TILA – RESPA · consumers - the interest rate, monthly payments, and the total closing costs - will make it easier for consumers to compare mortgage loans and choose the one that

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TILA – RESPA

Study Reference

Barnes Real Estate School


© Copyright 2016 Charles Barnes School of Real Estate

TILA – RESPA Outline

2-hours

Unit 1 - Overview of the TRID Rule and Loan Estimate

• TRID Rule o Consumer Benefits o Compliance o Lender Requirements

• Loan Estimate Form o Delivery requirements o Permitted changes o Shopping for services o Revised loan estimates Changed circumstances Timing requirements

o Sample forms o Loan Estimate sections walkthrough

Unit 2 - Closing Disclosure Form

• General requirements for use • Consummation • Delivery requirements • Three-day waiting period • Average charges • Revisions and corrections • Sample forms • Closing Disclosure sections walkthrough

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TILA-RESPA Disclosures - Unit 1 Screen 1 – Introduction and Objectives

The Real Estate Settlement Procedures Act (RESPA) of 1974 was created to ensure that the buyer and seller in a residential real estate transaction involving a new first mortgage loan have knowledge of all settlement costs. The Act is administered by the Consumer Financial Protection Bureau (CFPB).

As of October 2015, the financing industry, real estate industry, and consumers were impacted by a significant change in the disclosures lenders must provide to consumers in real estate transactions.

In this unit, we will discuss the changes that are now in effect in the industry and the requirements for using the new forms.

At the end of this unit, you will be able to:

• Discuss the rules for using the TILA/RESPA Integrated Disclosures, includingdelivery requirements.

• Explain what changes permit the issue of revised loan estimates.• Identify important parts of the Loan Estimate form.

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TILA-RESPA Disclosures - Unit 1 Screen 2 – Background

Sections 1098 and 1100A of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) directed the Consumer Financial Protection Bureau (CFPB) to publish rules and forms that combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the Truth in Lending Act (Regulation Z) and the Real Estate Settlement Procedures Act (Regulation X).

The new rule is known as the TILA/RESPA Integrated Disclosure (TRID) Rule. Not only does the TRID rule replace previously used forms, it impacts business practices, company policies and procedures, and how consumer service is provided.

The new TRID Rule was issued to simplify and improve disclosure forms for mortgage transactions. Previously, consumers received different, but overlapping federaldisclosure forms with the terms and costs of mortgage loans. These documents were the Good Faith Estimate (GFE), the HUD-1 Settlement Statement, and the Truth in Lending Disclosure (TIL). Because these forms were confusing for many people,Congress directed the CFPB to create new forms. The TRID Rule replaced the GFE, HUD-1, and TIL forms with two new forms: the Loan Estimate, given within three business days after application, and the Closing Disclosure, given three businessdays before closing.

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TILA-RESPA Disclosures - Unit 1 Screen 3 – Consumer Benefits

The use of the new forms have several specific consumer benefits.

• Combining several forms and additional statutory disclosure requirements intotwo forms will reduce paperwork and consumer confusion.

• Using clear language and design will help consumers understand complicatedmortgage loan and real estate transactions.

• Clearing presenting the information that has proven to be most important toconsumers - the interest rate, monthly payments, and the total closing costs - willmake it easier for consumers to compare mortgage loans and choose the onethat is right for them.

• Providing more information about the costs of taxes and insurance and how the interest rate and payments may change in the future will help consumers decide whether they can afford the mortgage loan and the home, now and in the future.

• Warning consumers about features they may want to avoid, like penalties forpaying off the loan early or increases to the mortgage loan balance even ifpayments are made on time, will help consumers make better choices about the best loan for them.

In addition, the TRID rule:

• Requires lenders to makes cost estimates more reliable for services required to close a mortgage loan, such as appraisal or pest inspection fees.

• Prohibits increases in charges from lenders and their affiliates for services the lender does not permit the consumer to shop for, such as appraisal or creditreporting fees.

• Requires that consumers receive the Closing Disclosure at least three businessdays before closing on the mortgage loan. This additional time will allowconsumers to compare the final terms and costs to the terms and costs theyreceived in the Loan Estimate. That will better equip them to raise any questionsbefore they go to the closing table.

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TILA-RESPA Disclosures - Unit 1 Screen 4 – Compliance Closings that must comply with TRID include:

• Most federally-related, closed-end mortgage loans secured by real property, including

o Construction-only loans o Loans secured by vacant land or by 25 or more acres

Closings that do not require compliance to the TRID Rule include:

• Reverse mortgages** • Home equity lines of credit (HELOCs)** • Loans secured by mobile homes or other dwellings that are not real property, if

the dwelling is not attached to real estate** • Loans made by creditors who make five or fewer mortgages per year** • Certain no-interest loans secured by subordinate liens made for the purpose of

down payment or similar home buyer assistance, property rehabilitation, energy efficiency, or foreclosure avoidance or prevention

** Note that creditors should continue to use the GFE, HUD-1 settlement, and TIL disclosures for these types of loans.

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TILA-RESPA Disclosures - Unit 1 Screen 5 – Lender Requirements

According to the TRID rule, lenders have very specific requirements:

• They must give a copy of the “Special Information Booklet” to every person atthe time of application for a loan. This booklet is called “Your home loantoolkit.” Click here to read a copy of this booklet which is published by CFPB.You may be asked questions in the course from this booklet.

Note: This booklet does not need to be provided for refinancing transactions,closed-end subordinate lien mortgage loans, and reverse mortgage transactions,or for any other federally-related mortgage loan not intended for the purchase ofa one-to-four family residential property.

• They must provide a Loan Estimate of settlement costs at the time of loanapplication or within three business days of application.

• They must deliver a Closing Disclosure to the borrower at least three days before closing. The actual time frame is based on the method of delivery. Thisform is designed to detail all the financial particulars of a transaction.

The settlement agent must also provide the seller with the Closing Disclosure, which may be done at consummation. Consummation is defined under Regulation Z as the time that a consumer becomes contractually obligated on a credit transaction.

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http://files.consumerfinance.gov/f/201503_cfpb_your-home-loan-toolkit-web.pdf



TILA-RESPA Disclosures - Unit 1 Screen 6 – Loan Estimate For closed-end credit transactions secured by real property (other than reverse mortgages), the creditor is required to provide the consumer with good-faith estimates of credit costs and transaction terms on the Loan Estimate form. This form integrates and replaces two of the federal forms, the Good Faith Estimate and the Truth in Lending Disclosure for these transactions. The creditor is generally required to provide the Loan Estimate within three-business days of the receipt of the consumer’s loan application.

• The Loan Estimate must contain a good faith estimate of credit costs and transaction terms.

• The Loan Estimate must be in writing and contain the information prescribed by the TRID rule.

• Delivery must satisfy the timing and method of delivery requirements. • Creditors may only use revised or corrected Loan Estimates when specific

requirements are met. • In certain situations, mortgage brokers may provide a Loan Estimate.

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TILA-RESPA Disclosures - Unit 1 Screen 7 – Loan Estimate Delivery Requirements The Loan Estimate must be delivered within three business days of loan application. Signature of the applicant(s) is permitted but not required. If a mortgage broker receives a consumer’s application, either the creditor or the mortgage broker may provide a consumer with the Loan Estimate. If the Loan Estimate is not provided to the consumer in person, the consumer is considered to have received the Loan Estimate three business days after it is delivered or placed in the mail.

For purposes of this rule, a loan application exists once the consumer has submitted 6 items (3 pertaining to customer and 3 pertaining to property) to the lender. Those items are:

• Name • Borrower’s Income • Borrower’s Social Security number • Property address • Estimated value of property • Amount of mortgage loan sought by the consumer

Note: Previously, lenders were permitted to require additional items (at their discretion) to determine when an application was officially “received.” The TRID Rule removed this option. So once the consumer has submitted the six items listed above, an application exists.

Also, a business day is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions. This definition of “business day” applies only to the Loan Estimate or revision of the Loan Estimate. It does not apply to the Closing Disclosure.

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TILA-RESPA Disclosures - Unit 1 Screen 8 – Variations in Estimated Charges

A creditor may charge the consumer more than the amount disclosed in the Loan Estimate in specific circumstances, such as:

• Charges for prepaid interest, property insurance premiums, or amounts placedinto an escrow, impound, reserve, or similar account.

• Charges for services required by the creditor if the creditor permits the consumerto shop and the consumer selects a third-party service provider not on thecreditor’s written list of service providers. Note: On an upcoming screen, we’lldiscuss the types of services a lender will allow or not allow consumers to shopfor.

• Charges paid to third-party service providers for services not required by thecreditor.

• Changed circumstances that would cause the consumer to need a revised LoanEstimate.

The above list of charges can change without limitation. However, creditors may onlycharge consumers more than the amount disclosed when the original estimated charge,or lack of an estimated charge for a particular service, was based on the bestinformation reasonably available to the creditor at the time he or she provided the disclosure to the consumer.

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TILA-RESPA Disclosures - Unit 1 Screen 9 – Restricted Changes in Estimated Charges Charges for certain services and fees paid by or imposed on the consumer are grouped together and subject to a 10% cumulative tolerance. This means the creditor may charge the consumer more than the amount disclosed on the Loan Estimate for any of these charges so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than 10%. These charges are:

• Recording fees

• Charges for third-party services that meet both of these conditions:

o The charge is not paid to the creditor or the creditor’s affiliate. o The consumer is permitted by the creditor to shop for the third-party

service, and the consumer selects a third-party service provider on the creditor’s written list of service providers.

Note: An actual charge for an item in this category may be more than 10% over the estimated charge, so long as the sum of all charges is still within the 10% cumulative tolerance.

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TILA-RESPA Disclosures - Unit 1 Screen 10 – Zero Tolerance For all charges other than those we have already discussed, creditors are not permitted to charge consumers more than the amount disclosed on the Loan Estimate under any circumstances other than changed circumstances that permit a revised Loan Estimate. These zero tolerance charges are:

• Fees paid to the creditor • Fees paid to a mortgage broker • Fees paid to an affiliate of either the creditor or the mortgage broker • Fees paid to an unaffiliated third party if the creditor did not permit the consumer

to shop for a third party service provider for a settlement service • Transfer taxes

Excess Charges If the amounts paid by the consumer at closing exceed the amounts disclosed on the Loan Estimate beyond the applicable tolerance threshold, the creditor must refund the excess to the consumer no later than 60 calendar days after consummation.

• For charges subject to zero tolerance, the creditor must refund to the consumer any amount charged beyond the amount disclosed on the Loan Estimate.

• For charges subject to a 10% cumulative tolerance, to the extent the total sum of

the charges added together exceeds the sum of all such charges disclosed on the Loan Estimate by more than 10%, the creditor must refund the difference to the consumer.

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TILA-RESPA Disclosures - Unit 1 Screen 11 – Shopping For Services In addition to the Loan Estimate, if the consumer is permitted to shop for a settlement service, the creditor must provide the consumer with a written list of services for which the consumer can shop. This written list of providers is separate from the Loan Estimate, but must be provided within the same time frame—that is, it must be provided to the consumer no later than three business days after the creditor receives the consumer’s application. The list must:

• Identify at least one available settlement service provider for each service. • State that the consumer may choose a different provider of that service.

The settlement service providers identified on the written list must correspond to the list of settlement services for which the consumer can shop as disclosed on the Loan Estimate. The creditor may also identify on the written list of providers those services for which the consumer is not permitted to shop, as long as those services are clearly and conspicuously distinguished from those services for which the consumer is permitted to shop. The CFPB publishes a sample written list of providers to help creditors see how to fill out that section of the Loan Estimate.

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http://files.consumerfinance.gov/f/201403_cfpb_mortgage-loans-transactions_cover_H27B.pdf



TILA-RESPA Disclosures - Unit 1 Screen 12 – Revised Loan Estimates

Creditors are bound by the Loan Estimate and may not issue revisions because they later discover technical errors, miscalculations, or underestimations of charges. TRID allows a creditor to provide a revised Loan Estimate only in certain specific circumstances:

• Changed circumstances that occur after the creditor has given the LoanEstimate to the consumer result in an increase in the settlement charges that aremore than TRID permits.

• Changed circumstances that occur after the creditor has given the LoanEstimate to the consumer affect the consumer’s eligibility for the terms for whichthe consumer applied or the value of the security for the loan.

• The consumer requests revisions.

When creditors revise Loan Estimates for the above reasons, the revised Loan Estimate may reflect increased charges only to the extent actually justified by the reason for the revision.

A creditor may also provide a revised Loan Estimate under these circumstances:

• The interest rate was not locked when the lender provided the Loan Estimate,and locking the rate causes the points or lender credits disclosed on the Loan Estimate to change.

• The consumer indicates an intent to proceed with the transaction more than 10 business days after the Loan Estimate was originally provided.

• The loan is a new construction loan, and settlement is delayed by more than 60 calendar days, if the original Loan Estimate clearly and conspicuously states thatat any time prior to 60 calendar days before consummation, the creditor may issue revised disclosures.

A changed circumstance for purposes of a revised Loan Estimate is any of the following:

• An extraordinary event beyond the control of any interested party or otherunexpected event specific to the consumer or transaction

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• Information specific to the consumer or transaction that the creditor relied upon when providing the Loan Estimate and that was inaccurate or changed after the creditor provided the disclosures

• New information specific to the consumer or transaction that the creditor did not

rely on when providing the Loan Estimate

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TILA-RESPA Disclosures - Unit 1 Screen 13 – Changed Circumstances Affecting Settlement Charges As we said previously, a creditor may provide and use a revised Loan Estimate to re-disclose a settlement charge if changed circumstances cause the estimated charge to increase or, in the case of charges subject to the 10% cumulative tolerance, cause the sum of those charges to increase by more than the 10% tolerance. Examples of changed circumstances affecting settlement costs include:

• A natural disaster, such as a hurricane or earthquake, damages the property or otherwise results in additional closing costs.

• The creditor provided an estimate of title insurance on the Loan Estimate, but the

title insurer goes out of business during underwriting.

• New information not relied upon when providing the Loan Estimate is discovered, such as a neighbor of the seller filing a claim contesting the boundary of the property to be sold.

Note: Creditors are not required to collect all six pieces of information constituting the consumer’s application—i.e., the consumer’s name, monthly income, social security number to obtain a credit report, the property address, an estimate of the value of the property, or the mortgage loan amount sought—prior to issuing the Loan Estimate. However, creditors are presumed to have collected this information prior to providing the Loan Estimate and may not later collect it and claim a changed circumstance. For example, if a creditor provides a Loan Estimate prior to receiving the property address from the consumer, the creditor cannot subsequently claim that the receipt of the property address is a changed circumstance.

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TILA-RESPA Disclosures - Unit 1 Screen 14 – Changed Circumstances Affecting Eligibility A creditor also may provide and use a revised Loan Estimate if a changed circumstance affected the consumer’s creditworthiness or the value of the security for the loan, and resulted in the consumer being ineligible for an estimated loan term previously disclosed. This may occur when a changed circumstance causes a change in the consumer’s eligibility for specific loan terms disclosed on the Loan Estimate, which in turn results in increased cost for a settlement service beyond the applicable tolerance threshold. For example:

• The creditor relied on the consumer’s representation to the creditor of a $90,000 annual income, but underwriting determines that the consumer’s annual income is only $80,000.

• There are two co-applicants applying for a mortgage loan and the creditor relied

on a combined income when providing the Loan Estimate, but one applicant subsequently becomes unemployed.

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TILA-RESPA Disclosures - Unit 1 Screen 15 – Timing Requirements for Revised Loan Estimates

The general rule is that the creditor must deliver the revised Loan Estimate or place it in the mail to the consumer no later than three business days after receiving the information sufficient to establish that one of the reasons for the revision described on the previous screens has occurred.

These rules also apply:

• The creditor may not provide a revised Loan Estimate on or after the date itprovides the Closing Disclosure.

• The creditor must ensure that the consumer receives the revised Loan Estimate no later than four business days prior to consummation. If the creditor ismailing the revised Loan Estimate and relying upon the 3 business day mailboxrule, the creditor would need to mail the Loan Estimate no later than seven business days before consummation of the transaction to allow 3 business daysfor receipt.

• When a revised Loan Estimate is provided in person, it is considered received bythe consumer on the day it is provided. If it is mailed or delivered electronically,the consumer is considered to have received it three business days after it isdelivered or placed in the mail. However, if the creditor has evidence that the consumer received the revised Loan Estimate earlier than three business daysafter it is mailed or delivered, it may rely on that evidence and consider it to be received on that date.

For more specific information about the Loan Estimate, please see the TILA-RESPAIntegrated Disclosure rule compliance guide.

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http://files.consumerfinance.gov/f/201508_cfpb_tila-respa-integrated-disclosure-rule.pdf




TILA-RESPA Disclosures - Unit 1 Screen 16 – Loan Estimate Form Now that we have discussed the requirements for using and delivering the Loan Estimate, let’s talk about the form itself. The Loan Estimate is a three-page document. Depending on the type of loan the borrower is receiving, pages 2 and 3 of the disclosure could look different. However, page 1 will be essentially the same, regardless of the loan type. The Consumer Financial Protection Bureau has several variations of the form on its website for you to view, including the following:

• Blank model loan estimate – annotated version. This annotated form is intended to provide a starting point for analysis of the relevant regulatory text.

• Blank model loan estimate – illustrating the application of the rule’s content

requirements. This form provides two variations of page one, four variations of page two, and four variations of page three, reflecting the variable content requirements in 12 CFR § 1026.37.

• Blank model loan estimate – illustrating the application of the optional alternative

tables for transactions without a seller This form provides one variation of page one, four variations of page two, and four variations of page three, reflecting the variable content requirements in 12 CFR § 1026.37.

• Sample of completed loan estimate – for fixed rate loan

• Sample of completed loan estimate – for interest only, adjustable rate loan

• Sample of completed loan estimate – for refinance

• Sample of completed loan estimate – for balloon payment

• Sample of completed loan estimate – for negative amortization

We will discuss only a couple of these forms, but you may need to look over others to answer some of the progress check, quiz, or exam questions.

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http://files.consumerfinance.gov/f/201312_cfpb_tila-respa_loan-estimate.pdf

http://files.consumerfinance.gov/f/201403_cfpb_loan-estimate_model-form-H24.pdf

http://files.consumerfinance.gov/f/201403_cfpb_loan-estimate_model-form-H24.pdf

http://files.consumerfinance.gov/f/201506_cfpb_loan-estimate_modification-H24G.pdf

http://files.consumerfinance.gov/f/201506_cfpb_loan-estimate_modification-H24G.pdf

http://files.consumerfinance.gov/f/201403_cfpb_loan-estimate_fixed-rate-loan-sample-H24B.pdf

http://files.consumerfinance.gov/f/201403_cfpb_loan-estimate_interest-only-adjustable-rate-loan-sample-H24C.pdf

http://files.consumerfinance.gov/f/201403_cfpb_loan-estimate_refinance-sample-H24D.pdf

http://files.consumerfinance.gov/f/201403_cfpb_loan-estimate_baloon-payment-H24E.pdf

http://files.consumerfinance.gov/f/201403_cfpb_loan-estimate_negative-amortization-sample-H24F.pdf



TILA-RESPA Disclosures - Unit 1 Screen 17 – Loan Estimate Form (cont) Annotated Version Let’s take a look at the Annotated Version of the Blank Loan Estimate form. As we said on the previous screen, this version of the form is intended to provide a starting point for analysis of the relevant regulatory text. As you can see, this version shows each page only once, unlike some of the other versions which show multiple variations of the pages. It is annotated in red to show the rule citations. This information can help professionals find the applicable information quickly. Sample Loan Estimate The sample loan estimate for a fixed-rate loan is good example for us to review. This particular sample is a statement of the estimated costs for a 30-year fixed rate loan. Let’s look at the kind of information the creditor will provide.

Loan Estimate - Page 1

The top of the first page has the identifying information:

• Date issued • Applicants • Property address • Sale price of the property • Loan term • Purpose • Product Loan type • Loan ID # • Rate lock

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http://files.consumerfinance.gov/f/201312_cfpb_tila-respa_loan-estimate.pdf

http://files.consumerfinance.gov/f/201403_cfpb_loan-estimate_fixed-rate-loan-sample-H24B.pdf



TILA-RESPA Disclosures - Unit 1 Screen 18 – Loan Estimate Form – Page 1 Loan Terms This section of page 1 gives the exact figures for the loan amount, interest rate, and monthly principal and interest payment, and indicates with a “yes” or “no” whether any of those amounts can increase after closing. It also indicates whether or not there is a prepayment penalty or balloon payment with the loan, and if so, gives the specifics that apply to that feature. Projected Payments This section of page 1 shows the actual payments the borrower will make for principal & interest and mortgage insurance, an estimated amount for the escrow payment, and the total estimated monthly mortgage payment. These calculations are given for years 1-7 and then for years 8-30 of the loan term. This section also gives an estimated monthly amount for taxes, insurance, and assessments and specifies whether or not the money for these payments will be in escrow. The last section of page 1 shows the borrowers’ estimated closing costs and the estimate of the total amount of cash the buyers need to bring to closing.

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TILA-RESPA Disclosures - Unit 1 Screen 19 – Loan Estimate Form – Page 2 Page 2 of the disclosure gives the details of the closing costs. It has two columns of information. Loan Costs The first section column 1 deals in with the loan costs:

• A. Origination charges - Items such as points, application fee, and underwriting fee

• B. Services the borrower did not shop for - These are items the lender

requires for the loan, such as appraisals and credit reports. • C. Services the borrower did shop for - These are items the borrower can get

on his own, such as pest inspections, survey fees, and title insurance. • D. The total of the costs of A, B, and C above

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TILA-RESPA Disclosures - Unit 1 Screen 20 – Loan Estimate Form – Page 2 (cont)

Other Costs

The next section at the top of column 2 deals with other costs:

• E. Taxes and other government fees - Items such as recording fees andtransfer taxes

• F. Prepaids - These are items paid for in advance, such as homeowner’sinsurance and property taxes.

• G. Initial escrow payment at closing - An escrow account is an account wheremoney is held for certain payments until they are paid out – typically forinsurance and taxes. The lender gives the borrower a statement that tells howmuch money it requires the borrower to put into the account each month.

• H. Other costs not covered elsewhere on the disclosure - Items such as HOAfees, home warranty fees, home inspection fees, and real estate commission

• I. The total of the costs of E, F, G, and H above

Section J gives the total closing costs to the borrower (D + I from above).This total isthe same as what appears at the bottom of page 1 under the heading “Estimated Closing Costs.”

Calculating Cash to Close

Closing costs are only part of the cash a borrower needs to bring to closing. The third section on the second half of column 2 deals with calculating the costs to close. Thiscalculation includes the total costs from section J above, closing costs paid from the loan account, down payment, deposits, funds for borrower, seller credits, adjustments,and other credits.

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TILA-RESPA Disclosures - Unit 1 Screen 21 – Loan Estimate Form – Page 3 Page 3 has additional information about the loan. At the top of the page is information about the lender, including the name of the loan officer with his or her contact information. The remainder of the page is divided into three sections. Comparisons This section has measures the borrower can use to compare the loan with other loan products. It shows:

• Total of principal, interest, mortgage insurance, and loan costs the borrower will have paid and the principal that will have been paid off in 5 years

• Annual percentage rate (APR) • Total interest percentage (TIP) – This is the total amount of interest the

consumer will pay over the term of the loan expressed as a percentage of the loan amount.

Other Considerations

• Appraisal – Informs the borrower that the lender may order and appraisal and charge the borrower

• Assumption – Indicates whether or not the lender will allow a loan assumption

on a future sale or transfer • Homeowner’s insurance – Indicates that the lender requires property insurance

that the borrower may obtain through a company of their choice that the lender finds acceptable

• Late payment – States what late fee the lender will charge • Refinance – Indicates that refinancing depends on future considerations and that

borrower may not be able to refinance • Servicing – Indicates whether the lender intends to service the loan or transfer

servicing to another entity

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Confirm Receipt This section has a place for the borrowers to sign. However, signing means only that the borrower has received a copy of the form. It does not mean that the borrower has accepted the loan.

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TILA-RESPA Disclosures - Unit 1 Screen 22– Unit Review The new TRID Rule was issued to simplify and improve disclosure forms for mortgage transactions. The TRID Rule replaced the GFE, HUD-1, and TIL forms with two new forms: the Loan Estimate and the Closing Disclosure. Closings that must comply with TRID include:

• Most federally-related, closed-end mortgage loans secured by real property, including

o Construction-only loans o Loans secured by vacant land or by 25 or more acres

Closings that do not require compliance to the TRID Rule include:

• Reverse mortgages** • Home equity lines of credit (HELOCs)** • Loans secured by mobile homes or other dwellings that are not real property, if

the dwelling is not attached to real estate** • Loans made by creditors who make five or fewer mortgages per year** • Certain no-interest loans secured by subordinate liens made for the purpose of

down payment or similar home buyer assistance, property rehabilitation, energy efficiency, or foreclosure avoidance or prevention

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TILA-RESPA Disclosures - Unit 1 Screen 23– Unit Review

According to the TRID rule, lenders have very specific requirements:

• They must give a copy of the “Special Information Booklet” to every person atthe time of application for a loan. This booklet is called “Your home loantoolkit.”

• They must provide a Loan Estimate of settlement costs at the time of loanapplication or within three business days of application.

• They must deliver a Closing Disclosure to the borrower at least three daysbefore closing. The actual time frame is based on the method of delivery. Thisform is designed to detail all the financial particulars of a transaction.

The Loan Estimate must be delivered within three business days of loan application. For purposes of this rule, a loan application exists once the consumer hassubmitted 6 items (3 pertaining to customer and 3 pertaining to property) to the lender.Those items are:

• Name• Borrower’s Income• Borrower’s Social Security number• Property address• Estimated value of property• Amount of mortgage loan sought by the consumer

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TILA-RESPA Disclosures - Unit 1 Screen 24– Unit Review A creditor may charge the consumer more than the amount disclosed in the Loan Estimate in specific circumstances, such as:

• Charges for prepaid interest, property insurance premiums, or amounts placed into an escrow, impound, reserve, or similar account.

• Charges for services required by the creditor if the creditor permits the consumer to shop and the consumer selects a third-party service provider not on the creditor’s written list of service providers.

• Charges paid to third-party service providers for services not required by the creditor.

• Changed circumstances that would cause the consumer to need a revised Loan Estimate.

TRID allows a creditor to provide a revised Loan Estimate only in certain specific circumstances:

• Changed circumstances that occur after the creditor has given the Loan Estimate to the consumer result in an increase in the settlement charges that are more than TRID permits.

• Changed circumstances that occur after the creditor has given the Loan

Estimate to the consumer affect the consumer’s eligibility for the terms for which the consumer applied or the value of the security for the loan.

• The consumer requests revisions.

The general rule is that the creditor must deliver the revised Loan Estimate or place it in the mail to the consumer no later than three business days after receiving the information sufficient to establish that one of the reasons for the revision has occurred.

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TILA-RESPA Disclosures - Unit 2 Screen 1 – Introduction and Objectives

As we discussed in Unit 1, the financing industry, real estate industry, and consumers were impacted by a significant change in the disclosures lenders must provide to consumers in real estate transactions. In Unit 1, we covered the Loan Disclosure in detail. In this unit, we will discuss the detailed requirements for using the Closing Disclosure form. At the end of this unit, you will be able to:

• Explain the general requirements and the delivery requirements of the Closing Disclosure Form.

• Discuss average charges, revisions, and corrections to the Closing Disclosure Form.

• Identify important parts of the Closing Disclosure form.

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TILA-RESPA Disclosures - Unit 2 Screen 2 – General Requirements For loans that require a Loan Estimate and that proceed to closing, creditors must provide a final disclosure reflecting the actual terms of the transaction called the Closing Disclosure. The form integrates and replaces the HUD-1 settlement statement and the final Truth in Lending (TIL) disclosure for these transactions. The creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan. • The Closing Disclosure generally must contain the actual terms and costs of the

transaction. Creditors may estimate disclosures using the best information reasonably available when the actual term or cost is not reasonably available to the creditor at the time the disclosure is made. However, creditors must act in good faith and use due diligence in obtaining the information. The creditor normally may rely on the representations of other parties in obtaining the information, including, for example, the settlement agent.

• The Closing Disclosure must be in writing and contain the information prescribed in

the TRID Rule.

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TILA-RESPA Disclosures - Unit 2 Screen 3 – General Requirements (cont) Other requirements:

• If the actual terms or costs of the transaction change prior to consummation, the creditor must provide a corrected disclosure that contains the actual terms of the transaction and complies with the other requirements of the TRID Rule, including the timing requirements and requirements for providing corrected disclosures due to subsequent changes.

• If the creditor provides a corrected disclosure, it may also be required to provide

the consumer with an additional three-business-day waiting period prior to consummation.

Use of the Consumer Financial Protection Bureau’s Form For any loans subject to the TILA-RESPA rule that are federally-related mortgage loans subject to RESPA (which will include most mortgages), Closing Disclosure Form H-25 is the standard form. This means that creditors must use the form H-25. For other transactions subject to the TILA-RESPA rule that are not federally-related mortgage loans, form H-25 is a model form. This means that creditors are not strictly required to use form H-25, but the disclosures must contain the exact same information and be made with headings, content, and format substantially similar to form H-25. We’ll look at the standard form in detail later in this unit.

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TILA-RESPA Disclosures - Unit 2 Screen 4 – Consummation

On the previous screens, we have used the term “consummation,” which we need to define more specifically. Consummation is not the same as closing or settlement.

Consummation may commonly occur at the same time as closing or settlement, but it is a legally distinct event. Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan, not, for example, when the consumer becomes contractually obligated to a seller on a real estate transaction.

The point in time when a consumer becomes contractually obligated to the creditor on the loan depends on applicable State law. Creditors and settlement agents must verify the applicable State laws to determine when consummation will occur and make sure delivery of the Closing Disclosure occurs at least three business days before this event.

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TILA-RESPA Disclosures - Unit 2 Screen 5 – Delivery Requirements As we said, the creditor is generally responsible for ensuring that the consumer receives the Closing Disclosure form no later than three business days before consummation. The creditor also is responsible for ensuring that the Closing Disclosure meets the content, delivery, and timing requirements outlined by the TRID Rule. To ensure the consumer receives the Closing Disclosure on time, creditors must arrange for delivery as follows:

• By providing it to the consumer in person. • By mailing, or by other delivery methods, including email. Note: Creditors may

use electronic delivery methods subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act.

If the Closing Disclosure is provided in person, it is considered received by the consumer on the day the creditor provides it. If it is mailed or delivered electronically, the consumer is considered to have received the Closing Disclosure three business days after it is delivered or placed in the mail. However, if the creditor has evidence that the consumer received the Closing Disclosure earlier than three business days after it is mailed or delivered, it may rely on that evidence and consider that the consumer received the form on that date.

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TILA-RESPA Disclosures - Unit 2 Screen 6 – Other Delivery Information Creditors may contract with settlement agents to have the settlement agent provide the Closing Disclosure to consumers on the creditor’s behalf. Creditors and settlement agents also may agree to divide responsibility with regard to completing the Closing Disclosure, with the settlement agent assuming responsibility to complete some or all the Closing Disclosure. Any such creditor must maintain communication with the settlement agent to ensure that the Closing Disclosure and its delivery satisfy the requirements outlined in the TRID Rule. The creditor is legally responsible for any errors or defects. Delivering the Closing Disclosure to the Seller The settlement agent is required to provide the seller with the Closing Disclosure reflecting the actual terms of the seller’s transaction. The settlement agent may comply with this requirement by providing the seller with one of the following:

• A copy of the Closing Disclosure provided to the buyer, if it also contains information relating to the seller’s transaction.

• A separate disclosure, including only the information applicable to the seller’s

transaction from the Closing Disclosure. However, if the seller’s disclosure is provided in a separate document, the settlement agent must provide the creditor with a copy of the disclosure that he or she provided to the seller.

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TILA-RESPA Disclosures - Unit 2 Screen 7 – Other Delivery Information (cont) Who Receives the Disclosure In rescindable transactions, the Closing Disclosure must be given separately to each consumer who has the right to rescind under TILA, although the disclosures required for adjustable rate mortgages need only be provided to the consumer who expresses an interest in a variable-rate loan program. In transactions that are not rescindable, the Closing Disclosure may be provided to any consumer with primary liability on the obligation. Business Day Definition The term “business day” has a different meaning for purposes of providing the Closing Disclosure than it does for purposes of providing the Loan Estimate. For purposes of providing the Closing Disclosure, the term business day means all calendar days except Sundays and the legal public holidays, 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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TILA-RESPA Disclosures - Unit 2 Screen 8 – Three-Day Waiting Period

Since the consumer must receive the Closing Disclosure at least three business days before consummation, this requirement imposes a three-business-day waiting period. This means that the loan may not be consummated less than three business days after the consumer receives the Closing Disclosure. If a settlement is scheduled during the waiting period, the creditor generally must postpone settlement, unless a settlement within the waiting period is necessary to meet a bona fide personal financial emergency. For example, the imminent sale of the consumer’s home at foreclosure, where the foreclosure sale will proceed unless loan proceeds are made available to the consumer during the waiting period, may be considered a bona fide personal financial emergency.

Consumers may waive or modify the three-business-day waiting period when all three of these conditions exist:

• The extension of credit is needed to meet a bona fide personal financialemergency.

• The consumer has received the Closing Disclosure.• The consumer gives the creditor a dated written statement that describes the

emergency, specifically modifies or waives the waiting period, and bears the signature of all consumers who are primarily liable on the legal obligation. Note that the creditor may not provide the consumer with a pre-printed waiver form.

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TILA-RESPA Disclosures - Unit 2 Screen 9 – Average Charges In general, the amount imposed on the consumer for any settlement service must not exceed the amount the settlement service provider actually received for that service. However, an average charge may be imposed instead of the actual amount received for a particular service, as long as the average charge satisfies certain conditions. The creditor may use an average charge if all of the following conditions are met:

• The average charge is no more than the average amount paid for that service by or on behalf of all consumers and sellers for a class of transactions.

• The creditor or settlement service provider defines the class of transactions

based on an appropriate period of time, geographic area, and type of loan.

• The creditor or settlement service provider uses the same average charge for every transaction within the defined class.

• The creditor or settlement service provider does not use an average charge:

o For any type of insurance o For any charge based on the loan amount or property value or o If doing so is otherwise prohibited by law.

If the creditor develops representative samples of specific settlement costs for a particular class of transactions, the creditor may charge the average cost for that settlement service instead of the actual cost for such transactions. An average-charge program may not be used in a way that inflates the cost for settlement services overall.

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TILA-RESPA Disclosures - Unit 2 Screen 10 – Revisions and Corrections to Closing Disclosures

Creditors must redisclose terms or costs on the Closing Disclosure if certain changes occur to the transaction after the Closing Disclosure was first provided that cause the disclosures to become inaccurate. There are three categories of changes that require a corrected Closing Disclosure containing all changed terms:

• Changes that occur before consummation that require a new three-business-daywaiting period.

• Changes that occur before consummation and do not require a new three-business day waiting period.

• Changes that occur after consummation.

Changes Before Consummation-New Waiting Period

If one of the following occurs after delivery of the Closing Disclosure and before consummation, the creditor must provide a corrected Closing Disclosure containing allchanged terms. This will require a new three-day waiting period, so the creditor mustensure that the consumer receives it no later than three business days before consummation.

• The disclosed APR becomes inaccurate. If the annual percentage rate (APR)previously disclosed becomes inaccurate, the creditor must provide a corrected Closing Disclosure with the corrected APR disclosure and all other terms thathave changed.

• The loan product changes. If the loan product previously disclosed becomesinaccurate, the creditor must provide a corrected Closing Disclosure with the corrected loan product and all other terms that have changed.

• A prepayment penalty is added. If a prepayment penalty is added to the transaction, the creditor must provide a corrected Closing Disclosure with the prepayment penalty provision disclosed and all other terms that have changed.

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TILA-RESPA Disclosures - Unit 2 Screen 11 – Revisions and Corrections to Closing Disclosures (cont) Changes Before Consummation-No New Waiting Period For any other changes before consummation that do not fall under the three categories listed on the previous screen (i.e., related to the APR, loan product, or the addition of a prepayment penalty), the creditor still must provide a corrected Closing Disclosure with any terms or costs that have changed and ensure that the consumer receives it. For these changes, there is no additional three-business-day waiting period required. The creditor must ensure only that the consumer receives the revised Closing Disclosure at or before consummation. Other examples of changes that would not require a new three-day waiting period include:

• Unexpected discoveries on a walk-through such as a broken refrigerator or a missing stove, even if they require seller credits to the buyer

• Most changes to payments made at closing, including the amount of the real

estate commission, taxes and utilities proration, and the amount paid into escrow

• Typos found at the closing table For your review, the CFPB Fact Sheet lists those changes that require and those that do not require a new three-day waiting period.

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http://files.consumerfinance.gov/f/201506_cfpb_factsheet_will-the-new-mortgage-disclosures-delay-my-closing.pdf



TILA-RESPA Disclosures - Unit 2 Screen 12 – Changes After Consummation In some circumstances, creditors must provide a corrected Closing Disclosure if an event in connection with the settlement occurs during the 30-calendar-day period after consummation that causes the Closing Disclosure to become inaccurate and results in a change to an amount paid by the consumer from what was previously disclosed. This applies to either the buyer or the seller. When a post-consummation event requires a corrected Closing Disclosure, the creditor must deliver or place in the mail a corrected Closing Disclosure not later than 30 calendar days after receiving information sufficient to establish that such an event has occurred.

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TILA-RESPA Disclosures - Unit 2 Screen 13 – Clerical Errors and Tolerance Violations Clerical Errors Creditors also must provide a revised Closing Disclosure to correct non-numerical clerical errors and document refunds for tolerance violations no later than 60 calendar days after consummation. An error is clerical if it does not affect a numerical disclosure and does not affect the timing, delivery, or other requirements. For example: If the Closing Disclosure identifies the incorrect settlement service provider as the recipient of a payment, the error would be considered clerical because it is non-numerical and does not affect any of the delivery requirements. However, if the Closing Disclosure lists the wrong property address, which affects the delivery requirement, the error would not be considered clerical. Tolerance Violations If the creditor cures a tolerance violation by providing a refund to the consumer, the creditor must deliver or place in the mail a corrected Closing Disclosure that reflects the refund no later than 60 calendar days after consummation.

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TILA-RESPA Disclosures - Unit 2 Screen 14 – Exceptions for Timeshares Loans secured by interests in timeshare plans are still subject to the TILA-RESPA rule, but the CFPB recognizes that these loans may commonly be consummated within a few days of the consumer’s application. The Bureau thus adopted abbreviated timing, delivery, and disclosure obligations for these loans when consummation occurs within three business days of the application. For these loans, creditors may forego a Loan Estimate and provide only the Closing Disclosure. In addition, the waiting periods and timing requirements applicable to most loans subject to the TILA-RESPA Rule are inapplicable to loans secured by timeshare interests. Rather, creditors must ensure only that the consumer receives the Closing Disclosure no later than consummation. For more specific information about the Closing Disclosure, please see the TILA-RESPA Integrated Disclosure rule compliance guide.

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TILA-RESPA Disclosures - Unit 2 Screen 15 – Closing Disclosure Form Now that we have discussed the requirements for using and delivering the Closing Disclosure, let’s talk about the form itself. The Closing Disclosure is a five-page document. Depending on the type of loan the borrower is receiving, pages 1, 4, and 5 of the disclosure could look different. Pages 2 and 3 will always look the same, regardless of the loan type. The Consumer Financial Protection Bureau has several variations of the form on its website for you to view, including the following:

• Blank closing disclosure – annotated version. This annotated form is intended to provide a starting point for analysis of the relevant regulatory text.

• Blank closing disclosure – illustrating the application of the rule’s content

requirements. This form provides three variations of page one, one page two, one page three, four variations of page four, and four variations of page five, reflecting the variable content requirements in 12 CFR § 1026.38.

• Blank closing disclosure – illustrating the application of the optional alternative

tables for transactions without a seller This form provides two variations of page one, one page two, one page three, four variations of page four, and four variations of page five, reflecting the variable content requirements in 12 CFR § 1026.38.

• Blank closing disclosure – illustrating disclosure provided to the seller

• Blank page 2 of closing disclosure– illustrating modifications to closing cost details

• Sample of completed closing disclosure – for fixed rate loan

• Sample of completed closing disclosure – for refinance

• Sample page 3 of closing disclosure – for disclosure of funds paid outside of

closing We will discuss only one of these forms in detail, but you may need to look over others to answer some of the progress check, quiz, or exam questions. For samples of other closing disclosures, visit the Rule Implementation page of the CFPB website.

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http://files.consumerfinance.gov/f/201312_cfpb_tila-respa_annotated-closing-disclosure.pdf

http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25A.pdf

http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25A.pdf

http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25HJ.pdf

http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25HJ.pdf

http://files.consumerfinance.gov/f/201506_cfpb_closing-disclosure_cover-H25HI.pdf

http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25H.pdf

http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25H.pdf

http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25B.pdf


http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25E.pdf

http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25E.pdf

http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25D1.pdf

http://files.consumerfinance.gov/f/201403_cfpb_closing-disclosure_cover-H25D1.pdf

http://www.consumerfinance.gov/regulatory-implementation/tila-respa/



TILA-RESPA Disclosures - Unit 2 Screen 16 – Closing Disclosure Form (cont) The sample closing disclosure for a fixed-rate loan is good example for us to review. This particular sample is a statement of the estimated costs for a 30-year fixed rate loan and is the companion sample to the Loan Disclosure we reviewed in Unit 1. Let’s look at the kind of information this form will provide. Closing Disclosure - Page 1 At the top of the first page of the form are three sections:

• Closing information – Includes date issued, closing date, disbursement date, settlement agent, file number, property address, and sale price

• Transaction information – Includes names and addresses for both the

borrowers and sellers and the lender’s name • Loan information – Includes the loan term, purpose of the loan, product type,

loan type and loan ID number Loan Terms This section of page 1 gives the exact figures for the loan amount, interest rate, and monthly principal and interest payment, and indicates with a “yes” or “no” whether any of those amounts can increase after closing. It also indicates whether or not there is a prepayment penalty or balloon payment with the loan, and if so, gives the specifics that apply to that feature.

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TILA-RESPA Disclosures - Unit 2 Screen 17 – Closing Disclosure Form – Page 1 (cont) Projected Payments This section of page 1 shows the actual payments the borrower will make for principal & interest and mortgage insurance, an estimated amount for the escrow payment, and the total estimated monthly mortgage payment. These calculations are given for years 1-7 and then for years 8-30 of the loan term. This section also gives an estimated monthly amount for taxes, insurance, and assessments and specifies whether or not the money for these payments will be in escrow. The last section of page 1 shows the borrowers’ total costs as closing costs (which are detailed on page 2) and the total amount the buyers need to bring to closing (which includes the closing costs and other amounts that are detailed on page 3).

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TILA-RESPA Disclosures - Unit 2 Screen 18 – Closing Disclosure Form – Page 2 Closing Disclosure - Page 2 Page 2 of the disclosure gives the details of the closing costs. This page and page 3 will be of particular interest to real estate agents, as this is where the actual settlement costs are outlined. The page is divided into four columns:

• Column 1 – Description of the costs • Column 2 – Costs paid by the borrower – designated as being paid either “at

closing” or “before closing” • Column 3 – Costs paid by the seller – designated as being paid either “at closing”

or “before closing” • Column 4 – Costs paid by others (As you can see in this example, the appraisal

fee was paid by someone other than the borrower or the seller.) Loan Costs The first section deals with the loan costs:

• A. Origination charges - Items such as points, application fee, and underwriting fee

• B. Services the borrower did not shop for - These are items the lender

requires for the loan, such as appraisals and credit reports. • C. Services the borrower did shop for - These are items the borrower can get

on his own, such as pest inspections, survey fees, and title insurance. • D. The total of the costs of A, B, and C above

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TILA-RESPA Disclosures - Unit 2 Screen 19 – Closing Disclosure Form – Page 2 (cont) Other Costs The next section deals with other costs:

• E. Taxes and other government fees - Items such as recording fees and transfer taxes

• F. Prepaids - These are items paid for in advance, such as homeowner’s

insurance and property taxes. • G. Initial escrow payment at closing - An escrow account is an account where

money is held for certain payments until they are paid out – typically for insurance and taxes. The lender gives the borrower a statement that tells how much money it requires the borrower to put into the account each month.

• H. Other costs not covered elsewhere on the disclosure - Items such as HOA

fees, home warranty fees, home inspection fees, and real estate commission • I. The total of the costs of E, F, G, and H above

Section J gives the total closing costs to the borrower (D + I from above).This total will be moved to the bottom of page 1 under the heading “Costs at Closing – Closing Costs.” Please review Section 3.3 found on pages 64-69 of the TILA-RESPA Integrated Disclosures Guide to see how this section must be completed.

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http://files.consumerfinance.gov/f/201503_cfpb_tila-respa-integrated-disclosure-guide-to-the-loan-estimate-and-closing.pdf




TILA-RESPA Disclosures - Unit 2 Screen 20 – Closing Disclosure Form – Page 3 Calculating Cash to Close Closing costs are only part of the cash a borrower needs to bring to closing. The top of page 3 shows how the final costs of the loan compare to the Loan Estimate the lender originally provided to the borrower and then calculates the amount of cash the borrower will need at closing. This calculation includes such items as costs paid before closing, down payment, deposits, seller credits, adjustments, and other credits. Summaries of Transactions This section is divided into two columns. The left column summarizes the borrower’s transaction and includes:

• K. Due from the borrower at closing – This includes the sale price of the property and any adjustments for items paid by the seller in advance.

• L. Paid already by or on behalf of borrower at closing – This includes

deposit, loan amount, loan assumptions, seller credits, other credits, and adjustments for items unpaid by the seller.

The calculation at the bottom of the left column subtracts the totals already paid by the borrower from the total due from the borrower and results in the Cash to Close due from the borrower at closing. This total is the same figure that you see on the bottom of page 1 under the heading “Costs at Closing – Cash to Close.”

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TILA-RESPA Disclosures - Unit 2 Screen 21 – Closing Disclosure Form – Page 3 (cont) The right column of page 3 summarizes the seller’s transaction and includes:

• M. Due to seller at closing – This includes the sale price of the property and any adjustments for items paid by the seller in advance.

• N. Due from seller at closing – This section includes closing costs the seller will

pay, payoff of any first or second mortgages, seller credit, and adjustments for items unpaid by the seller.

The calculation at the bottom of the right column subtracts the total due from the seller from the total due to the seller and results in the Cash to Seller, which is the amount the seller will receive from the borrower at closing. Note: This last line on page 3 is important because it shows how much cash the borrower needs to bring to closing and how much cash the seller will receive at closing. Please review Section 3.4 found on pages 70-84 of the TILA-RESPA Integrated Disclosures Guide to see how this section must be completed.

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TILA-RESPA Disclosures - Unit 2 Screen 22 – Closing Disclosure Form – Page 4 Page 4 details the Loan Disclosures. It covers:

• Assumption – Indicates whether or not the lender will allow a loan assumption on a future sale or transfer

• Demand feature – Indicates whether or not the loan has a demand feature,

which would allow the lender to require early repayment • Late payment – States what late fee the lender will charge • Negative amortization – Indicates whether or not the loan has a negative

amortization feature, which could result in the loan amount becoming larger than the original loan amount, resulting in a decrease of the equity the borrower has in the property

• Partial payments – Indicates whether or not the lender would accept partial

payments on the loan • Security interest – Lists the address of the property securing the loan • Escrow account – Breaks down what is and what is not included in the escrow

account

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TILA-RESPA Disclosures - Unit 2 Screen 23 – Closing Disclosure Form – Page 5 Page 5 includes the following sections:

• Loan Calculations – Details the total amount of all payments on the loan, the dollar amount of the finance charges over the life of the loan, the amount financed, the annual percentage rate (APR), and the total interest percentage (TIP)

• Other Disclosures – States other important information for the borrower to know

including whether or not the borrower would have any protection from liability for the unpaid balance in the event of a foreclosure

• Contact Information – Gives firm names, addresses, license numbers, contact

names, email addresses, and phone numbers for persons involved in the transaction.

• Confirm Receipt – A place for the borrowers to sign confirming receipt of the

Closing Disclosure document. Signing the document does not indicate acceptance of the loan.

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Insert Progress Check 3

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TILA-RESPA Disclosures - Unit 2 Screen 24– Unit Review The Closing Disclosure form integrates and replaces the HUD-1 settlement statement and the final Truth in Lending (TIL) disclosure for most mortgage transactions. The creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan. Consummation is not the same as closing or settlement. Consummation may commonly occur at the same time as closing or settlement, but it is a legally distinct event. Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan. To ensure the consumer receives the Closing Disclosure on time, creditors must arrange for delivery by providing it to the consumer in person, by mailing, or by other delivery methods, including email. The settlement agent is required to provide the seller with the Closing Disclosure reflecting the actual terms of the seller’s transaction. The term “business day” has a different meaning for purposes of providing the Closing Disclosure than it does for purposes of providing the Loan Estimate. The term business day means all calendar days except Sundays and the legal public holidays, 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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TILA-RESPA Disclosures - Unit 2 Screen 25– Unit Review

Since the consumer must receive the Closing Disclosure at least three business days before consummation, this requirement imposes a three-business-day waiting period. This means that the loan may not be consummated less than three business days after the consumer receives the Closing Disclosure.

In general, the amount imposed on the consumer for any settlement service must not exceed the amount the settlement service provider actually received for that service.

There are three categories of changes that require a corrected Closing Disclosure containing all changed terms:

• Changes that occur before consummation that require a new three-business-daywaiting period.

• Changes that occur before consummation and do not require a new three-business day waiting period.

• Changes that occur after consummation.

If one of the following occurs after delivery of the Closing Disclosure and before consummation, the creditor must provide a corrected Closing Disclosure containing allchanged terms. This will require a new three-day waiting period.

• The disclosed APR becomes inaccurate.• The loan product changes.• A prepayment penalty is added.

For any other changes before consummation that do not fall under these three categories, the creditor still must provide a corrected Closing Disclosure, but theadditional three-business-day waiting period is not required.

The Closing Disclosure is a five-page document. Depending on the type of loan the borrower is receiving, pages 1, 4, and 5 of the disclosure could look different. Pages 2and 3 will always look the same, regardless of the loan type.

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Documents

TILA – RESPA · consumers - the interest rate, monthly payments, and the total closing costs - will make it easier for consumers to compare mortgage loans and choose the one that