Agenda
This training manual consists of two parts that will provide you with step-by-step instructions about how to complete the Loan Estimate form required by the Integrated Disclosures Rule:
Chapter 1 – Completing Page One of the Loan Estimate Chapter 2 – Completing Page Two and Three of the Loan
Estimate
Upon completion, you will be able to:
Utilize the proper format of the required information on each
page of the form
Explain the different categories and proper locations for
disclosing estimated settlement charges
List the various other disclosures that are included on the Loan
Completing Page One
It’s still an estimate made in good faith.
The TILA-RESPA Integrated Disclosures Rulerequires that
creditors provide a Loan Estimate in good faith, based on the best information reasonably available to the creditor.
It must be delivered or placed in the mail to the applicant
within three business days after receiving an application and seven business days prior to loan consummation.
Closed End Consumer Credit
The Loan Estimate must be provided to applicants of
closed-end consumer credit transactions secured by real property.
o The Good Faith Estimate is still used for HELOCs and Reverse
mortgages
A consumer credit transaction is one that is primarily for
personal, family or household purposes.
Construction loans and loans securing vacant land as well
as loans securing 25 acres or more also require use of the Loan Estimate
The Loan Estimate
Lenders must use the
exact form and
cannot add pages to the Loan Estimate except to
accommodate more signature lines for multiple
co-applicants.
(Signatures are on page three)
Loan Estimate
Rounding numbers to the nearest dollar amount on the
Loan Estimate is required with the exception of the loan amount, P&I payment, per diem interest charge and
prepaid escrows.
o Confirm that your LOS is programmed to ensure compliance
If certain portions of the Loan Estimate do not apply they
General Information
Page one provides general information such as name,
subject property and the transaction.
The company name must indicate the creditor. This may
Applicant and Property Information
Date Issued
The date the Loan Estimate is delivered or mailed to the applicant,
whether a creditor or a broker issues the disclosure.
Applicants
Each applicant's name and mailing address should be included.
Property
Show the full property address. At a minimum, a property location
and zip code should be shown
Sale Price
Enter the sale price of the property for a purchase transaction.
If the loan is a transaction without a seller or the purchase contract
Term and Purpose Information
Loan Term
Show the term in whole years such as 30 years.
A loan term that is not in whole years, such as 242 months, would
be described as "20 yr., 2 mo.“
If the term is less than 24 months and not a whole year, it should be
shown in months only; such as "15 mo."
Purpose
The purpose of the loan should be only "purchase", "refinance",
"construction" or "home equity loan".
The term "construction" refers to initial construction loans or
construction-permanent loans, but not renovation loans.
If the loan is a construction-permanent loan, the lender has the
option to disclose the loan as one transaction or separate transactions.
Product Information
First show any product feature (with duration) that may change the payment, and then the product description. If there are no applicable features, show only the product description.
Optional Product Features: Negative Amortization, Interest Only,
Step Payment, Balloon Payment, Seasonal Payment.
Note: MiMutual does not offer any of these product features.
Optional Product Descriptions: "Fixed Rate“ or "Adjustable
Rate“.
The term "Adjustable Rate" is used if the amounts of future
Product Description Examples
Examples: If a fixed rate loan has a five-year interest-only period, it
would be described as 5 Year Interest Only Fixed Rate.
If a 3/1 ARM has an initial three-year period with negative
amortization it would be described as 3 Year Negative
Amortization 3/1 Adjustable Rate.
If there is more than one feature (such as negative
amortization and interest only), show only the first applicable feature.
Type and ID Information
Loan Type
"Conventional", "FHA", "VA" or "Other". "Conventional"
includes loans sold to the secondary market as well as loans to be held in portfolio.
"Other" should be followed by a description, such as
"Other RHS" for a Rural Housing Service loan.
Loan ID #
The loan's application or ID number is shown. This can
Rate Lock Information
Rate Lock
If “Yes”: show the expiration date with time (and time
zone).
If “No”: Include "Before closing, your interest rate, points
and lender credits can change unless you lock the interest rate. All other estimated closing costs expire on
Loan Terms Section
Rule includes specific requirements related to rounding
and how to show an increasing principal balance. The origination system is programmed to identify these product features.
Loan Terms
5 Yr. IO, 5/3 ARM Example
The LE will expand to accommodate the detailed information
needed for adjustable rate loans and loans with features that cause the payment to change or principal balance to increase.
Projected Payment
Show a breakdown of P&I and MI
Include estimated monthly amounts and a total for escrowed items, such as:
Taxes, Assessments
HOA fees, ground rent or leasehold payments Any insurance required by the lender
Range of Payments
Up to four columns are available to illustrate payment
changes
Minimum and maximum payment amounts should be
Loan Estimate or Closing Disclosure
– Page One, Loan Terms
PMI Termination
The PMI automatic drop point must be shown.
The origination system will show PMI termination after all
required payment change information is shown.
Remember: Automatic drop is always based on scheduled
amortization and does not apply when the borrower has paid down the UPB.
Escrow Account
The total of these amounts is disclosed whether or not an
escrow account will be established.
Indicate "YES" or "NO" or "SOME" to indicate if the items
Clear Totals
The totals on page one are calculated based on amounts
shown on page two.
Verify the cash to close estimate is as accurate as possible
Loan Estimate
- Page Two
The primary sections of page two of the
Loan Estimate include:
Loan Costs Section Other Costs Section Calculating Cash to
Optional Sections
The optional sections of page two of the Loan Estimate include:
Optional Adjustable Payments (AP) Table-included for
loans with payment changes not related to interest rate (such as an interest only loan)
Optional Adjustable Interest Rate (AIR) Table-included for
loans where the interest rate is scheduled to change during the loan term (such as an ARM)
Loan Costs Sections
Each subsection allows a
maximum number of charges that may be
shown. If there are more charges than allowed for a section, the total amount of charges over the limit should be disclosed on the last available line, labeled "Additional Charges". An addendum cannot be used.
Origination Charges
Amounts paid by the borrower to each creditor or broker for
originating the loan. A maximum of 13 charges may be shown.
The types of fees included here include origination, underwriting ,
processing, administration, application and other lender charges.
This section includes discount points
Discount points paid to the creditor to reduce the interest rate must
be itemized separately on the first line as both a percentage and a dollar amount.
LLPAs and Indirect Comp
Loan-level pricing adjustments (LLPAs) should also be
shown unless they are embedded in the interest rate.
Note: Indirect compensation paid by a creditor to a loan
originator through the interest rate is not itemized on the Loan Estimate (However, it will be itemized on the Closing
Cannot Shop – Zero Tolerance
Charges in this section are for services not provided by
the creditor or broker but the provider will be chosen by the creditor or broker, or the borrower is required to
Can Shop – 10% Category
Charges in this section of the Loan Estimate are for
services that were not provided by the creditor or broker for which the borrower is allowed to shop.
Remember: The change in circumstance must equal or
exceed 10% before re-disclosure resets the comparison between the Loan Estimate and the Closing Disclosure
Title Policy Simultaneous Lender Credit
A lender's title insurance premium may not be shown
with any credit for simultaneous purchase of an owner's policy; the full premium must be shown.
The calculation of the owner's policy premium will factor
Other Costs – No Restrictions
The Other Costs section's
fees are allowed to change without limit with the
exception of transfer taxes which are not allowed to change and recording fees which are in the 10%
Transfer Tax
The CFPB gave these examples to illustrate when the
transfer tax should be shown on the Loan Estimate:
If a State law indicates a lien can attach to the consumer's
acquired property if the charge is not paid, the amount should be included on the Loan Estimate.
If State of local law is unclear or does not specifically
attribute the amount to the borrower or the seller,
common practice in the area will apply. The transfer tax should not be shown if typically paid by the seller.
Pre- Paids
Calculate the charges accordingly
The lines and labels in this section may not be deleted,
even if they are not used. If they are not needed they should be left blank.
Initial Escrow Payment
The aggregate escrow adjustment is not included on the Loan
Estimate.
The lines and labels in this section may not be deleted, even if
they are not used. If they are not needed they should be left blank.
Other Costs
Items not required by the creditor or broker but that the
borrower is likely to pay and of which the creditor or broker is
aware at the time of preparing the Loan Estimate.
Including but not limited to:
an owner's title insurance policy (disclosed as "Title – Owner's
Title Insurance (optional)
credit life insurance (include "optional") warranties (include "optional")
real estate commissions
homeowners association-related ownership transfer charges the purchase of personal property from the seller
Cash To Close
Closing Costs Financed (Paid from your Loan Account)
If closing costs are to be paid from the proceeds of the loan amount they are shown on the next line as a negative number. The total of any credits given by someone other than the
creditor/broker or seller is shown here as a negative number:
Gifts, Builder credits
Pro-rations for property taxes or HOA dues
Personal property to be purchased by the borrower Proceeds from subordinate financing
AP and AIR Tables
The Adjustable Payment and Adjustable Interest Rate
Loan Estimate
– Page Three
Page Three of the
Loan Estimate includes certain
measures intended to allow applicants to compare lenders'
costs and loan terms. It also clarifies other important
information related to the loan
Comparisons
The Comparisons section discloses information designed
to help the borrower shop and make comparisons between lenders.
APR and TIP
Annual Percentage Rate (APR)
Disclose the APR for the loan and include the statement, "Your
costs over the loan term expressed as a rate. This is not your interest rate."
Total Interest Percentage (TIP)
Disclose the total amount of interest (TIP) that the borrower
will pay over the loan term, as a percentage of the loan amount. TIP calculation example:
Loan amount = $100,000
Interest paid over loan term = $50,000 TIP = 50%
Other Considerations
The appraisal and servicing transfer disclosure are included on
the Loan Estimate.
Confirming Receipt
The signature line is optional.
If a signature line is used, it must include the signatures of
Summary
Congratulations!
You should now be able to:
Utilize the proper format of the required information on each
page of the form
Explain the different categories and proper locations for
disclosing estimated settlement charges
List the various other disclosures that are included on the Loan
Estimate
Communicate the contents of the Loan Estimate to borrowers Complete the Loan Estimate based on the TILA RESPA
