Initial Disclosuresfic-webinars.s3.amazonaws.com/bc360-06-Handouts.pdf11 H-14 Variable Rate Mortgage Sample • Your interest rate will be based on an index plus a margin. • Your

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Initial Disclosures

Copyright © FIC Conferences, Inc. www.ficconferences.com

RESPATriggered by 1-4 Family Unit Collateral

These sections do not apply toTRID covered transactions:

1024.6 Special Information Booklet1024.7 Good Faith Estimate1024.8 HUD-1 or HUD-1A1024.10 One Day Inspection of HUD-1 or HUD-1A1024.33a Mortgage Servicing Transfers


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REGULATION Z

Triggered byPurpose

…Personal…Family…Household

ExemptPurposes

…Business…Commercial…Agricultural…Organizational Credit


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Mixed PurposesVacation Homes Also Used as

Investment- Subject to 14 Day Rule

Owner Occupied Rental Property- To acquire, improveor maintain 1-4 familyhousing units


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Covers most Closed-End Consumer Transactions Secured by Real Property including:

– Construction Only Loans– Lot Loans – Vacant Land– Loans Secured by 25 Acres or More

TILA RESPA Integrated DisclosuresApplications taken on or after

October 3, 2015

www.ficconferences.comCopyright © FIC Conferences, Inc.

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Loans Excluded from the Rule

HELOC’s – Home Equity Lines of Credit

Reverse MortgagesMobile Homes – Chattel Dwellings

(Mortgages secured by a Mobile Home or by a dwelling that is not attached to real property)

Partial exemption for certain Housing Assistance Programs


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GeneralInformation


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Application

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The definition of “Application” found in Regulation Z is used to prompt the Loan Estimate and other disclosure requirements


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“Application” means submission of:• Consumer’s Name• Monthly Income• Social Security Number• Property Address• Estimate of the Property Value• Amount of Loan being sought


Under Regulation Z – TRID

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Establish the best way to communicate

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E-Disclosures

The E-Disclosure process must comply with all requirements of the E-Sign Act, including demonstration of access, consent, receipt, and acceptance

As a “best practice” all of which should be logged with a time and date stamp for each event


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E-Sign Compliant EmailFrom the Commentary to the Rule (emphasis)

Page(s) 16912. Electronic delivery. The three-business-day period provided in § 1026.19(e)(1)(iv) applies to methods ofelectronic delivery, such as email. For example, if a creditor sends the disclosures required under § 1026.19(e) via email on Monday, pursuant to § 1026.19(e)(1)(iv) the consumer is considered to have received the disclosures on Thursday, three business days later. The creditor may, alternatively, rely on evidence that the consumer received the emailed disclosures earlier. For example, if the creditor emails the disclosures at 1 p.m. on Tuesday, the consumer emails the creditor with an acknowledgement of receipt of the disclosures at 5 p.m. on the same day, the creditor could demonstrate that the disclosures were received on the same day. Creditors using electronic delivery methods, such as email, must also comply with § 1026.37(o)(3)(iii), which provides that the disclosures in § 1026.37 may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. For example, if a creditor delivers the disclosures required under § 1026.19(e)(1)(i) to a consumer via email, but the creditor did not obtain the consumer’s consent to receive disclosures via email prior to delivering the disclosures, then the creditor does not comply with § 1026.37(o)(3)(iii), and the creditor does not comply with § 1026.19(e)(1)(i), assuming the disclosures were not provided in a different manner in accordance with the timing requirements of § 1026.19(e)(1)(iii).

Link: http://files.consumerfinance.gov/f/201311_cfpb_final-rule_integrated-mortgage-disclosures.pdf


Business DayA business day is a day in which the Creditor’s offices are open to the public for carrying on substantially all of it’s business functions

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Business Function TestActivities that indicate that the creditor is open for

substantially all of its business functions include the availability of personnel to make loan disbursements, to open new accounts, and to handle credit transaction inquiries.

Activities that indicate that the creditor is not open for substantially all of its business functions include a retailer's merely accepting credit cards for purchases or a bank's having its customer-service windows open only for limited purposes such as deposits and withdrawals, bill paying, and related services.


Business Day for purposes of Right of Rescission and several other Sections of Regulation ZA business day is all calendar days except Sundays and the legal public holidays specified in 5 USC 6103(a), such as New Year's Day, the Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day


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Notice of Action TakenWhen Credit is denied or

withdrawn within 3 business days of an

Application, the initial disclosure requirements

are not applicable


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Disclosuresto the

ApplicantCopyright © FIC Conferences, Inc. www.ficconferences.com

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Your Home Loan Toolkit

Deliver or Place in the Mail no later than 3 business days after

application is received or prepared


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Homeownership Counseling List& Notice of Information

Required within 3 business days of Application

Includes written list of 10 HUD-approved counseling organizations

List should be updated within 30 days of being provided to the Applicant


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Optional Written EstimatesProvided Prior to Loan Estimate


Must clearly state at the top of the first page:

“Your Actual Rate, Payment and Costs could be Higher.Get an Official Loan Estimate before Choosing the Loan”

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If a lender or mortgage broker provides a written estimate of terms or costs

BEFORE providing the LE, it must include the following statement:

“Your actual rate, payment and costs could be higher. Get an Official Loan Estimate before choosing the Loan.”


Model H-26 – Effective 10-3-2015

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Loan Estimate H-24

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Disclosures on LE


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Written List of Providers


Settlement Service Providers identified on the written list must correspond to the quoted amounts for settlement services on the Loan Estimate for which the borrower can shop

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Sample – Model Form H-27(A)Written List of ProvidersBorrower Can Shop For Page 7-8

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Certain Variable-Rate TransactionsTerm Greater than One Year

Secured by Consumer’s Primary Residence

These must be provided at the time of application or prior to the payment of a nonrefundable fee, whichever occurs earlier:

Consumer Handbook on Adjustable Rate Mortgages CHARM Booklet

Program Disclosure for each Variable Rate Program


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CHARMBooklet


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Loan Program Disclosures

A loan program disclosure for each variable-rate program in which the applicant expresses an interest must be provided to the applicant in a form they can keep


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H-14 Variable Rate Mortgage Sample

• Your interest rate will be based on an index plus a margin.

• Your payment will be based on the interest rate, loan balance and loan term.

-- The interest rate will be based on the weekly average yield on US Treasury Securities adjusted to a constant maturity of 1 year (your index), plus our margin. Ask for our current interest rate and margin.

-- Information about the index rate is published in the Wall Street Journal.

• Your interest rate will equal the index rate plus our margin unless your interest rate “caps” limit the amount of change in the interest rate.

This disclosure describes the features of the adjustable-rate mortgage (ARM) program you are considering. Information on other ARM programs is available upon request.

How Your Interest Rate and Payment are Determined

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• Your interest rate can change yearly.

• Your interest rate cannot increase or decrease by more than 2 percentage points at each adjustment.

• Your interest rate cannot increase by more than 5 percentage points over the term of the loan.

How Your Interest Rate Can Change

How Your Payment Can Change• Your monthly payment can increase or decrease substantially based

on annual changes in the interest rate.

• [For example, on a $10,000 30-year loan with an initial interest rate of 12.41% in effect in July 1996, the maximum amount that the interest rate can rise under this program is 5% to 17.41%, and the monthly payment can rise from a first year payment of $106.03 to a maximum of $145.34 in the fourth year. To see what your payments would be, divide your mortgage amount $10,000, then multiply the monthly payment by that amount. (For example, $60,000 divided by $10,000 equals 6; 6 X $106.03 = $636.18 per month)

• You will be notified in writing 25 days before the annual payment adjustment may be made. This notice will contain information about your interest rates, payment amount, and loan balance.] Page 9-14

[Example:

The example below shows how your payments would have changed under this ARM program based on actual changes in the index from 1982 to 1996. This does not necessarily indicate how your index will change in the future.

The example is based on the following assumptions:

Amount…………………..$10,000

Term………………………30 years

Payment Adjustment…..1 year

Interest Adjustment……1 year

[Margin]*…………………3%

Caps……………………...2 % annual interest rate

5% lifetime interest rate

Index……………………..Weekly average yield on US Treasury

securities adjusted to a constant

maturity of one year

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Year Interest Monthly Remaining(as of first week Index Margin Rate Payment Balanceending in July) (%) (%) (%) ($) ($)

----------------------------------------------------------------------------------------------------------1982 14.41 3 17.41 145.90 9,989.371983 9.78 3 15.41** 129.81 9,969.661984 12.17 3 15.17 127.91 9,945.511985 7.66 3 13.17** 112.43 9,903.701986 6.36 3 12.41*** 106.73 9,848.941987 6.71 3 12.41*** 106.73 9786.981988 7.52 3 12.41*** 106.73 9716.881989 7.97 3 12.41*** 106.73 9637.561990 8.06 3 12.41*** 106.73 9547.831991 6.40 3 12.41*** 106.73 9446.291992 3.96 3 12.41*** 106.73 9331.561993 3.42 3 12.41*** 106.73 9201.611994 5.47 3 12.41*** 106.73 9054.721995 5.53 3 12.41*** 106.73 8888.521996 5.82 3 12.41*** 106.73 8700.37

----------------------------------------------------------------------------------------------------------*This is a margin we have used recently, your margin may be different.**This interest rate reflects a 2 percentage point annual interest rate cap.***This interest rate reflects a 5 percentage rate lifetime interest rate cap.

To see what your monthly payments would have been during that period, divide yourmortgage amount by $10,000, then multiply the monthly payment by that amount (Forexample, in 1996, the monthly payment for a mortgage amount of $60,000 taken outin 1982 would be $60,000 divided by $10,000 = 6; 6 X $106.73 = $640.38.)

• You will be notified in writing 25 days before the annual payment adjustment may be made. This notice will contain information about your interest rates, payment amount, and loan balance.] Page 9-14

ECOA StatementThe federal Equal Credit Opportunity Act prohibits creditors

from discriminating against credit application on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised a right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is (name and address as specified by the appropriate agency listed in Appendix A or Regulation B).


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Notice to Home Loan Applicants

The Fair Credit Reporting Act requires a creditor that is using a credit score to make or arrange consumer credit (open-end and closed-end credit) secured by one to four units of residential real property (including purchase or refinance transactions) to provide the credit score with accompanying information to the applicants. The timing of this notice should be “as soon as reasonably practicable,” once the credit report has been received.


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Risk Based Pricing NoticeThe Fair Credit Reporting Act requires a creditor to provide a risk-

based pricing notice to a consumer when the creditor uses a consumer report to grant or extend credit to the consumer on material terms that are materially less favorable terms than the most favorable terms available to a substantial proportion of consumers from or through that creditor.

The creditor must disclose, as applicable, a credit score it used in taking adverse action along with related information, including up to four key factors that adversely affected the consumer’s credit score (or up to five if the number of inquiries made with respect to the consumer report is a key factor). Disclosing the consumer’s credit score does not satisfy the ECOA requirement to disclose specific reasons for denying or taking adverse action on an application or extension of credit.


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Standard Flood Hazard Determination Form


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Notification of Flood Hazardin a Reasonable Time


Notice to Borrower

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Acknowledgementis

Required


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Affiliated Business ArrangementDisclosure Statement

This disclosure statement with the applicant’s acknowledgment is required when an ABA exists and a referral is made (usually by the lender).

Disclosure must be on a separate piece of paper and provided no later than the time of each referral or, if the lender requires the use of a particular provider, no later than application


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When a lender makes the referral to the borrower,the requirements may be satisfied when the Loan Estimate is provided; and

Whenever an attorney or law firm requires a client to use a particular title insurance agent, the attorney or law firm shall supply the disclosures no later than at the time the attorney or law firm is engaged with the client


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Exceptions on timing of ABA Disclosure

Affiliated Business ArrangementAn affiliate relationship is the relationship among business entities where:

A) one entity has effective control over the other byvirtue of a partnership or other agreement or is under common control with the other by a third entity or

B) where an entity is a corporation related toanother corporation as parent to subsidiary by an identity of stock ownership


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Affiliated Business Arrangementis an arrangement in which:

A) a person who is in a position to refer business incident to or a part of a real estate settlement service involving a federally related mortgage loan, or an associate of such person, has either an affiliate relationship with or a direct or beneficial ownership interest of more than 1 percent in a provider of settlement services; and

B) either of such persons directly or indirectly refers such business to that provider or affirmatively influences the selection of that provider. In an Affiliated Business Arrangement the only thing of value that is received from the arrangement other than payments is a return on an ownership interest or franchise relationship


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A person who is in a position to refer business…Real Estate Broker or AgentLender or Mortgage BrokerBuilder or DeveloperAttorney or Law FirmTitle Company, or Title Agent

Either of such persons directly or indirectly refers such business to that provider or affirmatively influences the selection of that provider


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Nothing in RESPA explicitly states that referrals to “affiliated business” relationships is not allowed, but whenever such referrals take place in transactions where affiliated business arrangements exist, the proper disclosures must be provided

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No person making the referral except the lender, may require a borrower/buyer or seller to pay for the services of an affiliated business, except for the services of an attorney, credit reporting agency or real estate appraiser

An attorney or law firm arranging for issuance of a title insurance policy for a client, directly or through a separate corporate title agency would also be allowed


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Restrictions on “required use” of ABA Providers

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Title CompaniesNo seller of property that will be purchased

with assistance of a federally related mortgage loan shall violate section 9 of RESPA (sale of property cannot be conditioned on where title insurance will be purchased)

If the lender holds legal title to property being sold, the lender (seller) is prohibited from requiring the borrower, either directly or indirectly, to use a particular title company


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QUIZOnce you have completed the Quiz for this “Boot Camp 360” Webcast Training, that is included in the workbook, the Answer Key along with your Certificate of Completion have also been provided for you records.If you have questions or need assistance please email [email protected]

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Documents

Initial Disclosuresfic-webinars.s3.amazonaws.com/bc360-06-Handouts.pdf11 H-14 Variable Rate Mortgage Sample • Your interest rate will be based on an index plus a margin. • Your