Pub. 4 2014 Issue 3

22 www.azbankers.org consumer; however, ultimate responsi- bility falls on the lender. The final form that the CFPB devel- oped is a three-page form. The final form de-emphasizes APR because, in testing, the consumers found the APR to be confusing, but includes some new disclosures that were mandated by Dodd-Frank, such as total interest percentage and the “In 5 Years” calcu- lation. Second, there are multiple versions of the loan closing form to account for dif- ferent transaction types, for example a refinance and a purchase have different forms from each other. This will be a training concern — ensure lending staff understands the definition of each type of transaction and the “real purpose of the loan.” For instance, staff should be able to differentiate between a land-only loan, construction-only and construc- tion-to-permanent loan. There also is a “seller-only” form required for closed-end loans in residen- tial transactions. Other loans, such as reverse mortgages and home equity lines of credit and other mortgages secured by a mobile home or by a dwelling that is not attached to the real property, will still use the HUD-1 form. The new Loan Estimate co-mingles lender and settlement costs with loan terms and replaces the HUD line num- bers with an alphanumeric system. The Closing Disclosure itemizes the costs and includes section totals rather than lumping costs together and rolling them up into one line item. Because the form is a combination of loan information and settlement costs, communication and cooperation between the lender and closing agent is vital. If the settle- ment agent completes the loan closing disclosure form, the lender needs to provide a copy of the loan estimate form to provide the information necessary for an accurate Closing Disclosure. Third, the initial Loan Estimate must be delivered or mailed to the borrower no later than three business days after the lender receives the mortgage applica- tion and no less than seven business days before consummation of the loan. A revised Loan Estimate due to changed circumstances must be delivered or placed in the mail within three busi- ness days of the lender’s knowledge of a changed circumstance; however the borrower must receive it no later than four business days before consumma- tion of the loan. The borrower must receive the Closing Disclosure no later than three business days prior to the consumma- tion of the loan. A revised loan Closing Disclosure can, in most cases, be de- livered and received at the closing. Key points of the Three-day Rule include: • If disclosures are not delivered in person, but are instead delivered by mail, electronic media or a cou- rier; the borrower is considered to have received the disclosure three business days after being placed in the mail, sent by email or placed with a courier. Accordingly, if delivering other than in person, an additional three business days is required in order to ensure receipt by the borrower no later than three business days prior to consummation. • The lender is allowed to rely on evidence that the consumers actu- ally received the disclosure earlier, if the disclosure is sent by email (assuming the consumer has con- sented to email and complied with E-sign requirements), and receipt is acknowledged the same day as the lender sent them, then the lender can rely on the actual day of receipt and consummation may take place on the third business day after the actual receipt. • The loan closing disclosure can change from the time received by the borrower and consummation unless (a) the APR changes by 1/8 of 1%, or (b) the loan product changes, or (c) a prepayment pen- alty is added. In any of those three instances, a re-disclosure must be received by the borrower three business days before consumma- tion, meaning that consummation would be delayed. Fourth, the “tolerance levels” are kept intact; however, some of the items falling within the “buckets” will be changed for loans that require the disclosures. In the zero tolerance bucket, there can be no increase for any item in this bucket in the amount paid at closing over the estimated amount on the loan estimate form for borrower paid: • Charges paid to the lender and/or broker for their own fees, such as origination charges; n RESPA/TILA — continued from page 21 THE FINAL FORM DE-EMPHASIZES APR BECAUSE, IN TESTING, THE CONSUMERS FOUND THE APR TO BE CONFUSING, BUT INCLUDES SOME NEW DISCLOSURES THAT WERE MANDATED BY DODD-FRANK, SUCH AS TOTAL INTEREST PERCENTAGE AND THE “IN 5 YEARS” CALCULATION.