On Oct. 3*, all consumers who submit applications for most mortgage loans will receive a new document called the Loan Estimate.
The form has been redesigned to make early disclosure of the features, costs and risks of the particular mortgage loan for which the consumer has applied. The idea is that this clear, early disclosure will help consumers understand the loan product and compare it to others. Here are a few things you should know about the Loan Estimate before August 1st:
- The Loan Estimate will be issued upon the submission of a loan application by the consumer. A loan application consists of just six pieces of information: the consumer’s name, income and social security number, the address of the property that will act as security for the loan, the estimated value of the property and the loan amount sought.
- The Loan Estimate must be provided to the consumer, either in person or by mail, no later than three business days after the lender receives the consumer’s application. For these purposes, “business days” means any day that the creditor is open to the public to conduct regular business. After receiving the Loan Estimate, the consumer has up to 10 days to notify the lender that he or she intends to proceed with the application for that particular loan.
- The lender cannot charge a fee to the consumer, except a reasonable fee for a credit report, until the consumer has received the Loan Estimate and indicated an intent to proceed with the transaction. This will have the biggest impact on the business of ordering appraisals, which are typically required to be ordered and paid for shortly after the consumer submits an application.
- The document should contain the lender’s best estimates of the costs of the loan. The figures in the Loan Estimate are meant to give the consumer an understanding of the costs of the loan – including costs that will have to be paid at settlement – and should be compared to the second disclosure that the consumer will receive shortly before consummation. However, the exact information in the Loan Estimate may differ from transaction to transaction based on the type of loan product, the payment schedule of the loan, the terms of the transaction, and applicable state law.
- The lender cannot issue a revised Loan Estimate because it later discovers typographical errors, miscalculations, or an underestimation of charges. In general, unless there are changed circumstances as defined by the regulations, the lender is stuck with the figures provided to the consumer. A changed circumstance is an extraordinary event beyond the control of a party, or an unexpected event particular to the consumer or the transaction. A revised Loan Estimate must be provided to the consumer no later than three business days after the lender receives information about the change in circumstances.
More information about TRID can be found on PARealtor.org, from the National Association of Realtors® and the CFPB. Stay tuned for more information on the Closing Disclosure.
*The Consumer Financial Protection Bureau (CFPB) has delayed the rule’s effective date to Oct. 3, 2015.