By Sue Burt, Senior Compliance Consulting Specialist, Wolters Kluwer Financial Services
When it comes to issuing a Loan Estimate under the TILA-RESPA Integrated Disclosure (TRID) rule, revisions are not permitted due to mistakes, miscalculations, and underestimation of charges caught after the fact. However, the law does recognize that some situations can arise beyond lender errors that cause the original loan estimate to become inaccurate.
The Justifying Events
The law sets out six events that justify a revised Loan Estimate for purposes of re-setting fees and performing one’s good-faith analysis. Those six events include:
- Changed circumstances that cause an increase to settlement charges
- Changed circumstances that affect the consumer’s eligibility for the loan or affect the value of the property securing the loan
- Consumer-requested changes
- Interest rate locks
- Expiration of the original Loan Estimate
- Construction loan settlement delays
Before considering each of these, it is important to review the definition of “changed circumstance” as this term impacts the first two triggering events. Download the full whitepaper to explore specific case examples of the six justifying events, the timing for providing such revisions, and a review of the following few compliance tips.
Collect all application information before issuing a Loan Estimate. Revised Loan Estimates are not permitted simply because the lender failed to collect all six pieces of information required in the application prior to issuing the Loan Estimate. For example, the failure to obtain the property address prior to issuing the Loan Estimate cannot be used as a reason to issue a revision if that address is later collected and impacts fees.
Collect complete, accurate application information. Lenders should consider sequencing the application information requests to have sufficient information to issue an accurate Loan Estimate the first time around. In fact, they may request information above and beyond the six items that make up the definition of an “application.” For example, they may want to collect the consumer’s mailing address or the product the consumer is interested in prior to collecting the six pieces of required regulatory application information. However, keep in mind, once the lender receives those six items, a Loan Estimate is triggered.
Also, recognize that it is important to collect as much information as possible from the consumer during the application stage so that the Loan Estimate disclosures are accurate. Remember, lender errors and oversights will not justify a revised loan. Put another way, a “bad” application is not a change in circumstances.
Only fees affected by a triggering event can be re-set. For good-faith purposes, only those fees impacted by the triggering event can be re-set. The triggering events are not a license to issue a completely revised Loan Estimate and address other changes not affected by the event being relied upon.
Courtesy loan estimate revisions. The law does not prohibit issuing updates to a Loan Estimate to reflect changes not based on one of the six triggering events. Many refer to these revisions as “‘courtesy” revised Loan Estimates. The purpose of such revisions is more customer service oriented in nature and intended to keep the consumer updated on fee changes to avoid surprises at consummation. However, courtesy Loan Estimate revisions cannot be used for purposes of re-setting fees to establish good faith.
Record retention. The TRID rule recordkeeping provisions require that documentation be maintained to support the reason for issuing a revised Loan Estimate. Presumably, examiners will look for this supporting documentation when they review loan files and see revised Loan Estimates. Lenders should keep records documenting the reason for revision, the original Loan Estimate, and the revised Loan Estimate. This evidence of compliance should be retained for three years.
Manage Revisions. Lenders should implement some type of system to track and mange revised Loan Estimates. This will be important for purposes of conducting one’s good-faith analyses. It’s also important for purposes of tracking multiple revisions and determining at what point fee increases exceed the 10% cumulative tolerance threshold.
For more information, download “The Revised Loan Estimate: Changed Circumstances and Other Triggering Events.” The whitepaper highlights when a Loan Estimate revision is permitted, the timing for providing such revisions, and a few compliance tips to consider regarding the revision process.
Wolters Kluwer is NAFCU Services Preferred Partner for Consumer and Member Business Lending and Deposit Services for credit unions. More education resources and contact information are available at nafcu.org/wolterskluwer.