Written by Bernadette Clair, Senior Regulatory Compliance Counsel
TILA/RESPA – Revised Loan Estimates. Continuing our blog series on the TILA/RESPA Integrated Mortgage Disclosure Rule which goes into effect on August 1, 2015, today we’re going to take a closer look at the general rule on issuing revised Loan Estimates and highlight the situations under which a revised Loan Estimate may be used. A creditor's ability to use a revised Loan Estimate is limited, but could be critical to making sure the disclosure has been provided in accordance with the rule’s good faith standard set forth in section 1026.19(e)(3).
Section 1026.19(e)(3)(iv) governs when a revised Loan Estimate may be used for determining good faith. Under the rule, a creditor can only use a revised estimate of a charge in specific situations, such as when the revision is due to a changed circumstance or a borrower-requested change. Technical errors, miscalculations or underestimated charges alone are not permissible reasons for issuing revised disclosures. Redisclosure is not permitted if the amounts decrease or if the amounts increase but do not exceed the applicable tolerance - in these circumstances the original Loan Estimate is still deemed to be in good faith. Additionally, when a revised disclosure is permitted, a charge can only increase to the extent that the reason for the revision actually increased that particular charge.
Situations permitting the use of a revised Loan Estimate generally include the following:
- Changed circumstances affecting settlement charges or consumer eligibility.
- When consumer requested revisions to the credit terms or the settlement cause an estimated charge to increase.
- If a consumer indicates his or her intent to proceed with the transaction more than 10 business days after the Loan Estimate was provided.
- When a rate is locked after the initial Loan Estimate is provided, and points or lender credits change because the rate was not locked when the initial disclosure was made – in this case, the creditor must issue a revised Loan Estimate on the date the interest rate is locked. (Note that on October 10, 2014, the CFPB announced a proposal that would relax this particular redisclosure timeframe, giving creditors until the next business day to provide the revised disclosures. We blogged about that proposal here.)
- In connection with a new construction loan where the creditor reasonably expects settlement will occur more than 60 days after the initial Loan Estimate is required to be provided and the creditor reserved the right to issue revised disclosures.
Note that there are specific timing requirements for issuing revised Loan Estimates. In addition, each of the situations permitting the use of a revised Loan Estimate has its own applicable requirements, which may be found in section 1026.19(e)(3)(iv).
NAFCU Compliance Monitor. NAFCU members can read more about the use of revised Loan Estimates in this month’s NAFCU Compliance Monitor article, Loan Estimates - Revisions and Corrections Under TILA/RESPA Integrated Mortgage Disclosure Rule, available for download here (login required). This month’s edition also includes links to NAFCU resources that are available for NAFCU member credit unions to assist in complying with the rule.
Updated Small Entity Compliance Guides. The CFPB also recently revised its Small Entity Compliance Guides for the Ability-to-Repay and Qualified Mortgage Rule and the RESPA and TILA Mortgage Servicing Rules to incorporate adjustments to the rules that became effective on November 3, 2014 – including the limited cure mechanism for the points and fees limit that applies to qualified mortgages that we blogged about here.