& The Home Buying Information Booklet LOAN … · Regulation Z). The Loan Estimate is designed to provide disclosures that will be helpful to credit union members in understanding

1 CUNA’s CompNotes – THE LOAN ESTIMATE & Information Booklet

Colleen Kelly, Senior Federal Compliance Counsel

March, 2015

Coverage: Most Closed-End Consumer Mortgages – Not HELOCs, reverse

mortgages or mobile home loans not attached to real property

Agency/Citation: Consumer Financial Protection Bureau /

12 CFR §§1026.19(e),(g) & 1026.37

Effective Date: October 3, 2015

The Integrated LOAN ESTIMATE Mortgage Disclosure The Loan Estimate disclosure replaces two current Federal forms - the Good Faith

Estimate (RESPA, Regulation X) and the ‘‘early’’ Truth in Lending disclosures (TILA,

Regulation Z).

The Loan Estimate is designed to provide disclosures that will be helpful to credit union

members in understanding the key features, costs, and risks of the mortgage for which

they are applying and help them shop for their best mortgage option.

For quick reference, use the following links to jump to specific sections of this report:

Delivery Requirements

Pre-Loan Estimate Fee Restrictions

Preliminary Written Estimates

Determining Good Faith Estimates

Requirements when permitting members to shop for services

Optional Services

Services not obtained

Lender Credits

Streamlined Refinancing Programs

Rounding

Refunds

Filling out the Form

Revised Estimates

Home Buying Information Booklet

THE LOAN ESTIMATE & The Home Buying Information Booklet



March, 2015

WHAT AND WHO IS COVERED?

The new Loan Estimate applies to:

Most closed-end consumer credit transactions secured by real property;

Construction-only loans;

Loans secured by vacant land;

Loans secured by 25 or more acres (previously exempt from some of these

disclosures); and

Extensions of credit secured by a member’s interest in a timeshare plan.

What type of loans are NOT covered?

This new disclosure form does not apply to:

HELOCs

Reverse Mortgages, or

“Chattel-dwelling” loans, which are not attached to real property (land), such as

loans secured by mobile homes.

These loans will remain subject to Regulation X (the existing Good Faith Estimate and

the HUD settlement statement), until the Consumer Financial Protection Bureau (CFPB

or Bureau) addresses them in a separate, future rulemaking. The CFPB intends to

adopt integrated disclosures specifically tailored to their distinct features.

EFFECTIVE DATE The new rule is effective on October 3, 2015. The rule applies to transactions for which

the credit union (or mortgage broker) receives an application on or after this effective

date.

The CFPB notes that in regard to applications received before the effective date, for

example, September 30, 2015, the Loan Estimate, the Special Information Booklet, and

Closing Disclosures required under the new TILA-RESPA integrated disclosure rule do

not apply. Instead, for such loans, where the application was received prior to October

3, 2015, the creditor and the settlement agent must provide the disclosures required

under the existing TILA and RESPA rules, as applicable.

Exceptions: The following provisions become effective on October 3, 2015, without

respect to whether an application has been received on that date:



March, 2015

Pre-disclosure activities - fee restrictions and written information regarding

estimated terms and costs provided prior to the Loan Estimate (§1026.19(e)(2)),

and

Provisions addressing the preemption of inconsistent state disclosure laws (§

1026.28(a)(1)), as well as the commentary regarding the “substantial similarity”

standard used to grant state exemptions (§1026.29).

DEFINITIONS: (12 CFR §1026.2)

“Application”: The Loan Estimate is triggered by a mortgage application. A mortgage

application is considered to be provided when the borrower provides the following six

pieces of information:

the member’s name,

the member’s income,

the member’s social security number (to obtain a credit report),

the property address,

an estimate of the value of the property, and

the mortgage loan amount requested.

The CFPB notes that this new definition does not prevent a creditor from collecting any

additional information in relation to the mortgage loan, however, once a creditor has

received these six pieces of information the Loan Estimate requirements are triggered.

“Business day”: The general definition of “business day” applies to the 3-day

delivery requirement for the Loan Estimate. The general definition considers a

“business day” as a day on which the credit union's offices are open to the public for

carrying on substantially all of its business functions.

The specific definition of “business day” applies to the seven-business-day waiting

period the Loan Estimate must be delivered before consummation. The specific

definition considers a “business day” as all calendar days except Sundays and the legal

public holidays.

“Consummation” vs “Settlement”: In some jurisdictions, settlement does not occur

until after consummation, and costs could change between consummation and

settlement. The CFPB has recognized that recording fees, which are subject to the 10%

tolerance category, are an example of such costs that could change between

consummation and settlement. For this reason, the Bureau has clarified that a charge

“paid by or imposed on the consumer” refers to the final amount for the charge paid by

or imposed on the consumer at consummation or settlement, whichever is later.



March, 2015

Consummation is defined by Regulation Z, §1026.2(13): Consummation means the

time that a consumer becomes contractually obligated on a credit transaction.

Settlement is defined by Regulation X, §1024.2(b): Settlement means the process of

executing legally binding documents regarding a lien on property that is subject to a

federally related mortgage loan. This process may also be called “closing” or “escrow” in

different jurisdictions.

Example: At consummation, the member pays the creditor $100 for recording fees.

Settlement of the transaction concludes five days after consummation, and the actual

recording fees are $70. The creditor refunds the member $30 immediately after

recording. The recording fee paid by the member is $70.

STATE LAW PREEMPTION

State laws are preempted by the rule to the extent of their inconsistencies with the new

integrated disclosure forms. States, creditors, and other interested parties are permitted

to request a determination by the CFPB regarding such inconsistencies. If the Bureau

determines that a State-required disclosure is inconsistent, creditors located in that

State may not make disclosures using the inconsistent term or form, and will incur no

liability under the State law for failure to use them – unless the Bureau’s determination

is subsequently amended, rescinded, or determined invalid.

DELIVERY REQUIREMENTS (12 CFR §1026.19(e)(1))

The Loan Estimate must be delivered or placed in the mail not later than three

“business days” (general definition) after the credit union (or mortgage broker)

receives the member’s written application, and not later than the seventh “business

day” (specific definition) before consummation of the loan. The member does not need

to indicate an intent to proceed with the loan.

The CFPB clarifies that this timing provision does not prevent a creditor from fulfilling its

obligation to evaluate a borrower’s ability to repay. Credit unions will be able to collect

whatever information they need to evaluate a borrower’s ability to repay as long as they

sequence the collection of that information to ensure that they provide a Loan Estimate

once the six “application” pieces of information have been collected. Creditors cannot

condition the issuance of the disclosure on verifying the information.

If the disclosures are provided to the member by means other than delivery in person,

the member is considered to have received the disclosures three business days after

they are delivered or placed in the mail to the address specified by the member.



March, 2015

Additionally, the seven day waiting period begins when the credit union delivers the

disclosures or places them in the mail, not when the member receives or is presumed to

have received the disclosures.

Alternatively, the credit union may rely on evidence that the member received the

disclosures earlier than three business days. Example: If the credit union sends the

disclosures via overnight mail on Monday, and the member signs for receipt of the

overnight delivery on Tuesday, the credit union could demonstrate that the disclosures

were received on Tuesday.

Electronic delivery: The three-business-day delivery period applies to methods of

electronic delivery, such as e-mail. For example, if a credit union sends the disclosures

via email on Monday, the member is considered to have received the disclosures on

Thursday, three business days later. The credit union may, alternatively, rely on

evidence that the member received the emailed disclosures earlier.

Example: If the credit union emails the disclosures at 1 p.m. on Tuesday, the member

emails the credit union with an acknowledgement of receipt of the disclosures at 5 pm

on the same day, the credit union could demonstrate that the disclosures were received

on the same day.

Disclosures provided via email are subject to compliance with the member consent and

other applicable provisions of the E-Sign Act. If the credit union delivers the

disclosures via email, but did not obtain the member’s consent to receive disclosures,

then the credit union is not in compliance – assuming the disclosures were not provided

in another manner in accordance with the timing requirements.

Application withdrawn or denied: The disclosure is not required in cases where the

credit union knows within the 3-day period that the application will not or cannot be

approved, or where the member withdraws the application. This would apply when a

member’s credit score is lower than the minimum score required for the terms the

member applied for, or the member applies for a type or amount of credit that the

creditor does not offer.

Waiver of 7 day Waiting Period :The CFPB believes the seven-business-day waiting

period is the minimum amount of time in which a member could meaningfully shop,

compare, and negotiate the terms of the mortgage loan, and should only be waived in

the most stringent of circumstances. (See Time-share Plan exception below).

After receiving the Loan Estimate, the member may modify or waive the right to the

seven-business-day waiting period in the case of a “bona fide personal financial

emergency” – not for convenience purposes. This determination of whether a “bono fide

personal emergency” exists will be determined on the individual facts and



March, 2015

circumstances of each situation. An example of a “bona fide personal financial

emergency” is the imminent sale of the member’s home at foreclosure, where the

foreclosure sale will proceed unless loan proceeds are made available during the

waiting period.

The member must give the credit union a dated written statement that describes the

emergency, specifically modifies or waives the waiting period, and bears the signature

of all the consumers primarily liable on the legal obligation in order for the waiver to be

effective. The waiver should be provided upon the delivery of the Closing Disclosure.

Printed forms are prohibited for this purpose.

Example of Waiver: If the Loan Estimate is delivered to the member in person on

Monday, June 1, the seven-business-day waiting period ends on Tuesday, June 9. If on

Monday, June 1, the member executes a waiver of the seven-business-day waiting

period, the final disclosures could then be delivered three business days before

consummation, on Tuesday, June 2, and the loan could be consummated on Friday,

June 5.

Joint obligors: Where two consumers are joint obligors, the Loan Estimate may be

provided to any consumer with primary liability on the obligation.

Combined with other disclosures: The Loan Estimate may be provided with other

documents or disclosures, such as a cover letter or disclosures required by State or

other applicable law.

Mortgage Broker: A mortgage broker is any loan originator that is not an employee of

the creditor. If a mortgage broker receives a member’s application, either the creditor or

the mortgage broker must provide the member with the Loan Estimate within three

business days of receipt of the application and, except for timeshare plans, not later

than the seventh business day before consummation of the transaction.

If the mortgage broker provides the Loan Estimate, the mortgage broker must comply

with all relevant regulatory requirements as if it were the creditor, including the record

retention requirements, such as retaining documentation of any reasons a revised Loan

Estimate was provided. The creditor must ensure that the Loan Estimate is provided in

accordance with all of the requirements. Disclosures provided by a mortgage broker in

accordance with the regulations satisfy the creditor’s obligations under the rule.

The new rule does not permit the creditor to issue a separate Loan Estimate or revised

disclosures to correct a mortgage broker’s error. Mortgage brokers are not required to

get authorization from creditors before providing Loan Estimates. Creditors are bound

by the terms of the Loan Estimate, subject to one of the six legitimate reasons for



March, 2015

revisions such as changed circumstances or borrower-requested changes, whether or

not the creditor has authorized the mortgage broker to provide the Loan Estimate.

Either the creditor or the mortgage broker may provide a revised Loan Estimate based

on any of the six valid reasons for revisions included in the rule.

The rule does not impose explicit requirements on mortgage brokers with respect to

providing application information to the creditor and to establishing additional conditions

that mortgage brokers must satisfy before they issue a Loan Estimate. The Bureau

believes that these requirements should be set by the creditor contractually with the

mortgage broker.

If a mortgage broker issues the Loan Estimate in the creditor's place, the creditor

remains responsible for ensuring that the requirements have been satisfied. For

example, if a mortgage broker receives a consumer's application and provides the

consumer with the Loan Estimate, the creditor does not satisfy the requirements of

providing a Loan Estimate if it provides duplicative disclosures to the consumer. In the

same example, even if the broker provides an erroneous disclosure, the creditor is

responsible and may not issue a revised disclosure correcting the error. The creditor is

expected to maintain communication with the broker to ensure that the broker is acting

in place of the creditor.

The rule requires either a mortgage broker or creditor to provide the Loan Estimate form

upon receipt of an application by a mortgage broker. However, even if the mortgage

broker provides the Loan Estimate, the credit union remains responsible for complying

with all requirements concerning the provisions of the form.

Time-share Plans: Transactions secured by a member’s interest in a “timeshare plan”

are not subject to the seven-business-day waiting period. [1026.19(e)(1)(iii)(C)]

Given that timeshare transactions typically occur on the same day or the day after the

creditor receives a member’s application, the CFPB believes that it would be

burdensome to creditors to provide the Loan Estimate before consummation. So, if a

member provides the creditor with an application for a timeshare transaction, and

consummation occurs within three business days after the creditor’s receipt of the

member’s application, then the creditor will be considered to be in compliance with the

Loan Estimate timing requirements by providing the Closing Disclosure (1026.19(f)(1)(i))

instead of the Loan Estimate.

However, for timeshare transactions that will be consummated more than three business days after the receipt of an “application”, the Bureau believes that the receipt



March, 2015

of the Loan Estimate within three business days of the creditor’s receipt of the consumer’s application will help consumers.

PRE-LOAN ESTIMATE FEE RESTRICTION (12 CFR §1026.19(e)(2))

Effective date: The following pre-disclosure provisions are effective October 3, 2015,

regardless of whether an application has been received on that date.

A credit union may not impose a fee on a member in connection with a mortgage loan

application before the member:

1. has received the Loan Estimate, AND

2. takes the affirmative step to indicate an intent to proceed with the mortgage

loan.

This includes, for example, fees for an application, an appraisal, underwriting or even a

“pre-application” fee. (See Credit Report Fee Exception below).

A fee is considered “imposed” if the member is required to provide a method for

payment, for example, check or credit card number, even if the payment is not made at

that time.

Check Example: A credit union may not require the member to provide a $500 check

to pay for a “processing fee” before the member receives the Loan Estimate and has

indicated an intent to proceed with the loan, even if the credit union has stated that the

check will not be cashed until after the Loan Estimate has been delivered and an intent

to proceed indicated by the member.

Credit Card Example: A credit union cannot require the member to provide a credit card

number before the member receives the Loan Estimate, even if the credit union

promises not to charge the member’s credit card for the $500 processing fee until after

the Loan Estimate is provided and the member indicates an intent to proceed with the

loan.

Credit Report Fee Exception: The only exception from this fee restriction is for a bona

fide and reasonable fee for obtaining a member’s credit report. At any time prior to

delivery of the Loan Estimate, a credit union may impose a reasonable credit report fee

in connection with the mortgage loan application. The credit union must accurately

describe or refer to this fee, for example, as a “credit report fee”. Not as Regulation Z

previously allowed, “an application fee”.



March, 2015

Credit Card Example: A credit union may require the member to provide a credit card

number before the Loan Estimate is provided and an intent to proceed with the loan is

indicated, as long as the member’s authorization is only to pay for the cost of a credit

report and the credit union only charges a reasonable and bona fide fee for obtaining

the credit report.

Maintaining a credit card number on file: As long as the credit union requests and

receives a separate authorization for an additional fee to be imposed after the Loan

Estimate is provided and intent to proceed is indicated, the credit union may maintain

the credit card information on file. A separate authorization means a new authorization,

whether verbal or written, from the member for the credit union to charge new fees. The

CFPB notes that an expression of a member’s intent to proceed with a transaction is not

the same as an authorization to the credit union to charge additional fees.

Only one credit report fee allowed. Example: A third party submits a member’s

application to a credit union following a different creditor’s denial of the member’s

application (or following the member’s withdrawal of that application), and if a fee

already has been assessed for obtaining the credit report, the new creditor (the credit

union) or third party must not impose any additional fee until the member receives the

Loan Estimate from the credit union and indicates an intent to proceed with the

transaction.

“Indication of Intent”: A credit union may require a particular method of

communication for the member to “indicate an intent” to proceed.

Acceptable methods of communication include:

Oral communication in person immediately upon delivery of the Loan Estimate

disclosure;

Oral communication over the phone;

Written communication via email; or

Signing a pre-printed form -

as long as these actions occur after receipt of the Loan Estimate. Also, the credit

union must document this communication.

Non-acceptable methods of communication include:

A member’s silence (because it cannot be sufficiently documented). Example: A

credit union may not deliver the disclosures, wait for some period of time for the

member to respond, and then charge the member an application-related fee if

the member does not respond, even if the credit union disclosed that it would do

so.

A signature line on the Loan Estimate that could be signed by the member to

indicate the member’s intent to proceed. (The optional signature line permitted



March, 2015

on the sample Loan Estimate in Appendix H to Regulation Z (Form H-24) only

documents receipt of the Loan Estimate.)

PRELIMINARY WRITTEN ESTIMATE (pre-Loan Estimate) (12 CFR §1026.19(2)(ii))

The CFPB recognizes that consumers often want preliminary written estimates based

on less information than is needed to issue the Loan Estimate. The regulation refers to

this preliminary estimate as a “written estimate”. To avoid consumer confusion

between a “written estimate” and the required “Loan Estimate”, the CFPB requires that

the written estimate include a statement to distinguish it from the Loan Estimate and

warn consumers of the risk of relying on preliminary written estimates.

If a credit union provides a member with a written estimate of terms or costs specific to

that member before the member receives the Loan Estimate, the credit union must

clearly and conspicuously state at the top of the front of the first page of the estimate in

a font size that is no smaller than 12-point font: “Your actual rate, payment, and costs

could be higher. Get an official Loan Estimate before choosing a loan.”

Example: If the credit union provides a document showing the estimated monthly

payment for a mortgage loan, and the estimate was based on the estimated loan

amount and the member’s estimated credit score, then the credit union must include the

statement on the document. In contrast, if the credit union provides the member with a

preprinted list of closing costs common in the member’s area, the credit union need not

include the statement. Similarly, the statement would not be required on a preprinted

list of available rates for different loan products. Finally, this requirement does not apply

to an advertisement.

To avoid confusion, pre-application worksheets must not be formatted in a way that is

substantially similar to the Loan Estimate or Closing Disclosure. A written estimate of

terms or costs may not be made with headings, content, and format substantially similar

to Forms H-24 or H-25 of Appendix H to Regulation Z.

A credit union providing member-specific written estimates may use forms they have

already developed, provided that they add the required disclaimer and that their forms

are not substantially similar to forms H-24 or H-25 in Appendix H to Regulation Z.

Verification of Information (12 CFR §1026.19(e)(2)(iii))

The credit union or other person is prohibited from requiring a member to submit

documents verifying information related to the member’s application before providing

the Loan Estimate. The credit union may collect any information that it requires prior to

providing the Loan Estimate, but is not permitted to require that the member submit



March, 2015

documentation to verify that information. Example: A credit union may ask for the sale

price and address of the property, but may not require the member to provide a

purchase and sale agreement to support the information that the member provides

orally before the credit union provides the Loan Estimate.

DETERMINING GOOD FAITH ESTIMATES (12 CFR §1026.19(e)(3))

The General Rule

The settlement service charges listed on the Loan Estimate must represent a good faith

estimate of these charges. The general rule is that an estimated closing cost disclosed

on the Loan Estimate is in good faith if the charge later paid by or imposed on the

member does not exceed the amount originally disclosed. There are some exceptions

to this general rule:

limited increases permitted for certain charges (permitted tolerances);

changed circumstances affecting the costs and terms of the loan; or

changes made at the borrower’s request.

(See detailed information regarding these exceptions below)

If the originally estimated amount changed due to one of the valid reasons allowed by

the rule, such as a changed circumstance or borrower request, the credit union may

compare the actual charge paid by or imposed on the member with a revised

estimated amount. (See Revised Estimates in this report)

“No Cost” Loans are Not Exempt : The general rule applies to both charges that are

paid by the member, and charges that are imposed on the member. In a “no cost” loan

transaction, closing costs may not be paid by the member because they are financed by

the creditor, but are nonetheless imposed on the member.

The CFPB believes that consumers should receive reliable cost estimates for “no cost”

loans so that the consumer can use the Loan Estimate to compare loans where the

closing costs are financed with loans that do not finance closing costs.

Zero Tolerance Category (The General Rule)

The following charges, when paid or imposed on the member, must not exceed the

amounts listed on the initial Loan Estimate:

(a) origination charges - fees paid to the creditor and fees paid to a mortgage

broker;

(b) transfer fees;

(c) affiliate charges - fees paid to an affiliate of the creditor or mortgage broker;



March, 2015

(d) fees paid to an unaffiliated third party that the creditor requires the member to

use – the member is not allowed to shop for the service.

(The 2015 rule added “affiliate fees of the creditor” and “fees of lender-required service

providers” to this category. Before October 3, 2015 these charges were in the 10%

tolerance category).

Payments to Affiliated Providers disbursed to unaffiliates are Not Exempt: The

CFPB explains that if a lender requires a consumer to use an affiliated company for title

services, then the fees the consumer pays to the affiliate company should be subject to

zero percent tolerance, even if the affiliate uses vendors to perform the title services.

Example: Payments that affiliated title companies receive at closing that are then

disbursed to unaffiliated service providers as payment for services performed by the

unaffiliated service providers on behalf of the affiliated title companies, are not exempt.

Aggregate amount: The Bureau does not believe it is appropriate to permit fees in the

zero percent tolerance category to increase, regardless of whether the aggregate

amount of these fees does not increase.

To avoid the zero tolerance rule: If the credit union does not want the zero percent

tolerance rule to apply to the cost of a lender-required service, the credit union must

permit the member to shop around for the settlement service provider for that service,

and the service provider cannot be an affiliate of the credit union.

10% Tolerance Category

This part of the rule provides flexibility in disclosing individual fees by focusing on

aggregate amounts. Certain estimated charges are considered in good faith if the

aggregate amount (or the sum) of all such charges paid by or imposed on the member

does not exceed the aggregate amount (or sum) of all such charges that was disclosed

on the Loan Estimate by more than 10%. This limited increase is only allowed for:

Recording fees, and

Charges paid to unaffiliated third parties for which your member is allowed to

shop – and the member picks a service on the list provided by the credit union.

Example: Assume that the sum of all estimated charges in the 10% category disclosed

on the Loan Estimate equals $1,000. The credit union does not include an estimated

charge for a notary fee but a $10 notary fee is charged to the member. Assume the

notary fee is subject to the 10% aggregate limitation, the credit union has not violated

the rule if the sum of all amounts charged to the member subject to the 10% aggregate

limitation does not exceed $1,100, even though an individual notary fee was not

included on the Loan Estimate.



March, 2015

Example: The credit union includes a $300 estimated fee for a settlement agent on the

Loan Estimate and this fee is included in the category of charges subject to the

aggregate 10% limit. The sum of all of the charges in this category, including the

settlement charge, equals $1,000. The credit union does not violate this rule if the actual

settlement agent fee exceeds $330 (ie: 10%), provided that the sum of all such charges

does not exceed $1,100 (ie: 10%).

However, even if a particular charge does not increase by more than 10 percent, if the

aggregate of all such charges does increase by at least that amount, then even that

charge is not considered in good faith.

Services for which the member may shop, but does not: If the credit union requires

a service in connection with the mortgage loan transaction and permits the member to

shop for that service, but the member either does not select a settlement service

provider or chooses a settlement service provider identified by the credit union on the

list, then good faith is determine using the 10% aggregate limitation.

Example: If a credit union discloses on the Loan Estimate an estimated fee for an

unaffiliated settlement agent and permits the member to shop for that service, but the

member either does not choose a provider, or chooses a provider identified by the credit

union on the required written list, then the estimated settlement agent fee is included

with the fees that may, in aggregate, increase by no more than 10%. However, if the

member chooses a provider that is not on the written list, then good faith is determined

by the best information available to the credit union at the time the Loan Estimate was

provided.

Unlimited Increases Category

Regardless of good faith estimate efforts, certain types of estimates may change

significantly after the original Loan Estimate is provided. Similar to the pre-October 3,

2015 rule, under the new rule a cap will not be applied to certain settlement cost

estimates. NOTE: Even though good faith is not determined by a comparison of

estimated amounts and actual costs, the estimates for these charges must still be made

in good faith by using the best information available.

The estimates for the charges in this category, or lack of an estimated charge for a

particular service, must be consistent with the best information reasonably available

to the credit union at the time the disclosures were made. This means that the estimate

for the charge was obtained through due diligence, acting in good faith.

The charges in this “unlimited increases” category include:

prepaid interest;

o Example: If the credit union knows that the loan must close on the 15th of

the month but estimates prepaid interest to be paid from the 30th of that

month, then the under-disclosure violates the rule. If, however, the credit

union’s estimates are consistent with the best information reasonably



March, 2015

available that the loan will close on the 30th of the month and bases the

estimate of prepaid interest accordingly, but the loan actually closes on

the 1st of the next month, the credit union is in compliance.

property insurance premiums (whether or not the insurance provider is a credit

union affiliate);

amounts placed into an escrow, impound, reserve, or similar account; and

charges paid to third-party service providers, such that:

o they are required by the creditor,

o the credit union permits the member to shop for the service,

o the credit union provides a written list of providers, and

o the member chooses a servicer not on the list.

Example: If the member informs the credit union that the member

will choose a settlement agent not identified by the credit union on

the written list and the credit union subsequently discloses an

unreasonably low estimated settlement agent fee, then the under-

disclosure violates the rule.

Charges paid for third-party services not required by the credit union, even if a

credit union affiliate provides them. The Bureau takes this position because the

optional nature of such services means that borrowers may decide not to

purchase these services later in the origination process, or choose a provider

that offers a better price for the service.

Requirements When Permitting Members to Shop for Services

List of providers: If the credit union permits a member to shop for a settlement service,

the credit union must provide the member with a written list identifying available

providers of that service and stating that the member may choose a different provider

for that service. If the member is not allowed to shop off the list, then it is not permitting

the member to shop. A sample service provider list expressly disclosing that the

member may choose a different settlement service provider off the list is available in

Appendix H to the rule, Form H-27.

No written list provided: If the credit union permits the member to shop for a service

provider, but fails to provide the list of service providers, then good faith is determined

using the 10% tolerance category, instead of the unlimited tolerance category,

regardless of the provider selected by the member. However, if the selected provider is

an affiliate of the credit union, good faith is determined using the general rule - zero

tolerance.

Requirements of providers: A credit union may impose reasonable requirements

regarding the qualifications of the provider. For example, the credit union may require



March, 2015

that a settlement agent chosen by the member be appropriately licensed in the relevant

jurisdiction.

Delivery of the list: The list must be provided separately from the Loan Estimate but in

accordance with the timing requirements (within three business days of receiving the

application, not later than 7 days before consummation of the loan). Although the Loan

Estimate must be provided on separate pages that are segregated from other

documents or disclosures, the credit union is not prohibited from providing the written

list in the same transmittal as the Loan Estimate.

Contents of the list : The list must include sufficient information to allow the member to

contact the service provider, such as the name, address and telephone number. The

street address is not required, but if it is not listed the credit union must demonstrate

that the information that is provided is sufficient to allow the member to contact the

provider. Providing the member with a toll-free number or a Web site, rather than a

written list with contact information, is not sufficient because it adds an extra step into

the shopping process.

The list should not include service providers that are no longer in business or that do not

provide services in the area where the member or the property is located. A vendor

management company must not be included on the list if it cannot ensure that the

service for which it is listed can be performed by its employees or contractors in the

area where the member or property is located.

How many servicers must be listed? The credit union must identify at least one

available provider for each settlement service for which the member is permitted to

shop. If the credit union determines that there is only one available settlement service

provider, the credit union is only required to identify that provider on the written list.

Affiliates: Affiliates are permitted to be included on the list, as long as the affiliate

business arrangement is in compliance with RESPA requirements (§1024.15) and the

affiliation is disclosed to the member when the Loan Estimate is provided. Additionally,

the heading on the list should clearly state that the member can select the provider or

shop for different providers, clarifying that an affiliated provider is not a required

provider.

Referrals: The list is considered a “referral” for purposes of RESPA’s prohibition against

kickbacks and unearned fees. (§1024.14(f)).

Endorsements: The credit union may include a statement on the written list that the

listing of a settlement service provider does not constitute an endorsement of that

service provider.



March, 2015

Fees: Credit unions are not required to list the estimated fees of the service providers,

even though Form H-27(A) of Appendix H does provide space to do so. The credit

union is required to itemize on the Loan Estimate the estimated amount for each of the

services for which a member may shop. Even if the credit union lists on the written list

more than one service provider for a particular settlement service, the credit union must

itemize on the Loan Estimate only one estimated cost of that service for one of the

service providers listed. This estimated cost would be the amount used for the purpose

of the good faith estimate analysis. However, the rule does not prohibit a credit union

from identifying the estimated fee of each service provider listed for a settlement service

on the written list.

Revised Loan Estimates: The credit union is only required to provide the written list

once, in accordance with the timing requirement that applies to the original Loan

Estimate.

Optional Services

The CFPB does not believe that optional services chosen by a consumer should be

exempt from the good faith requirement. Differences between the amounts of estimated

charges for services not required by a credit union and the amounts of such charges do

not constitute a lack of good faith, as long as the original estimated charge, or lack of an

estimated charge for a particular service, was based on the best information

reasonably available to the credit union at the time the Loan Estimate was provided.

Example: The member informs the credit union that the member will obtain a type of

inspection not required by the credit union. The credit union must include the charge for

that item in the Loan Estimate based on the best information reasonably available to

the credit union at the time that the estimate was provided.

Example: The subject property is located in a jurisdiction where borrowers are

customarily represented at closing by their own attorney, even though it is not a

requirement. If the credit union fails to include a fee for the member’s attorney, or

includes an unreasonably low estimate for such fee, on the original Loan Estimate, then

the credit union’s failure to disclose, or under-estimate, violates the rule.

Example: If the credit union requires homeowner’s insurance but fails to include a

homeowner’s insurance premium on the Loan Estimate, then the credit union’s failure to

disclose the charge is a violation of the rule.

Example: The credit union does not require flood insurance and the subject property is

located in an area where floods frequently occur, but not specifically located in a zone

where flood insurance is required. The credit union’s failure to include flood insurance

on the original Loan Estimate does not constitute a lack of good faith.



March, 2015

Services not obtained

If the credit union discloses a cost estimate for a settlement service on the Loan

Estimate, but the settlement service was not obtained, the credit union cannot include

the fee estimate in the estimated aggregate amount for purposes of conducting the

good faith analysis.

Example: Assume the credit union included a $100 estimated fee for a pest inspection

on the Loan Estimate, the fee is included in the 10% tolerance category, but a pest

inspection was not obtained in connection with the transaction. In this case, the sum or

aggregate of all charges in the 10% tolerance category paid by or imposed on the

member is compared to the sum of all such charges disclosed on the Loan Estimate,

minus the $100 estimated pest inspection fee.

Lender Credits

To perform the good faith analysis with respect to lender credits, the total amount of

lender credits, whether specific or non-specific, actually provided to the member is

compared to the amount of lender credits as identified in the Loan Estimate.

Non-specific lender credits (generalized payments from the credit union to the member

that do not pay for a particular fee on the Loan Estimate) and specific lender credits

(specific payments, such as a credit, rebate, or reimbursement, from a credit union to

the member to pay for a specific fee) are negative charges to the member. The actual

total amount of lender credits, whether specific or non-specific, provided by the credit

union that is less than the estimated lender credit on the Loan Estimate is an increased

charge to the member for purposes of determining good faith.

Example: If the credit union discloses a $750 estimate for lender credits, but only $500

of lender credits is actually provided to the member, the credit union has not complied

with this rule. This is because the actual amount of lender credits provided to the

member is less than the estimated lender credits disclosed on the Loan Estimate, and is

therefore an increased charge to the member for purposes of determining good faith.

Example: The credit union discloses a $750 estimate for lender credits to cover the

cost of a $750 appraisal fee. The appraisal fee subsequently increases by $150, and

the credit union increases the amount of the lender credit by $150 to pay for the

increase. In this case, the lender credit is not being revised in a way that violates this

rule. Although the credit increased from the amount disclosed, the amount paid by the

member did not. However, if the credit union discloses a $750 estimate for lender

credits to cover the cost of a $750 appraisal fee, but subsequently reduces the credit by

$50 because the appraisal fee decreased by $50, then the rule has been violated. This

situation is a violation of the rule because, although the amount of the appraisal fee

decreased, the amount of the lender credit decreased, as well.



March, 2015

Streamlined Refinancing Programs are Not Exempt

Although requested by the financial industry, the CFPB declined to provide a specific

exemption that would allow the amount of lender credits to decrease so that the creditor

would be able to stay within guidelines under streamlined refinancing programs.

Similar to the existing rule, under the new rule loan originators may only:

apply the amount of the excess lender credits to additional closing costs

previously not anticipated to be included in the loan,

apply the excess to a principal reduction to the outstanding balance of the loan,

pay the member the excess in cash, or

reduce the interest rate and the credit accordingly.

Use Unrounded Numbers to Compare Actual and Estimated Costs

Although dollar amounts of certain charges disclosed on the Loan Estimate and Closing

Disclosure are required to be rounded to the nearest whole dollar, the credit union

should use unrounded numbers to compare the actual charge paid by or imposed on

the member for a settlement service with the estimated cost of the service. This applies

to charges that cannot increase and those fees whose aggregate may increase up to

10%.

Refunds Related to Loan Estimates If amounts paid by the member exceed the amounts specified in the Loan Estimate

beyond the tolerance limits, the credit union must refund the excess to the member no

later than 60 days after closing. The credit union must also deliver or place in the mail

corrected disclosures that reflect the refund within the 60-day period.

LOAN ESTIMATE CONTENT – Filling out the Form (12 CFR §1026.37)

Generally, the Loan Estimate contains the disclosures of categories of information that

will vary due to the type of loan, the payment schedule of the loan, the fees charged, the

terms of the transaction, and State law provisions.

The disclosures must be made using Form H-24, found in appendix H to the rule.

The form may be translated into languages other than English, and credit unions may

modify Form H-24 to the extent that such translation prevents the headings, labels,

designations, and required disclosure items from fitting in the space provided on form H-

24.



March, 2015

You may add additional pages to the Loan Estimate for:

Applicant Information: An addendum page may be added to the Loan Estimate if

the space provided is insufficient to list all of the applicants.

Services You Can Shop For: An addendum to the Loan Estimate may be used

to disclose additional services for which the member is permitted to shop.

You may not add additional pages to the Loan Estimate for:

Property Information: An addendum to the Loan Estimate may not be added to

disclose a description of personal property.

State Law Disclosures: If State law requires additional disclosures, those

additional disclosures are made on a document whose pages are separate from,

and not presented as part of, the Loan Estimate.

Services You Cannot Shop For: An addendum to the Loan Estimate cannot be

used to disclose additional services the member is not permitted to shop for

beyond the 13 permitted on the form.

Other Costs: An addendum to the Loan Estimate cannot be used for additional

items on the Other Costs Table located on page 2 of the Loan Estimate.

Attaching a business card. The credit union may physically attach a business card over

the credit union’s name and address on the Loan Estimate.

Adding administrative information. The credit union may insert at the bottom of each

page under the required disclosures any administrative information, text, or codes that

assist in identification of the form or the information disclosed on the form - as long as

the space provided on Form H-24 for any of the information required by the rule is not

altered.

Rounding : Dollar amounts must be rounded to the nearest whole dollar where noted in

the regulation. If an amount is required to be rounded but is composed of other amounts

that are not required or permitted to be rounded, use the unrounded amounts in

calculating the total and then round the final sum. Conversely, if an amount is required

to be rounded and is composed of rounded amounts, use the rounded amounts in

calculating the total. Percentage amounts may not be rounded and should be shown up

to two or three decimals, as needed, except where noted in the regulation. If a

percentage amount is a whole number, show the whole number only with no decimals.



March, 2015

PAGE 1 OF THE LOAN ESTIMATE The first page of the Loan Estimate includes general information, a Loan Terms table with descriptions of applicable information about the loan, a Projected Payments table, a Costs at Closing table, and a link for members to obtain more information about loans secured by real property at a website maintained by the CFPB. See Figure 1.

The statement “Save this Loan Estimate to compare with your Closing Disclosure” appears on the top of the page.

General Information

Creditor’s information: The top of the page also includes the name and address of the credit union, a logo or slogan can be used along with the credit union’s name and address, so long as the logo or slogan does not exceed the space provided for that information. If there are multiple creditors, use only the name of the creditor completing the Loan Estimate. If a mortgage broker is completing the Loan Estimate, they should use the name of the creditor if known. If not yet known, the space should be left blank.

Date issued: The date the disclosures are mailed or delivered to the member.

Applicant information: Name and mailing address of the member(s) applying for the loan. Use each applicant’s name and mailing address if there are multiple applicants. An additional page may be added to the Loan Estimate if the space provided is insufficient to list all of the applicants.

Property information: You must list the address of the property (which must include the zip code) that will secure the mortgage transaction. If the address of the property is unavailable, use a description of the location of the property, for example a lot number. Always use a zip code. Personal property, such as furniture or appliances, that also secures the credit transaction may be, but is not required to be included as “property”. An additional page may not be appended to the Loan Estimate to disclose a description of personal property.

Sale Price: The contract sale price of the property for transactions that involve a seller. If there is no seller involved, the label “Prop. Value” should be used with the estimated value of the property.

Loan Term: Include the term to maturity of the credit transaction stated in years or months, or both, as applicable.

Purpose: State the member’s intended use of the loan, using one of the following terms: “Purchase”, “Refinance”, “Construction”, or “Home Equity Loan”.

Product: Provide a description of the loan. You are required to include two pieces of information in this disclosure. The first piece of information (1026.37(a)(10)(ii)) is any payment feature that may change the periodic payment, which includes:



March, 2015

Negative Amortization: when the principal balance of the loan may increase due to the addition of accrued interest to the principal balance. The duration of this payment feature must also be included.

Interest Only: when one or more regular periodic payments may be applied only to interest accrued and not to the principal of the loan. The duration of this payment feature must also be included.

Step Payment: when the scheduled variations in regular periodic payment amounts occur that are not caused by changes to the interest rate during the loan term. The duration of this payment feature must also be included.

Balloon Payment: when the terms of the legal obligation include a payment that is more than two times that of a regular periodic payment. The duration of this payment feature must also be included.

Seasonal Payment: when the terms of the legal obligation expressly provide that regular periodic payments are not scheduled between specified unit-periods on a regular basis. For example, a “teacher” loan that does not require monthly payments during summer months has a Seasonal Payment.

Example: a payment feature where there is a five-year period during which the payments cover only interest, and are not applied to the principal balance, would be disclosed as a 5 Year Interest Only for the payment feature.

If the loan can be described with more than one of these descriptions, only the first applicable feature (in the order listed above) is disclosed. Example: a loan that would result in both Negative Amortization and a Balloon Payment would only disclose Negative Amortization as part of the product description on the Loan Estimate.



March, 2015

FIGURE 1.



March, 2015

The second piece of information (1026.37(a)(10)(i)) included in the loan description (“Product”) is the type of interest rate applied to the principal balance:

Adjustable Rate: When the interest rate may increase after consummation, but the rates that will apply or the periods for which they will apply are not known at consummation. Each description must be preceded by the duration of any introductory rate or payment period, and the first adjustment period, as applicable. Example: A product with an introductory rate that is fixed for the first five years and adjusts every three years starting in year 6 is a 5/3 Adjustable Rate.

When there is no introductory period for an Adjustable Rate, disclose “0.” Example: A product with no introductory rate that adjusts every year after consummation is a 0/1 Adjustable Rate.

Step Rate: When the interest rate will change after consummation and the rates that will apply and the periods for which they apply are known at consummation. Each description must be preceded by the duration of any introductory rate or payment period, and the first adjustment period, as applicable. Example: A product with a step rate that lasts for ten years, adjusts every year for five years, and then adjusts every three years for the next 15 years is a 10/1 Step Rate. (Comment 37(a)(10)-1.ii)

When there is no introductory rate for a Step Rate, disclose “0” and then the applicable time period until the first adjustment. (Comment 37(a)(10)-1.ii)

Fixed Rate: When the interest rate is not an Adjustable Rate or Step Rate.

Loan type: Include the type of loan offered to the member using one of the following terms, as applicable: “Conventional”, “FHA”, “VA”, or “Other”, and provide a brief description of the loan type.

Loan ID #: The Loan ID # may be used by the credit union, member, and other parties to identify the transaction. The same Loan ID # may not be used for different, but related, loan transactions (such as different loans to the same borrower). When a revised Loan Estimate is issued, the Loan ID # must be sufficient for the purpose of identifying the transaction associated with the initial Loan Estimate.

Rate Lock: Include a statement of whether the interest rate disclosed is locked for a

specific period of time. When the interest rate is locked at the time of the Loan

Estimate’s delivery, the date and time (including the applicable time zone) when the lock

period ends must be disclosed. You must also include a statement that the interest

rate, any points, and any lender credits may change unless the interest rate has been

locked, and the date and time (including the applicable time zone) at which estimated

closing costs expire.



March, 2015

Loans Terms Table: The Loan Terms Table describes whether the loan amount,

interest rate and monthly principal and interest can increase after closing, as well as

whether the loan has a prepayment penalty and/or balloon payment.

Projected Payments Table: The Projected Payments Table shows the estimates of

the periodic payments that the member will make over the life of the loan. The initial

periodic payment (or range of payments, if required) will be listed in the first column.

Depending on the features of the loan, subsequent periodic payments also may be

required to be disclosed.

The maximum number of columns the Projected Payments Table may contain is four. If

a loan has more than four triggering events, show a range of payments in the fourth

column that reflects all remaining periodic payments not shown in the first three

columns. Balloon Payment Exception: A balloon payment scheduled as a final

payment always requires its own column. If disclosing the final balloon payment means

that other triggering events will not fit within the four-column maximum, show the other

triggering events as a range of payments in the third column. A balloon payment that is

not a final payment is a triggering event that does not necessarily require its own

column.

Mortgage Insurance: The automatic termination of mortgage insurance generally

requires the corresponding periodic payment to be shown in its own column, unless

doing so would exceed the four-column maximum. Where the automatic termination of

mortgage insurance need not be shown in its own column, the column showing the next

periodic payment or range of payments should show the periodic payment amount

without mortgage insurance.

The lender must automatically terminate mortgage insurance or any functional

equivalent. Even if the borrower may cancel the insurance earlier, use the date on

which the lender must automatically terminate mortgage insurance coverage under

applicable law. Only termination of mortgage insurance is a triggering event, while a

decline in mortgage insurance premiums is not.

Estimated Escrow: Disclose the amount the member will pay into an escrow account

each month under the terms of the legal obligation. Use a rounded number. If an escrow

account will not be established, disclose “0.” Disclose “—” if there will be an escrow

account, but the escrow account will be closed during the time-frame attributable to the

applicable periodic payment.

Estimated Taxes, Insurance & Assessments: Disclose the total monthly amount due for

property taxes, homeowner’s insurance, charges imposed by a cooperative,



March, 2015

condominium or homeowners association, ground rent, leasehold payments, and

certain insurance premiums, such as credit life, accident, health, or loss-of-income

insurance, insurance against loss of or damage to property, or against liability arising

out of the ownership or use of property, and debt cancellation or debt suspension

coverage, or charges if required by the lender. Disclose it as a rounded number.

PAGE 2 OF THE LOAN ESTIMATE

Page 2 of the Loan Estimate (Figure 2) includes a good-faith itemization of the “Loan

Costs” (costs paid by the member to the creditor and to third-party providers of services

the creditor requires to be obtained during the origination of the loan), and “Other Costs”

(such as taxes, governmental recording fees), a “Calculating Cash to Close” Table to

show the member how the amount of cash needed at closing is calculated, and for

certain transactions, an Adjustable Payment (AP) Table, or Adjustable Interest Rate

(AIR) Table with relevant information addressing how the monthly payments or the

interest rate will change. (Figure 3)

When are fees NOT considered “paid to” a particular party?

Pass-through fees: A fee is not considered “paid to” a person if the person does

not retain the fee. For example, if a member pays the credit union transfer taxes

and recording fees at the real estate closing and the credit union subsequently

uses those funds to pay the county that imposed these charges, then the transfer

taxes and recording fees are not “paid to” the credit union. Similarly, if a member

pays the credit union an appraisal fee in advance of the real estate closing and

the credit union subsequently uses those funds to pay another party for an

appraisal, then the appraisal fee is not “paid to” the credit union.

Reimbursements: A fee is also not considered “paid to” a person if the person

retains the fee as reimbursement for an amount it has already paid to another

party. For example, if a credit union pays for an appraisal in advance of the real

estate closing and the member pays the credit union an appraisal fee at the real

estate closing, then the fee is not “paid to” the credit union, even though the

credit union retains the fee, because the payment is a reimbursement for an

amount already paid.



March, 2015

Figure 2.



March, 2015

Figure 3.



March, 2015

Origination Charges: These are items the member will pay to each creditor and loan

originator for originating and extending credit.

First, include the amount paid, if any, by the member to the creditor to reduce the

interest rate (sometimes referred to as “points”) as both a percentage of the loan

amount and a dollar amount. If no points are charged, then leave blank both the

percentage of points and the dollar amount.

Any other items that the member will pay to the creditor and loan originator may also be

disclosed, up to 13 individual items. If there are more than 13 Origination Charges,

disclose the total amount of the items that exceed 12 as “Additional Charges.” Describe

the items, other than for points paid, using terminology that clearly and conspicuously

describes the service that is disclosed.

Only items paid directly by the member to compensate a loan originator are considered

Origination Charges. Do not disclose compensation to a loan originator paid indirectly

by a creditor through the interest rate on the Loan Estimate.

Services You Cannot Shop For: When listing these items, you must use terminology

that describes each item, and disclose them in alphabetical order. For example, you

might include Appraisal fee, Credit Report fee and Flood Determination fee – in that

order. Disclose no more than 13 “Services You Cannot Shop For”. If there are more

than 13 such services, disclose the total amount of the items that exceed 12 with the

label “Additional Charges”. An addendum to the Loan Estimate may not be used to

disclose the additional items.

Services You Can Shop For: When listing these items, you must use terminology that

describes each item, and disclose them in alphabetical order. For example, you might

include a Pest Inspection fee, Title- Settlement Agent Fee, or Title: Title search. (Items

that are a component of title insurance or are for conducting the closing must include

the introductory description of “Title”. (§§ 1026.37(f)(2)(i) & 1026.37(g)(4)(i))

Disclose no more than 14 “Services You Can Shop For”. If there are more than 14 such

services, disclose the total amount of the items that exceed 13 with the label “Additional

Charges”. An addendum to the Loan Estimate may be used to disclose the additional

items.

Other Costs Table: Items on the “Other Costs” Table must be disclosed in the order listed in the regulation, with any additional items listed in alphabetical order in subsequent lines of the applicable subheading. An addendum to the Loan Estimate cannot be used for additional items on the Other Costs Table. If all of the charges cannot be itemized in the number of lines provided in a subheading of the Other Costs Table, the total of those items that exceed the number permitted are disclosed with the label “Additional Charges” on the last line of that subheading.



March, 2015

Taxes and Other Government Fees: Under this subheading you will disclose

“Recording Fees and Other Taxes” first and “Transfer Taxes” second.

Transfer taxes are state and local government fees on mortgages and home sales that

are based on the loan amount or sale price of the property. The name that is used

under state or local law to refer to these amounts is not determinative of whether or not

they are disclosed as Transfer Taxes on the Loan Estimate.

Disclose only Transfer Taxes paid by the member on the Loan Estimate. Whether the

member pays the transfer tax is based on applicable State or local law. Example: If a

State law indicates a lien can attach to the member’s acquired property if the charge is

not paid, the amount is included as part of the Transfer Taxes. Example: If State or

local law is unclear or does not specifically attribute the amount to the seller or

purchaser/member, disclose the amount apportioned to the member using common

practice in the locality of the property.

Transfer taxes to be paid by the seller are not disclosed on the Loan Estimate as

Transfer Taxes.

Prepaids: These are items to be paid by the member in advance of the first scheduled

payment of the loan. Prepaids may include: Homeowner’s Insurance Premium,

Mortgage Insurance Premium, Prepaid Interest, Property Taxes, and a maximum of

three additional items. Each item must include the applicable time period covered by the

amount to be paid by the member and the total amount to be paid.

Initial Escrow Payment at Closing : These items may include homeowner’s insurance,

mortgage insurance and property taxes.

Other : These items include charges in connection with the transaction that the member

is likely to pay or has contracted with a person other than the credit union to pay at

closing and of which the credit union is aware of at the time of issuing the Loan

Estimate. Example: Commissions of real estate brokers or agents, additional payments

to the seller to purchase personal property pursuant to the contract of sale,

Homeowner’s Association and condominium charges associated with the transfer of

ownership, and fees for inspections not required by the credit union but paid by the

member pursuant to the contract of sale.

Items that disclose any premiums paid for separate insurance, warranty, guarantee, or

event-coverage products not required by the credit union must include the parenthetical

description (optional).

Lender Credits: This is the amount of any payments from the credit union to the

member that do not pay for a particular fee on the Loan Estimate and is disclosed as a

negative number.



March, 2015

For loans where all or a portion of closing costs are offset by a credit or rebate provided

by the credit union (sometimes referred to as a “no cost” loan), disclose such credit or

rebate as Lender Credits. The credit union should ensure that Lender Credits is

sufficient to cover the estimated items the credit union represented to the member as

not being paid by the member at consummation, regardless of whether such

representations pertained to specific items.

Calculating Cash to Close

This is the total amount of cash or other funds that must be provided by the member at

consummation, with an itemization of that amount into the following components:

Total closing costs,

Closing costs to be financed,

Downpayment and other funds from borrower,

Deposit,

Funds for borrower (determined by subtracting the principal amount of the credit

extended from the total amount of all existing debt being satisfied),

Seller credits,

Adjustments and other credits: This is the total amount of all items in the “Loan

Costs” and “Other Costs” tables that are paid by persons other than the loan

originator, creditor, member, or seller, together with any other amounts that are

required to be paid by the member at closing pursuant to the contract of sale (if

any), disclosed as a negative number. Example: gifts from family members, and

credits from a developer or home builder to be applied to items in the Loan Costs

and Other Costs Table.

Estimated Cash to Close.

Estimated Payoffs and Payments: This is the total amount to be paid to third

parties not otherwise disclosed as items in the Loan Costs or Other Costs tables,

disclosed as a negative number. Examples: payoffs of existing liens secured by

the property such as mortgages, deeds of trust, judgments that have attached to

the property, Mechanics’ and materialmans’ liens, Local, State, and Federal tax

liens, payments of unsecured outstanding debts of the member, and payments to

other third parties for outstanding debts of the member as required to be paid as

a condition for the extension of credit.

Transaction without a seller: An optional “Alternative Calculating Cash to Close” Table

can be disclosed for transactions without a seller. A credit union that uses the optional

Alternative Calculating Cash to Close Table must also use the alternative disclosure

provisions of the Alternative Costs at Closing Table on Page 1 of the Loan Estimate.

Adjustable Payment (AP) Table: This Table is disclosed when (1) the periodic principal and interest payment may change after consummation, but not because of a



March, 2015

change to the interest rate, or (2) the loan is considered to be a Seasonal Payment product. If the loan does not have one of these two features, the AP Table is not disclosed.

Rounding

The amounts disclosed in the Loan Costs and Other Costs Tables are rounded to the

nearest whole dollar. The daily amount of Prepaid Interest and the monthly amounts

for the items in the Initial Escrow Payment at Closing are not rounded, but the

calculated amounts for those items are rounded to the nearest whole dollar. (See

§1026.37(o)(4) for more specific information addressing which disclosures must be

rounded and which disclosures must not be rounded.

Page 3 of the Loan Estimate

The third page of the Loan Estimate (Figure 4) discloses “Additional Information About

This Loan”, such as additional contact information, a “Comparisons” Table, an “Other

Considerations” Table, and an optional “Confirm Receipt” for the member to

acknowledge receipt of the Loan Estimate.

Contact information: Additional contact information is included on the third page of the

Loan Estimate, such as the Nationwide Mortgage Licensing System and Registry

(NMLS) license identification number for the creditor and mortgage broker, if any, and

the individual loan officer of both.

Comparisons Table: The Comparisons Table includes the statement “Use these

measures to compare this loan with other loans”: “In 5 Years”, “Annual Percentage Rate

(APR)”, and “Total Interest Percentage (TIP)”.

Other Considerations Table: The additional “Considerations” that must, if applicable, be

disclosed on the Loan Estimate include:

Appraisal information (for high-priced mortgage loans and loans covered by the

Equal Credit Opportunity Act);

Assumption (whether the subsequent purchaser of the property may assume the

loan on its original terms);

Homeowner’s insurance (at the option of the creditor, a statement that such

insurance is required and that the member may choose the provider);

Late Payment (details of any amount that may be imposed for a late payment);

Refinance ( the nature of a refinance of the loan in the future);

Servicing (whether the credit union intends to service the loan or transfer to

another servicer);



March, 2015

Liability After Foreclosure (for refinance transactions, a statement relating to

State law protections against liability after foreclosure).

Confirm Receipt: The member is not required to sign the Loan Estimate. The credit

union may add a signature statement and have the member sign Page 3 of the Loan

Estimate to confirm receipt of the disclosure. If used, the signature statement must

contain the exact language from the model form:

“By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or received this form.”

(§1026.37(n)(2))

If the Confirm Receipt section is not used by a credit union, a statement about Loan Acceptance must be included at the end of the Other Consideration Table that states,

“You do not have to accept this loan because you have received this form or signed a loan application.”



March, 2015

Figure 4.



March, 2015

REVISED ESTIMATES (12 CFR §1026.19(e)(3)(iv))

There are certain situations that could legitimately cause increases over the amounts

originally estimated. In these situations, a credit union may use a Revised Estimate of a

charge instead of the amount originally disclosed in the Loan Estimate to determine

good faith – as long as the revision is due to one of the valid reasons listed in the

regulation. To satisfy the good faith requirement, Revised Estimates may increase only

to the extent that the reason for revision actually caused the increase. For example, if a

member requests a rate lock extension, then the revised disclosures may reflect a new

rate lock extension fee, but the fee may be no more than the rate lock extension fee

charged by the creditor in its usual course of business, and other charges unrelated to

the rate lock extension may not change.

Valid Reasons for a Revised Estimate

(1) Extraordinary / Unexpected Event: This includes an extraordinary event

beyond the control of any interested party or other unexpected event specific to

the member or transaction, such as a war or a natural disaster. Example: If the

credit union provided an estimate of title insurance on the Loan Estimate, but the

title insurer goes out of business during underwriting, then this unexpected event

specific to the transaction is a changed circumstance. “Unexpected event” is

meant to encompass scenarios that involve changes that take place after the

original Loan Estimate has been provided to the member;

“Interested party” should be interpreted broadly. Example: The local

government where the property is located can be considered an interested party

because it would be the recipient of the transfer taxes that would be collected

upon consummation of the transaction.

(2) Inaccurate Information: This includes information specific to the member or

transaction that the credit union relied upon when providing the disclosures and

that was inaccurate or subsequently changed after the Loan Estimate was

provided. Example: The credit union relied on the member’s income when

providing the Loan Estimate. The member represented to the credit union that

the member had an annual income of $90,000, but underwriting determines that

the member’s annual income is only $80,000. The credit union relying on this

inaccurate information is a changed circumstance.

Example: Two co-applicants applied for a mortgage loan. One applicant’s

income was $30,000, while the other applicant’s income was $50,000. The credit

union relied on the combined income of $80,000 when providing the Loan

Estimate. The applicant earning $30,000 becomes unemployed during



March, 2015

underwriting. The reduced combined income of $50,000 is a changed

circumstance.

Example: A credit union provides a $200 estimated appraisal fee on the Loan

Estimate, which will be paid to an affiliated appraiser and therefore may not

increase for purposes of determining good faith (zero tolerance category). The

estimate was based on information provided by the member at application – that

the property was a single-family dwelling. Upon arrival at the property, the

appraiser discovers that the property is actually a single-family dwelling located

on a farm, which requires a $400 appraisal fee. A changed circumstance has

occurred (ie: information provided by the member is found to be inaccurate after

the Loan Estimate was provided), which caused an increase in the cost of the

appraisal. Therefore, if the credit union issues a revised Loan Estimate with the

corrected appraisal fee, the actual appraisal fee of $400 paid at the real estate

closing by the member will be compared to the revised appraisal fee of $400 to

determine if the actual fee has increased above the estimated fee.

However, if the credit union failed to provide a revised Loan Estimate, then the

actual appraisal fee of $400 must be compared to the originally disclosed

estimated appraisal fee of $200.

(3) New Information: This includes new information specific to the member or

transaction that was not relied on when providing the original disclosures.

Example: If the credit union relied upon the value of the property in providing the

Loan Estimate, but during underwriting a neighbor of the seller, upon learning of

the impending sale of the property, files a claim contesting the boundary of the

property to be sold, then this new information specific to the transaction is a

changed circumstance.

Example: A credit union provides a $400 estimate of title fees, which are

included in the category of fees which the aggregate may not increase by more

than 10% for the purposes of determining a good faith estimate. An unreleased

lien is discovered and the title company must perform additional work to release

the lien. However, the additional costs amount to only a five percent increase

over the sum of all fees included in the category of fees which may not increase

by more than 10%. A changed circumstance has occurred (ie: new information),

but the sum of all costs subject to 10 percent tolerance category has not

increased by more than 10%.

A valid reason for issuing a revised Loan Estimate exists when changed

circumstances cause estimated charges to increase or cause the sum of certain

charges to increase by more than 10%. The rule does not prohibit the credit

union from issuing a revised Loan Estimate, but if the credit union issues revised



March, 2015

disclosures in this scenario, when the disclosures are delivered, the actual title

fees of $500 may not be compared to the revised title fees of $500; they must be

compared to the originally estimated title fees of $400 because the changed

circumstance did not cause the sum of all costs subject to the 10% tolerance

category to increase by more than 10%

(4) Member’s Eligibility Changes: A revised Loan Estimate may be provided when

a changed circumstance affecting the member’s eligibility for the specific loan

terms, such as the member’s creditworthiness or the value of the collateral,

causes the estimated charges to increase.

Example: Prior to providing the Loan Estimate, the credit union believed that the

member was eligible for a loan program that did not require an appraisal. The

credit union then provides the Loan Estimate, which does not include an

estimated charge for an appraisal. During the underwriting it is discovered that

the member was delinquent on mortgage payments in the past, making the

member ineligible for the loan program originally identified on the Loan Estimate.

The member is eligible for a different program that requires an appraisal. If the

credit union provides a revised Loan Estimate reflecting the new program and

including the appraisal fee, then the actual appraisal fee will be compared to the

appraisal fee included in the revised disclosures to determine if the actual fee

has increased above the estimated fee. However, if the revised disclosures also

include increased estimates for title fees, the actual title fees must be compared

to the original estimates assuming that the increased title fees do not stem from

the change warranting a revised Loan Estimate.

(5) Revisions Requested by the Member: A revised Loan Estimate may be

provided if the member requests revisions to the credit terms or the settlement

that cause a charge on the Loan Estimate to increase. Example: The member

decides to grant a power of attorney authorizing a family member to consummate

the transaction on the member’s behalf after the Loan Estimate is provided. If the

credit union provides a revised Loan Estimate reflecting the fee to record the

power of attorney, then the actual charges will be compared to the revised

charges to determine if the fees have increased.

(6) Interest Rate Dependent Charges: A revised Loan Estimate may be provided if

the interest rate on the original Loan Estimate had not been locked, or a locked

interest rate has expired. When the interest rate is later locked, the charge or

credit for the interest rate chosen, the adjusted origination charges, per diem

interest, and loan terms related to the interest rate may change.



March, 2015

Under these circumstances, a revised Loan Estimate must be provided, no later

than three business days after the date the interest rate is locked (February 19,

2015 change from the original final rule), showing the new interest rate and

revisions to any other interest rate dependent charges and terms, such as the

points paid to the credit union to reduce the interest rate and lender credits.

Example: A credit union sets the interest rate by executing a rate lock

agreement with the member. If such an agreement exists when the original Loan

Estimate is provided, then the actual points and lender credits are compared to

the estimated points and lender credits included in the original Loan Estimate for

the purpose of determining good faith.

Example: If the member enters into a rate lock agreement with the creditor after

the Loan Estimate is provided, then the rule requires the credit union to provide,

no later than three business days after the date the interest rate is locked, a

revised version of the Loan Estimate reflecting the revised interest rate, the

points, lender credits, and any other interest rate charges and terms. If the

revised version of the Loan Estimate reflects any revised points and lender

credits, the actual points and lender credits are compared to the revised points

and lender credits for the purpose of determining good faith.

(7) Loan Estimate Expires: A revised Loan Estimate may be provided when the

member does not express an intent to proceed with the transaction until more

than ten business days after the original Loan Estimate has been provided.

Once the Loan Estimate has expired, credit unions are permitted to provide

revised disclosures that may reflect new charges. For purposes of determining

good faith, a credit union may use the charges on this revised estimate instead of

the original Loan Estimate. The rule requires no justification for the change to

the original estimate other than the lapse of ten business days.

Example: A credit union includes a $500 underwriting fee on the Loan Estimate

and the credit union delivers those disclosures on Monday. If the member

indicates intent to proceed 11 business days later, the credit union may provide a

new Loan Estimate with a $700 underwriting fee. In this example, the rule

requires the credit union to document that a new disclosure was provided, but

does not require the credit union to document a reason for the increase in the

underwriting fee.

(8) Construction Loan with Delayed Settlement Date: In transactions involving

new construction, where the credit union reasonably expects that settlement will

occur more than 60 days after the Loan Estimate is provided, the credit union

may provide a revised Loan Estimate to the member if the original Loan Estimate

states clearly and conspicuously that at any time prior to 60 days before



March, 2015

consummation, the credit union may issue revised disclosures. If no such

statement is provided, the credit union may not issue revised disclosures, except

as permitted by the Closing Disclosure provisions to provide corrected

disclosures reflecting any changed terms at or before consummation. (12 CFR

§1026.19(f)(2))

“Construction loan” includes the purchase of a home either to be constructed or

under construction. However, if a use and occupancy permit has been issued for

the home prior to the issuance of the Loan Estimate, then the home is not

considered to be under construction and the transaction would not be a

construction loan to build a home for purposes of this exception.

NOT Changed Circumstances

Missing Application Information: For purposes of determining whether an estimate is

provided in good faith, a credit union is presumed to have collected these six pieces of

information that constitute a mortgage application (name, income, SSN, property

address, value of property, and the loan amount sought) before providing the Loan

Estimate. If a credit union provides the Loan Estimate prior to receiving, for example,

the property address from the member, the credit union may not subsequently claim

that the receipt of the property address was a changed circumstance.

Errors: As a general matter, errors are not a basis for revising Loan Estimates, and

mortgage broker errors should not be treated differently than other errors.

Exceeding Points and Fees Threshold: The CFPB recognizes that creditors are

incented not to make loans that exceed the points and fees thresholds for qualified

mortgages, HOEPA loans, or qualified residential mortgages. If a changed

circumstance causes the loan to exceed the application threshold, then the credit union

has a legitimate basis for revision. However, the fact that the points and fees exceed the

threshold, by itself, is not a changed circumstance. The CFPB notes that a loan may

exceed the threshold because of mistakes that the creditor made in the points and fees

calculation. And, as stated above, creditor errors are not legitimate reasons for revising

Loan Estimates. Furthermore, a Loan Estimate is not a loan commitment. A credit union

may deny a loan once the applicable points and fees threshold has been exceeded, as

long as Regulation B requirements are met.



March, 2015

Delivery of Revised Disclosures

If a revised Loan Estimate is provided by the credit union, it must be delivered to the

member within three business days of receiving information sufficient to establish that

a valid reason for revision exists. The three-business-day begins on the date that the

credit union receives information that sufficiently establishes the reason for the revision.

Additionally, the member must receive a revised version of the Loan Estimate not later

than four business days prior to consummation. If the revised Loan Estimate is not

provided to the member in person, the member is considered to have received the

revised disclosures three business days after the credit union delivers it or puts it in the

mail. It must be delivered in a manner that ensures that the disclosure is not received

after or on the same business day as the member receives the Closing Disclosure.

If there are less than four business days between the time the revised version of the

Loan Estimate must be provided and consummation, credit unions comply with these

requirements if the revised disclosures are reflected in the Closing Disclosure.

Example: If the credit union is scheduled to meet the member and provide the Closing

Disclosure on Wednesday, and the APR becomes inaccurate on Tuesday, the credit

union complies with this rule by providing the Closing Disclosure reflecting the revised

APR on Wednesday. However, the credit union does not comply with the rule if it

provides both a revised version of the Loan Estimate reflecting the revised APR on

Wednesday, and also provides the Closing Disclosure on Wednesday.

Example: If the credit union is scheduled to email the Closing Disclosure to the member

on Wednesday, and the member requests a change to the loan that would result in a

revised Loan Estimate on Tuesday, the credit union complies with this rule by providing

the Closing Disclosure reflecting the member-requested changes on Wednesday.

However, the credit union does not comply if it provides both the revised version of the

Loan Estimate reflecting member requested changes, and also the Closing Disclosure

on Wednesday.

10% Tolerance Category

The three-business-day period is counted from the date on which the creditor has

received sufficient information to establish that the sum of all fees included in the

category of fees subject to the 10 percent tolerance rule has exceeded the original

estimate sum of such fees by more than ten percent due to changed circumstances.

Example: The credit union receives information on May 1, that a fee included in the ten

percent tolerance category will increase by an amount totaling six percent of the

originated estimated sum of charges in the ten percent tolerance category. Then on

May 8th, the credit union receives information that a changed circumstance will cause a

different fee included in the ten percent tolerance category to increase by an amount

totaling two percent of the originated estimated sum of charges in the ten percent

tolerance category. Next, on June 15th the credit union receives information that a



March, 2015

changed circumstance will cause a different fee included in the ten percent tolerance

category to increase by an amount totaling four percent of the original estimated sum

of charges in the ten percent tolerance category. The credit union would have to provide

a revised Loan Estimate reflecting the 12 percent increase by June 18th, assuming that

June 16th, 17th and 18th are business days.

Example: Assume a credit union requires a pest inspection. The unaffiliated pest

inspection company informs the credit union on Monday that the subject property

contains evidence of termite damage, requiring a further inspection, the cost of which

will cause an increase in estimated settlement charges by more than an aggregated

10%. The creditor must provide revised disclosures by Thursday.

Example: Assume a credit union receives information on Monday that, because of a

changed circumstance the title fees will increase by an amount totaling six percent of

the originally estimated settlement charges. The credit union had received information

three weeks before that, because of a changed circumstance, the pest inspection fees

increased by an amount totaling 5 percent of the originally estimated settlement

charges. Thus, on Monday, the creditor has received sufficient information to establish

a valid reasons for revision and must provide revised disclosures reflecting the 11

percent increase by Thursday.

Example: Assume a credit union requires an appraisal. The credit union receives the

appraisal report, which indicates that the value of the home is significantly lower than

expected. However, the credit union has reason to doubt the validity of the appraisal

report. A reason for revision has not been established because the credit union

reasonably believes that the appraisal report is incorrect. The credit union then

chooses to send a different appraiser for a second opinion, but the second appraiser

returns a similar report. At this point, the credit union has received information sufficient

to establish that a reason for revision has, in fact, occurred, and must provide corrected

disclosures within three business days of receiving the second appraisal report. In

order to comply with Regulation Z’s recordkeeping requirements, the credit union must

maintain records documenting the credit union’s doubts regarding the validity of the

appraisal to demonstrate that the reason for revision did not occur upon receipt of the

first appraisal report.

Revisions Due to Good Faith Estimate Refunds:

If the credit union is required to refund settlement costs to the consumer due to a good

faith estimate discrepancy, the credit union must deliver or place in the mail corrected

disclosures that reflect the refund within the 60-day period.

Record Retention (12 CFR §1026.19(3)(iii))

To comply with Regulation Z record retention requirements (12 CFR §1026.25), credit

unions must retain records demonstrating compliance with the Loan Estimate

requirements. Example: If revised disclosures are provided because of a changed



March, 2015

circumstance affecting settlement costs, the credit union must be able to show

compliance by documenting the original estimate of the cost at issue, explaining the

reason for revision and how it affected settlement costs, showing that the corrected

disclosures increased the estimate only to the extent that the reasons for revision

actually increased the cost and showing that the timing requirements of the rule were

satisfied.

However, the documentation requirement does not require separate corrected

disclosures for each change. A credit union may provide corrected disclosures

reflecting multiple changed circumstances, provided that the credit union’s

documentation demonstrates that each correction complies with the rule.



March, 2015

THE HOME BUYING INFORMATION BOOKLET (12 CFR §1026.19(g)) (formerly “Special Information Booklet”) The CFPB has updated the “Special information Booklet”, which has been required

since 1974 by RESPA to be provided to consumers shopping for a home loan. The

updated publication is titled: “Your Home Loan Toolkit: A Step-by-Step Guide” (Booklet),

and is available for download on the Bureau’s website:

http://www.consumerfinance.gov/learnmore/#respa

The CFPB is required to prepare at least once every five years, “a booklet to help

consumers applying for federally related mortgage loans to understand the nature and

costs of real estate settlement services.” The updated Booklet includes new content,

such as:

information on homeownership counseling services,

an explanation of a consumer’s responsibilities, liabilities and obligations in a

mortgage transaction,

information on flood insurance,

information on the new Loan Estimate and Closing Disclosure,

a list of questions a consumer obtaining a federally related mortgage loan should

ask regarding the loan, for example:

o will the member have the ability to repay the loan?

o Has the member sufficiently shopped for the loan?

o Does the loan include prepayment penalties?

o Does the loan include balloon payments?

o Will the loan benefit me, the borrower?

Additional Bureau contact information, online tools and information on how to

submit complaints, and

A link to a HUD Web page on loan fraud.

Exceptions: The credit union or mortgage broker is not required to provide the Booklet

for credit transactions secured by real property, for which the purpose of the loan is not

to purchase a one-to-four family residential property.

Examples include:

(A) Refinancing transactions;

(B) Reverse mortgages; and

(C) Closed-end loans secured by a subordinate lien. However, the Booklet would

be required to be provided when the credit union is extending a closed-end first-

lien consumer credit transaction secured by real property for the purpose of

purchasing a one-to-four family residential property, even if the credit union also

http://www.consumerfinance.gov/learnmore/#respa



March, 2015

is extending a closed-end subordinate-lien loan contemporaneously. The credit

union would not be required to provide a second Booklet for the subordinate-lien

loan.

HELOC: In the case of a home equity line of credit, a credit union or mortgage broker

that provides the member with a copy of the brochure entitled “When Your Home is On

the Line: What You Should Know About Home Equity Lines of Credit,” or any successor

brochure issued by the CFPB, is deemed to be in compliance with this requirement.

Delivery The credit union must deliver or place in the mail the Booklet no later than three

business days after the member’s application is received. If the credit union denies

the member’s application before the end of the three-business-day period, or if the

member withdraws the application, the credit union does not need to provide the

Booklet. However, the CFPB encourages credit unions to provide the Booklet to

members at any other time, preferably as early in the home or mortgage shopping

process as possible.

Mortgage Broker: If a member uses a mortgage broker, the mortgage broker must

provide the Booklet and the credit union does not need to provide it.

Joint Applicants: When two or more persons apply together for a loan, the credit union

is in compliance with the rule if the credit union provides a copy of the Booklet to one of

the persons applying.

Future Developments

The Bureau expects future revised or alternative versions of the booklet, which may

possibly expand the scope beyond first-lien, purchase-money consumer credit

transactions secured by real property, as well as address topics other than settlement

costs. Additionally, the CFPB may determine that alternative versions of the booklet for

particular product types may aid consumer understanding by providing information most

relevant to their situation.

The Bureau may also choose to permit the forms or booklets of other Federal Agencies

to be used by creditors.

♦

Documents

& The Home Buying Information Booklet LOAN … · Regulation Z). The Loan Estimate is designed to provide disclosures that will be helpful to credit union members in understanding