14 Oct 5 Top Items Real Estate Agents Should Know about TILA RESPA Integrated Disclosure implementation!
Here we are at the very beginning of TILA RESPA Integrated Disclosure implementation. Right now it could be the calm before the storm. We won’t see the true results until mid to end of November when mortgage applications were taken on or after October 3rd. After doing 40+ TRID presentations I have come up with the top 5 things that realtors should be aware of.
What is the Difference Between Pre-approval and Application?
A Loan Estimate (LE) has to be delivered to the consumer within 3 business days of application. What determines that? Here are the six pieces on information that converts a pre-approval to an application
•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
•The mortgage loan amount.
The TILA RESPA rule eliminated the 7th catch all element under Regulation X that is “any other information deemed necessary by the loan officer.” This makes defining application very clear. If the Loan Officer does not have these 6 pieces of information, then the loan officer does not have application.
Intent to Proceed
A loan officer cannot collect any fees up front except for a bona fide and reasonable credit report fee- In layman’s term, an appraisal fee cannot be collected up front unless the consumer expresses an Intent to Proceed. Here is an example. Let’s say borrower signs said purchase agreement. Loan officer does their due diligence in following up with consumer and asks “are you ready to proceed with the Loan?” The Borrower response is “no”. “We ae waiting for the inspection to be completed.” The loan officer cannot collect an appraisal fee until the consumer expresses an intent to proceed. The loan officer may receive an intent to proceed by Oral communication in person immediately upon delivery of the Loan Estimate, oral communication over the phone, written communication via email, or signing a preprinted form after receipt on the Loan Estimate. If the consumer delays on their response for the Intent to proceed, then that will delay the appraisal process. Time is of the essence when inspection is complete and acceptable to the borrower.
Closing Disclosure – Three Business Day Rule
In order to consummate a purchase transaction, the consumer needs to receive the new Closing Disclosure (CD) 3 business days prior to the closing date specified. For Example, if the borrower wants to close the transaction on a Friday, the Closing Disclosure needs to be delivered on or before that Tuesday. If the consumer does not receive the Closing Disclosure with in that time frame then the closing cannot take place and it will be delayed by 1 business day. Business day means all calendar days except Sundays and legal public holidays. Yes, Saturday is considered a business day under the Closing Disclosure.
If there is a change to the Closing Disclosure, do we have to wait another 3 Business days??
It all depends! Here are the 3 triggers that would require another 3 business day waiting period
- Changes to the APR above .125% of fixed rate mortgage and .250% for loans with irregular payment or periods e.g., Adjustable rate Mortgages
- The loan product changes
- The addition of a pre-payment penalty
If there are any minor changes that do not affect APR or if there are any seller side changes, then the Closing Disclosure can be used to re-disclose on or before the consummation on the transaction.
Last Minute Negotiation of Seller Paid Closing Costs
Be aware that last minute negotiation or changes to seller paid closing costs could trigger another 3 business day waiting period. Seller paid closing costs can affect or increase APR. If the Realtor is in a position to renegotiate those costs, they may want to consult with their Loan Officer to see if there would be changes to the APR calculation. Example of some prepaid finance charges would be discount points, origination charge, title closing fee, VA Funding fee, private mortgage insurance, courier fee, wiring fees, etc…
At Ancona Title & Escrow we are ready for these changes. Our structure of the company allows us to be fast and efficient along with a high level of Communication (no voicemail, technology, internal closers, etc.) to meet the needs of our Realtors and Loan officers. Priority number 1 is to convert these changes into a smooth and flawless transaction for our customers.