CFPB RESPA/TILA Rule Reference: 5.3-5.4, Page 23-24, CFPB Detailed Summary of the Rule
In this post, we’ll outline the general requirements of the Loan Estimate that were born from the goals and findings of the “Know Before You Owe” initiative. In parts two and three of this series, we’ll do a deep-dive into each page of the forthcoming Loan Estimate disclosure which replaces the GFE and the Initial TIL for most mortgage loans as of August 2015.
The following are specific requirements for the Loan Estimate (LE) disclosure:
- The LE must contain a good-faith estimate of credit costs and transaction terms. If any necessary information is unknown, the lender must make the disclosure based on the best information available at the time
- The LE must be in writing and contain the specific information outlined in Section 1026 of Regulation Z (discussed in greater detail in parts two and three)
- The lender is responsible for delivering the Loan Estimate (or placing it in the mail) no later than the third business day after receiving the loan application
- Revised or corrected Loan Estimates may not be issued because the lender later discovers technical errors, miscalculations, or underestimations of charges
The Loan Estimate will be used for all closed-end credit transactions secured by real property (other than reverse mortgages) — essentially all residential home loans. It’s a required form for all “federally related” mortgage loans, which, again, includes most mortgages. Even for non-federally related loans, the disclosure is considered a “model form,” meaning that lenders are not necessarily expected to use the government-produced version of the form but must create something substantially similar to it including content and style.
One of the greatest business impacts of the new Loan Estimate rules is that the lender is committed to its promises, with very few exceptions, after the form has been delivered. Loan processors nationwide will be scrambling to get these documents out the door within three days, and once they’re finalized, they can’t be amended.
Therefore, the industry will need to find ways to generate a faster estimate but ensure that it’s at least as accurate (if not more) than the Good Faith Estimates being generated today.
We elaborate more on how this impacts business, and how technology solutions mitigate that impact, in the knowledge article titled “A look at the business impacts of the Loan Estimate form” in the TILA-RESPA Knowledge Center.
All information and views expressed or implied are provided without warranty and are only the opinion of Pavaso, Inc. Each participant should seek legal representation for legal interpretation of the ruling and the CFPB directly for final instruction and interpretation. The final rule can be found here.
