(Editor’s note: With the new TRID requirements effective October 3, we felt it appropriate to highlight Ginger Bell’s earlier article and also include some additional information you’ll want to share with real estate agents.)
It’s critical that loan originators and others involved in the mortgage industry have a clear understanding of the new TILA RESPA Integrated Disclosure (TRID) rule that the Consumer Financial Protection Bureau (CFPB) recently announced will now be effective as of October 3, 2015.
As previously highlighted, TRID consolidates several disclosures required for most mortgage transactions. A Loan Estimate (LE) is replacing the initial Good Faith Estimate (GFE) and the Truth In Lending (TIL) disclosures; and a Closing Disclosure (CD) will replace the final TILA and the HUD-1. Lenders must provide The Loan Estimate to borrowers no later than three business days after they submit a loan application.
A recent poll conducted by Morf Media, Inc. on TRID Trivia revealed that 71 percent of respondents did not know the correct definition of business day for providing the Loan Estimate to the borrower.
The definition of a business day for purposes of providing the initial Loan Estimate is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions. (Comment 19(e)(1)(iii)-1, § 1026.2(a)(6))
This means that if your office is generally open for business on a Saturday, then you would count Saturday as a part of the timing for delivering the initial Loan Estimate. The same would apply if you are open for business on a Sunday. This business day definition is the same as exists today for providing initial disclosures.
If an application is denied or withdrawn during the three business day period, the creditor does not need to provide the consumer with the disclosures.
Mortgage Broker Loan Estimate Business Day Definition
Mortgage brokers will need to work closely with their wholesale lenders to meet the days that they are using for business days. This is because the definition of a business day for proposes of providing the initial Loan Estimate applies to the day on which the “creditor’s” offices are open to the public for business. This means that is will not matter what days a mortgage broker is open for business but rather that mortgage brokers will be using the definition of business day for the wholesale lenders are using. So, if a mortgage broker is working with ABC Wholesale Lender and that lender is only open Mon-Fri, then the mortgage broker will not use Saturday and Sunday as a part of the three business days for providing the initial Loan Estimate.
Important Areas of Focus
There are a few key areas to focus on for providing the Loan Estimate to the borrower on time. First, the Loan Estimate must be provided within three business days after application.
Application is received when you have received information from the borrower for the following six items. If you remember the word ALIENS you can always remember the six items for an application.
Address of Property
Estimated Value of the Property
Social Security Number
6 Items for Application = Loan Estimate in 3 Business Days
It does not matter how you receive the six items of information for an application. It can be in person, on the phone, on the internet, at a soccer game or on Facebook. The bottom line is that once you have the six items of information, you have an application and you must provide a Loan Estimate to the borrower within three business days. Again, those are the days in which a Creditor is open to the public for generally carrying out its business functions. To complicate the matter; let’s say that you are a non-delegated lender who typically counts Monday through Saturday as your business days for providing an initial Loan Estimate, but you have a borrower who is going to do an FHA loan that you are going to broker to a wholesale lender. Your business days to provide the initial Loan Estimate will be based on your wholesale lenders business days which are typically Monday through Friday and not your business days of Monday through Saturday.
The upcoming TRID changes will have an impact on many real estate transactions and real estate agents will benefit from understanding the changes. It’s important to understand and convey to others involved in the loan process the definition of a Loan Application.
One of the key changes is in the definition prior to and after October 3, 2015. From a Realtor’s perspective, the definition of application prior to October 3rd would be that a GFE must be issued within three business days of application upon receipt of: address of the property, loan amount, income, estimated value, name, social security number, and an additional/seventh “Catch-all” item that includes income, purchase agreement, etc.
However, for all applications taken on or after October 3rd the seventh “Catch all” item will be gone and a Loan Estimate must be issued within three business days of application. This means that when an originator receives the six items that trigger an application they must issue a Loan Estimate
It’s critical that agents know this means that even if you take an application online, on the phone, on a napkin or on Facebook, the borrower must receive the Loan Estimate within three business days.
Agents will not want to share the address of the home being purchased until they have an approved contract or agreement so that originators can accurately disclose fees.
The TRID changes will have a lasting impact on the mortgage and real estate landscape. Agents and originators must understand the changes to help their clients.
By Ginger Bell
Ginger Bell is the best-selling author of “Cracking the Success Code,” co-authored with Brian Tracy, and a well known education specialist in the mortgage banking industry. She is SVP e-Learning for Morf Media, an international gamification software development firm. A previous Dale Carnegie Training Consultant, Ginger has been awarded the Presidential Award by both the California and the Oregon Association of Mortgage Professionals, and the Professional Woman of the Year” award by the National Association of Professional Women.