First Guaranty Mortgage Corporation - Compliance Department




When are revisions or corrections permitted for Loan Estimates?
 

Creditors generally are bound by the Loan Estimate provided within three business days of the application, and may not issue revisions to Loan Estimates because they later discover technical errors, miscalculations, or underestimations of charges. Creditors are permitted to provide to the consumer revised Loan Estimates (and use them to compare estimated amounts to amounts actually charged for purposes of determining good faith) only in certain specific circumstances:

  • Changed circumstances that occur after the Loan Estimate is provided to the consumer cause estimated settlement charges to increase more than is permitted under the TILA-RESPA rule (§ 1026.19(e)(3)(iv)(A));
  • Changed circumstances that occur after the Loan Estimate is provided 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 (§ 1026.19(e)(3)(iv)(B));
  • Revisions to the credit terms or the settlement are requested by the consumer (§ 1026.19(e)(3)(iv)(C));
  • The interest rate was not locked when the Loan Estimate was provided, and locking the rate causes the points or lender credits disclosed on the Loan Estimate to change (§ 1026.19(e)(3)(iv)(D));
  • The consumer indicates an intent to proceed with the transaction more than 10 business days after the Loan Estimate was originally provided (§ 1026.19(e)(3)(iv)(E)); or
  • The loan is a new construction loan, and settlement is delayed by more than 60 calendar days, if the original Loan Estimate states clearly and conspicuously that at any time prior to 60 calendar days before consummation, the creditor may issue revised disclosures. (§ 1026.19(e)(3)(iv)(F)).

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 8.1

 
What is a "changed circumstance"?
 

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

  • An extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction (§ 1026.19(e)(3)(iv)(A)(1));
  • 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 disclosures were provided (§ 1026.19(e)(3)(iv)(A)(2)); or
  • New information specific to the consumer or transaction that the creditor did not rely on when providing the Loan Estimate. (§ 1026.19(e)(3)(iv)(A)(3))

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 8.2

 
What are changed circumstances that affect settlement charges?
 

A creditor may provide and use a revised Loan Estimate redisclosing 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. (§ 1026.19(e)(3)(iv)(A); Comment 19(e)(3)(iv)(A)-1)

Examples of changed circumstances affecting settlement costs include (Comment 19(e)(3)(iv)(A)-2):

  • 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. (Comment 19(e)(3)(iv)(A)-3)

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 8.3

 
What if the changed circumstance causes third party changes subject to a cumulative 10% tolerance to increase?
 

It is possible that one of the events described above may cause one or more third-party charges subject to a 10% cumulative tolerance to increase. Creditors are permitted to provide and rely upon a revised Loan Estimate only when the cumulative effect of the changed circumstance results in an increase to the sum of all costs subject to the tolerance by more than 10%. (Comment 19(e)(3)(iv)(A)-1.ii)

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 8.4

 
What are changed circumstances that affect 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. (§ 1026.19(e)(3)(iv)(B) and Comment 19(e)(3)(iv)(B)-1)

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. (Comment 19(e)(3)(iv)(A)-2).

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.

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 8.5


May a creditor use a revised Loan Estimate if the consumer requests revisions to the terms or charges?
 

Yes. A creditor may use a revised estimate of a charge if the consumer requests revisions to the credit terms or settlement that affect items disclosed on the Loan Estimate and cause an estimated charge to increase. (§ 1026.19(e)(3)(iv)(C); Comment 19(e)(3)(iv)(C)-1)

Remember, providing a revised Loan Estimate allows creditors to compare the updated figures for charges that have increased due to an event that allows for redisclosure to the amount actually charged for those services. If amounts decrease or increase only to an extent that does not exceed the applicable tolerance, the original Loan Estimate is still deemed to be in good faith and redisclosure is not permitted. (§ 1026.19(e)(4)(i))

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 8.6


May a creditor use a revised Loan Estimate if the rate is locked after the initial Loan Estimate is provided?
 

Yes. If the interest rate for the loan was not locked when the Loan Estimate was provided and, upon being locked at some later time, the interest rate as well as points or lender credits for the mortgage loan may change. The creditor is required to provide a revised Loan Estimate no later than three business days after the date the interest rate is locked, and may use the revised Loan Estimate to compare to points and lender credits charged.

The revised Loan Estimate must reflect the revised interest rate as well as any revisions to the points disclosed on the Loan Estimate pursuant to § 1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms that have changed due to the new interest rate. (§ 1026.19(e)(3)(iv)(D); Comment 19(e)(3)(iv)(D)-1)

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 8.7


 
 
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