, and Adjustments for Items Paid by Seller in Advance due to the seller pursuant to the terms of the real estate sales contract.

RFPA and Suspicious Activity

Financial institutions and their employees have complete immunity from civil liability for the reporting of known or suspected criminal offenses or suspicious activity. This disclosure is made by filing a Suspicious Activity Report (SAR). A provision of the Money Laundering Act requires Financial institutions to file a SAR if any of the following information is discovered: Insider abuse of a financial institution. Federal crimes against, or involving transactions conducted through, a financial institution that exceeds $5,000 with an identified suspect, or $25,000 if a suspect cannot be identified. Transactions that exceed $5,000 that the institution knows, or suspects, are designed to evade regulations of the Bankruptcy Secrecy Act. Transactions that exceed $5,000 if the institution suspects are from illegal activities, or have no apparent lawful purpose. Cash transactions that exceed $10,000 in one transaction, or two or more related transactions. The $10,000 limit applies to all transactions, not just transactions that are 'suspicious'. The RFPA statute only applies to federal agencies and departments. It does not apply to state and local governments.

Loan Information

For Loan Information, disclose the Loan Term, Purpose, Product, Loan Type, the creditor's loan identification number as Loan ID #, and mortgage insurance case number, if required by the creditor, as MIC # under the Loan Information subheading. The information disclosed for Loan Term, Purpose, Product, Loan Type, and Loan ID # are determined by the same definitions for those items on the Loan Estimate. (see section 2.2.1 above) These items should be updated to reflect the terms of the legal obligation at consummation.

Summaries of Transactions

Generally, the Summaries of Transactions table is similar to the Summary of Borrower's Transaction and Summary of Seller's Transaction tables on the HUD -1 Settlement Statement provided under Regulation X prior to the TILA-RESPA rule taking effect. There are some modifications to the Closing Disclosure related to the handling of the disclosure of the consumer's Deposit, the disclosure of Credits, and other matters, discussed below. Lenders and Settlement Agents will use the Summaries of Transactions table to disclose the amounts associated with the real estate purchase transaction between the consumer and seller, together with closing costs, in order to disclose the amounts due from or payable to the consumer and seller at closing, as applicable. A separate Closing Disclosure can be provided to the consumer and the seller that do not reflect the other party's costs and credits by omitting certain disclosures on each separate Closing Disclosure.

Down Payment/Funds from Borrower

In a Purchase transaction, Down Payment/Funds from Borrower is the difference between the purchase price of the property and the principal amount of the loan, disclosed as a positive number. However, when the loan amount exceeds the purchase price of the property, disclose $0 as Down Payment/Funds from Borrower. In all other transactions, subtract the principal amount of credit extended (excluding any amount disclosed as Closing Costs Financed (Paid from Your Loan Amount)) from the total amount of all existing debt being satisfied in the transaction. When this calculation yields an amount that is positive, Down Payment/ Funds from Borrower is that amount. If the calculation yields a result that is negative or $0, Down Payment/ Funds from Borrower is $0.

Integrated Mortgage Disclosures: Loan Terms

Interest Rate & Monthly Principal & Interest If the initial Interest Rate is not known at consummation, the fully-indexed rate is disclosed; a fully-indexed rate is the interest rate calculated using the index value and margin at the time of consummation. The initial principal and interest payment amount also would be calculated using the same fully-indexed rate. Adjustments Notice that any possible adjustments to the loan amount, rate or P&I are also disclosed. If these items cannot increase after consummation the lender will place a No in these spaces. Remember that "N/A" is not allowed under the new rules. For an adjustment in Loan Amount, the creditor must also disclose the maximum principal balance for the transaction and the due date (expressed as the year or month in which it occurs, rather than an exact date) of the last payment that may cause the principal balance to increase, together with a statement whether the maximum principal balance may or will occur under the terms of the legal obligation. For an adjustment in the Interest Rate, also disclose the frequency of interest rate adjustments, the date when the interest rate may first adjust, the maximum interest rate, and the first date when the interest rate can reach the maximum interest rate. For an adjustment to the Monthly Principal & Interest, the creditor would also disclose the scheduled frequency of adjustments, due date of the first adjustment, and the maximum possible amount (and the earliest date it can occur) of the Monthly Principal & Interest. Prepayment or Balloon If a prepayment penalty is included, the maximum amount of the Prepayment Penalty and the date when the period during which the penalty may be imposed terminates will be disclosed. Prepayment Example: As high as $3,240 if you pay off the loan in the first two years. The maximum amount of the Balloon Payment and the due date of such payment will also be entered. Balloon Example: You will have to pay $149,263 at the end of year 7.

HOEPA

Most types of mortgage loans secured by a consumer's principal dwelling are subject to HOEPA coverage. Loans that are exempted from this rule include reverse mortgages, construction loans, and loans originated and financed by Housing Finance Agencies, and loans originated through the United States Department of Agriculture's (USDA) Rural Housing Service Direct Loan Program. "High Cost" mortgages will have additional requirements and protections. Lenders are prohibited from offering balloon loans, charging pre-payment penalties, and financing points and fees for "high cost" loans. In addition, lenders cannot charge fees for loan modification or payment deferral and late fees are restricted to four percent of the payment amount past due. Escrow accounts for taxes and insurance are required. Loans are considered High-Cost if: The APR exceeds the applicable average prime offer rate by more than 6.5% for first mortgage loans and 8.5% for second mortgage loans, The total points and fees exceed 5% of the total transaction amount (8% for loans below $20,000), A prepayment penalty is permitted after 36 months or exceeds more than 2% of the transaction amount. ****Additionally, before making a high-cost mortgage, creditors are required to obtain confirmation from a federally certified or approved homeownership counselor that the consumer has received counseling on the advisability of the mortgage.

Is there a required naming convention used for charges on the Loan Estimate? (i.e. Terminology)

No, the Bureau did not prescribe a uniform naming convention outside of the general label set forth in the rule, for example, taxes and other government fees, prepaids and so on. The Bureau also did not create a standard or prescribed list of fee names. However, anyone applying these rules should read each provision carefully, because there are some specific types of charges that must be identified in a prescribed manner on the form.

Agricultural Lending: Eligibility

Open to all agricultural enterprises: The applicant should discuss the program with his/her lender (including any commercial lending bank or Farm Credit System). The lender will submit an application to TAFA on the borrower's behalf. The applicant must meet the lender's underwriting criteria. The lender and borrower determine the loan terms, while TAFA retains the right to alter any loan terms as necessary to provide the guarantee.

RESPA Enforcement

Persons who believe a settlement service provider has violated RESPA may wish to file a complaint. For details on how to file a RESPA complaint with the CFPB. The CFPB, a State Attorney General or State insurance commissioner may bring an injunctive action to enforce violations of Section 6, 8 or 9 of RESPA within three (3) years. Under Section 10, HUD has authority to impose a civil penalty on loan servicers who do not submit initial or annual escrow account statements to borrowers. Individuals have one (1) year to bring a private lawsuit to enforce violations of Section 8 or 9. A borrower may bring a private lawsuit, or a group of borrowers may bring a class action suit, within three years, against a servicer who fails to comply with Section 6's provisions. Lawsuits for violations of Section 6, 8, or 9 may be brought in any federal district court in the district in which the property is located or where the violation is alleged to have occurred. Effective July 21, 2011, the Real Estate Settlement Procedures Act (RESPA) is administered and enforced by the Consumer Financial Protection Bureau (CFPB). Consumers with a question or complaint related to your mortgage or mortgage servicer should contact the CFPB's Consumer Response team at P:(855-729-2372 TTY/TDD), or by fax number 855-237-2392, or visit the CFPB website. Settlement service providers with questions about RESPA should email the CFPB at E:[email protected]

Advertising

Regulation Z also affects advertising of consumer credit, including window displays, fliers, billboards, multiple-listing data if shown to the public, and direct mail literature, regardless of whom the advertiser may be. All types of advertising are covered. Regulation Z does not prohibit the advertising of credit terms, but only regulates how they may be advertised. Three terms that may be advertised without any additional disclosures are: "Cash price" "Annual percentage rate" (not the interest rate) General terms, such as "small down payment," "reasonable monthly payments," or "FHA/VA financing available" An ad is subject to full disclosure of credit terms and requirements if it contains any of the following " triggering terms": The amount or percentage of any down payment ("5% down") The number of payments or period of repayment The dollar amount of any payment The dollar amount of the finance charge (or even that there is no finance charge) If any term previously listed is advertised, it "triggers" disclosure of all of the following in the ad: The amount or percentage of down payment. The terms of repayment. The APR and whether increase is possible (Adjustable Loans).

Integrated Mortgage Disclosures: Timeline & Questions

Real Estate Professionals and Loan Officers can also prepare their clients by communicating the CD document is coming and that signing the document does NOT bind them to a contract, it simply acknowledges receipt of the CD. Scheduling a conference call, webinar or meeting with the clients to help answer questions about the CD in advance of the closing may end up creating smoother closings later on. When it comes to the delivery and receipt of the two new disclosures, the Loan Estimate should have less of an impact on the overall transaction than the Closing Disclosure. As long as the lender issues the LE within three days after receiving all six of the required elements of an application, that timeline should be met easily. Issues may arise if there is a change and a new LE must be issued. Of larger concern is the requirement that a Closing Disclosure be delivered to the borrower 3 days prior to consummation (closing) and settlement. Concerns relating to delivery method and the borrowers acknowledgement of receipt could alter the closing timeline. Here we look at two methods of delivery and when the three-day clock will start before closing. Email: If the closing disclosure is sent via email and no confirmation of receipt is received you must assume that the email will be opened in three days. This means that unless a read receipt is returned you will start a three day clock before the three day disclosure requirement is met. This means that a closing disclosure sent via email with no read receipt requires a six day window prior to closing. Overnight Disclosure: If the Closing Disclosure is sent via overnight delivery (UPS, FedEx, USPS or other) the receipt that the package was delivered is not sufficient to assume that the buyer got the package. The receipt that it was signed for or left at the door does not confirm that the buyer received the disclosure at that time. At this time the three day rule is not aspirational but instead is a firm requirement. Here again you would start a three day clock prior to the three day notice requirement being met, or six days. Waiver of Three Day Rule Under no circumstance can the lender, seller, agent or title company receive a waiver of the three day requirement. Buyers can only get a waiver if there is a bona fide personal financial emergency. What constitutes an emergency is narrowly defined to a foreclosure.

Intent to Proceed

The CFPB Compliance Guide discusses the responsibility of the consumer to indicate that they intend to proceed with the transaction. This obligation occurs after receipt of the Loan Estimate has been delivered.

Paid Already By or on Behalf of Borrower at Closing

The amount Paid Already by or on Behalf of Borrower at Closing is the sum of: Deposit, Loan Amount, Existing Loan(s) Assumed or Taken Subject to, Seller Credits, Other Credits, and Adjustments for Items Unpaid by Seller pursuant to the terms of the real estate sale contract.

Other Costs

The items to be disclosed in the Other Costs table should be disclosed as they would be disclosed on the Loan Estimate, updated to reflect the terms of the legal obligation and real estate transaction at consummation, except as specifically discussed below. An itemization of Transfer Taxes paid by the consumer and the seller is disclosed under the heading Taxes and Other Government Fees, instead of the sum total of Transfer Taxes to be paid by the consumer. Prepaids are items to be paid by the consumer in advance of the first scheduled payment of the loan. Prepaids are: Homeowner's Insurance Premium, Mortgage Insurance Premium, Prepaid Interest, Property Taxes, and A maximum of three additional items. Each item must include the applicable time period covered by the amount to be paid by the consumer and the total amount to be paid. Property Taxes paid during different time periods can be disclosed as separate items. Items are disclosed as Other to reflect costs incurred by the consumer or seller that were not required to be disclosed on the Loan Estimate. These costs include: Real estate brokerage fees, Homeowner or condominium association fees paid at consummation, Home warranties, Inspection fees, and Other fees paid at closing that are not required by the creditor or otherwise required to be disclosed elsewhere on the Closing Disclosure. The amount of an earnest money deposit does not affect the amount of real estate commissions paid by the consumer or seller on the Closing Disclosure, even if the earnest money deposit is held by the real estate brokerage. The total of all closing costs paid by the consumer, reduced by the Lender Credit, is disclosed as Total Closing Costs (Borrower-Paid). The total of items designated as Borrower-Paid At or Before Closing, Seller-Paid At or Before Closing, and Paid by Others are disclosed as Closing Cost Subtotals. Lastly, the total amount of Lender Credits, if any, are disclosed and designated as Borrower-Paid At Closing.

My First Texas Home

The program channels low interest rate mortgage money through participating Texas lending institutions to eligible families who are purchasing their first home, or to those who have not owned a home in the past three years. Although income limits may vary with each bond issue, the program is designed to serve very low- to moderate-income (30 to 115 percent of AMFI) Texas families.

Mortgage Loan Quality Standards

There are several new duties one imposed on mortgage loan originators. Loan originators need to be "qualified", registered, and licensed in accordance with the SAFE Act and any other applicable State or Federal laws and must obtain a unique identifier number from the National Mortgage Licensing System and Registry (NMLSR). This number must be printed on all loan documents. Point banks are prohibited. Mortgage Originators compensation can be based on the loan amount, and not on the revenue, loan terms, interest rates, prepayment penalties, or any other factors unique to the loan.

SAFE Act of 2008

This act establishes a Nationwide Mortgage Licensing System and Registry. It encourages the states, through the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, to establish a Nationwide Mortgage Licensing System and Registry for the residential mortgage industry in order to increase uniformity, reduce regulatory burdens, enhance consumer protection, and reduce fraud. It requires HUD to establish minimum guidelines regarding registration, licensing, education, and testing. States are given one year (two years for states whose legislatures only been bi-annually) to establish a state licensing program that meets the education and testing guidelines set by HUD. States must meet minimum requirements, but can establish higher standards. States that do not comply will be subject to HUD guidelines. Sets forth general registration and state licensing requirements, including one for a unique identifier, for engaging in loan origination transactions. Prescribes requirements for state licensing and registration applications and issuance, including education, testing, background checks, and fingerprinting. Sets the minimum passing grade for the test of 75% Prescribes minimum standards for license renewal for state-licensed loan originators, including continuing education. Requires federal banking agencies jointly, through the Federal Financial Institutions Examination Council, to develop and maintain a system for registering with the Nationwide Mortgage Licensing System and Registry (Registry) as registered loan originators any employees of a depository institution, a subsidiary owned and controlled by a depository institution and regulated by a federal banking agency, or an institution regulated by the Farm Credit Administration. Directs the HUD Secretary to establish and maintain a backup licensing and registration system for loan originators operating in a state that either: (1) does not, after a certain period of time, have a licensing and registering system for loan originators that meets the requirements of this Act; or (2) does not participate in the Registry. Requires the HUD Secretary to establish and maintain a nationwide mortgage licensing and registry system upon determining that the Registry is not in compliance with this Act. Authorizes the federal banking agencies, the Farm Credit Administration, the HUD Secretary, and the Registry to charge fees to cover the costs of maintaining and providing access to information from the Registry. Directs the Attorney General to provide state officials responsible for regulating state-licensed loan originators access to all criminal history information to the extent criminal history background checks are required under the laws of the requesting state. Grants the HUD Secretary Enforcement powers under its backup licensing system. Grants state licensing agencies authority to investigate and examine loan originators. Instructs the HUD Secretary to study and report to Congress on the root causes of home loan defaults and foreclosures.

Total Closing Costs

is the same amount disclosed as Total Closing Costs in the Other Costs table. The amount is disclosed as a positive number.