If a consumer is given the option to cap monthly payments that may result in negative amortization, the creditor must fully disclose the rules relating to the option, including the effects of exercising the option (such as negative amortization will occur and the principal loan balance will increase); however, the disclosure in 1026.19(b)(2)(viii) need not be provided. 3. For example, assume that the creditor included a $100 estimated fee for a pest inspection in the disclosures provided pursuant to 1026.19(e)(1)(i), and the fee is included in the category of charges subject to 1026.19(e)(3)(ii), but a pest inspection was not obtained in connection with the transaction, then for purposes of the good faith analysis required under 1026.19(e)(3)(ii), the sum of all charges subject to 1026.19(e)(3)(ii) paid by or imposed on the consumer is compared to the sum of all such charges disclosed pursuant to 1026.19(e), minus the $100 estimated pest inspection fee. On Wednesday, June 10, a prepayment penalty is added to the transaction such that the disclosure required by 1026.38(b) becomes inaccurate. For good-faith purposes, the appraisal fee has been re-set from $200 to $400 and there is no tolerance violation. We will extend your rate lock at no cost to you. In certain transactions involving an intermediary agent or broker, a creditor may delay providing disclosures. Section 1026.19(f)(1)(iii) provides that, if any disclosures required under 1026.19(f)(1)(i) are not provided to the consumer in person, the consumer is considered to have received the disclosures three business days after they are delivered or placed in the mail. Whether disclosures must be in electronic form depends upon the following: i. The disclosures required by 1026.19(e)(1)(i) must be delivered not later than three business days after the creditor receives the consumer's application. 1. Fees paid to a person. The tax certification fees charged to a consumer on May 20 may not exceed the average tax certification fee paid from January 1 through April 30. The creditor then chooses to send a different appraiser for a second opinion, but the second appraiser returns a similar report. i. Mail solicitations. Discounted and premium interest rate. In disclosing the period during which the loan may be converted and the margin, the creditor may use information applicable to the conversion feature during the six months preceding preparation of the disclosures and state that the information is representative of conversion features recently offered by the creditor. 4. The creditor must make corrected disclosures such that the consumer receives them on or before Monday, June 8. For example, if, in the disclosures provided pursuant to 1026.19(e)(1)(i) and 1026.37(f)(3), a creditor discloses an estimated fee for an unaffiliated settlement agent and permits the consumer to shop for that service, but the consumer either does not choose a provider, or chooses a provider identified by the creditor on the written list provided pursuant to 1026.19(e)(1)(vi)(C), then the estimated settlement agent fee is included with the fees that may, in aggregate, increase by no more than 10 percent for the purposes of 1026.19(e)(3)(ii). For example, assume that, prior to providing the disclosures required by 1026.19(e)(1)(i), the creditor believed that the consumer was eligible for a loan program that did not require an appraisal. For purposes of conducting the good faith analysis required under 1026.19(e)(3)(i) for lender credits, the total amount of lender credits, whether specific or non-specific, actually provided to the consumer is compared to the amount of the lender credits identified in 1026.37(g)(6)(ii). This means that the estimate disclosed under 1026.19(e)(1)(i) was obtained by the creditor through due diligence, acting in good faith. Section 1026.19(e)(1)(i) requires early disclosure of credit terms in closed-end credit transactions, other than reverse mortgages, that are secured by real property or a cooperative unit, regardless of whether a cooperative unit is treated as real property under State or other applicable law. The actual total amount of lender credits, whether specific or non-specific, provided by the creditor that is less than the estimated lender credits identified in 1026.37(g)(6)(ii) and disclosed pursuant to 1026.19(e) is an increased charge to the consumer for purposes of determining good faith under 1026.19(e)(3)(i). 5. Section 1026.19(e)(2)(i)(A) provides that a consumer may indicate an intent to proceed with a transaction in any manner the consumer chooses, unless a particular manner of communication is required by the creditor. The creditor should identify any index or other measure or formula used to determine the fixed rate and state any margin to be added. The creditor must make corrected disclosures so that the consumer receives them on or before Monday, June 8. For example, separate programs would not exist based on differences in the following loan features: 3. 1. Best information reasonably available. Demand feature. 1026.8 Identifying transactions on periodic statements. Charges subject to the zero percent tolerance category. The creditor must deliver or place in the mail the disclosures required by 1026.19(e)(1)(i) for the construction financing no later than Thursday, June 4, the third business day after the creditor received the consumer's application for the construction financing only, and not later than the seventh business day before consummation of the construction transaction. If during the 30-day period following consummation, an event in connection with the settlement of the transaction occurs that causes such disclosures to become inaccurate and such inaccuracy results in a change to the amount actually paid by the seller from that amount disclosed under 1026.19(f)(4)(i), the settlement agent shall deliver or place in the mail corrected disclosures not later than 30 days after receiving information sufficient to establish that such event has occurred. However, a consumer's silence is not indicative of intent because it cannot be documented to satisfy the requirements of 1026.25. 1. Section 1026.19(e)(1)(ii)(B) provides that if a mortgage broker provides any disclosure required under 1026.19(e), the mortgage broker must also comply with the requirements of 1026.25(c). 5. If a historical example is provided under 1026.19(b)(2)(viii)(A), the terms to maturity or payment amortization used in the historical example must be used in calculating the initial and maximum payment. The current interest rate is the interest rate that applies on the date of the disclosure. The initial rate lock and Loan Estimate reflect a lender credit of $2000.00 with 4.25% interest rate. If a program is made available only to certain customers of an institution, a creditor need not provide disclosures for that program to other consumers who express a general interest in a creditor's ARM programs. 2. Specific lender credits are specific payments, such as a credit, rebate, or reimbursement, from a creditor to the consumer to pay for a specific fee. A creditor may determine good faith under 1026.19(e)(3)(i) and (ii) based on the increased charges reflected on revised disclosures only to the extent that the reason for revision, as identified in 1026.19(e)(3)(iv)(A) through (F), actually increased the particular charge. If a service is required by the creditor, the creditor permits the consumer to shop for that service consistent with 1026.19(e)(1)(vi)(A), the creditor provides the list required under 1026.19(e)(1)(vi)(C), and the consumer chooses a service provider that is not on that list to perform that service, then the actual amounts of such fees need not be compared to the original estimates for such fees to perform the good faith analysis required under 1026.19(e)(3)(i) or (ii). Section 1026.19(e)(1)(vi)(A) permits creditors to impose reasonable requirements regarding the qualifications of the provider. Finally, in any assumption of a variable-rate transaction secured by the consumer's principal dwelling with a term greater than one year, disclosures need not be provided under 1026.18(f)(2)(ii) or 1026.19(b). The consumer must have received the disclosures required under 1026.19(e)(1)(i) and indicated an intent to proceed with the transaction described by those disclosures before paying or incurring any other fee imposed by a creditor or other person in connection with the consumer's application for a mortgage loan that is subject to 1026.19(e)(1)(i). In some variable-rate transactions, creditors may set an initial interest rate that is not determined by the index or formula used to make later interest rate adjustments. 4. The limitation on increases to your interest rate over the term of the loan will be set at an amount in the following range: Between 4 and 7 percentage points above the initial interest rate. A creditor using this alternative rule must include a statement in its program disclosures suggesting that the consumer ask about the overall rate limitations currently offered for the creditor's ARM programs. Unless disclosures for all of its variable-rate programs are provided initially, the creditor must inform the consumer that other closed-end variable-rate programs exist, and that disclosure forms are available for these additional loan programs. 02/24/2019 Content of new disclosures. See comment 19(e)(1)(iii)-3 for additional guidance on denied or withdrawn applications. Get an official Loan Estimate before choosing a loan. See form H-26 of appendix H to this part for a model statement. In contrast, if the creditor provides the consumer with a preprinted list of closing costs common in the consumer's area, the creditor need not include the statement. The median recording fee for one product is $80, while the median recording fee for the other product is $130. See comment 19(f)(1)(i)-2.i. 2. In contrast, a creditor or other person complies with 1026.19(e)(2)(i) if the creditor or other person requires the consumer to provide a credit card number before the consumer receives the disclosures required by 1026.19(e)(1)(i) and subsequently indicates an intent to proceed, provided that the consumer's authorization is only to pay for the cost of a credit report and the creditor or other person only charges a reasonable and bona fide fee for obtaining the consumer's credit report. 1. The Bureau may, from time to time, issue revised or alternative versions of the special information booklet that addresses transactions subject to 1026.19(g) by publishing a notice in the Federal Register. ii. If a loan program permits consumers to convert their variable-rate loans to fixed-rate loans, the creditor must disclose that the interest rate may increase if the consumer converts the loan to a fixed-rate loan. Statement that consumer may choose different provider. 3. i. The reasonably available standard requires that the creditor, acting in good faith, exercise due diligence in obtaining the information. The Bureau also may choose to permit the forms or booklets of other Federal agencies to be used by creditors. ), 1. During the recording process on Tuesday the settlement agent and the creditor discover that the property is subject to an unpaid $500 nuisance abatement assessment, which was not disclosed pursuant to 1026.19(f)(1)(i), and learns that pursuant to an agreement with the seller, the $500 assessment will be paid by the seller rather than the consumer. If redisclosure is required, the creditor may provide a complete set of new disclosures, or may redisclose only the changed terms. 1026.17 General disclosure requirements. An average-charge program may not be used in a way that inflates the cost for settlement services overall. Settlement is defined in Regulation X, 12 CFR 1024.2(b). For example, assume that the consumer decides to grant a power of attorney authorizing a family member to consummate the transaction on the consumer's behalf after the disclosures required under 1026.19(e)(1)(i) are provided. If a settlement agent provides disclosures required under 1026.19(f) in the creditor's place, the creditor remains responsible under 1026.19(f) for ensuring that the requirements of 1026.19(f) have been satisfied. However, while the creditor spent $700 more than it collected during the May to August period, it collected $1,300 more than it spent from January to August. Fees imposed by a person. 1026.39 Mortgage transfer disclosures. Section 1026.19(g)(1)(i) requires that the creditor deliver or place in the mail the special information booklet not later than three business days after the consumer's application is received. For example, in a five-year loan, a creditor would show the payments and loan balance for the five-year term, from 1977 to 1981, with a zero loan balance reflected for 1981. Denied or withdrawn applications. Revisions. Section 1026.19(e)(3)(iv)(E) requires no justification for the change to the original estimate other than the lapse of 10 business days. Documentation requirement. The creditor satisfies these requirements under 1026.19(f)(2)(v) if it revises the disclosures accordingly and delivers or places them in the mail by November 30. iii. A consumer may modify or waive the right to the three-business-day waiting periods required by 1026.19(f)(1)(ii)(A) or (f)(2)(ii) only after the creditor makes the disclosures required by 1026.19(f)(1)(i). Assume a creditor defines a type of loan that includes two distinct rate products. Creditors are permitted to provide more detailed information than is contained in the Consumer Handbook. Rate Lock Extensions can only be issued up to 60 days beyond the initial 45-day rate lock. Revised Loan Estimate may not be delivered at the same time as the Closing Disclosure. To illustrate: i. See 1026.19(f)(1)(iii) and comments 19(f)(1)(iii)-1 and -2. The term affiliate, as used in 1026.19(e), has the same meaning as in 1026.32(b)(5). However, if a creditor develops complex algorithms for determining averages, not only must the creditor maintain the underlying receipts and ledgers, but the creditor must maintain documentation sufficiently detailed to allow an examiner to verify the accuracy of the calculations. 2. Assume a creditor provides the disclosure under 1026.19(f)(1)(ii)(A) for a transaction in which the title insurance company that is providing the title insurance policies is acting as the settlement agent in connection with the transaction, but the creditor does not request the actual cost of the lender's title insurance policy that the consumer is purchasing from the title insurance company and instead discloses an estimate based on information from a different transaction. Origination Charges Section B. 1026.19 Certain mortgage and variable-rate transactions. The creditor need not disclose each periodic or overall rate limitation that is currently available. 1. Creditors may make changes in the format or content of form H-27 in appendix H and be deemed to be in compliance with 1026.19(e)(1)(vi)(C), so long as the changes do not affect the substance, clarity, or meaningful sequence of the form. 3. Intermediary agent or broker. Revised disclosures for general informational purposes. A creditor that offers multiple variable-rate loan programs is required to have disclosures for each variable-rate loan program subject to 1026.19(b)(2). Estimates of prepaid interest, property insurance premiums, and amounts placed into an escrow, impound, reserve or similar account must be consistent with the best information reasonably available to the creditor at the time the disclosures are provided. 7. However, the creditor may not utilize an estimate without exercising due diligence to obtain the actual term for the consumer's transaction. Thus, in a loan with 2 percentage point annual (and 5 percentage point overall) interest rate limitations or caps, the maximum interest rate would be 5 percentage points higher than the initial interest rate disclosed. If a Rate Lock Extension Fee was incorrectly disclosed on a revised CD as Origination Points, can this be corrected with another revised CD before closing, or corrected on the final consummation CD? Other permissible changes. If the creditor generally conducts separate closings for the construction financing and the permanent financing or expects that the construction financing and the permanent financing may have separate closings, providing separate Loan Estimates for the construction financing and for the permanent financing allows the creditor to deliver separate Closing Disclosures for the separate phases. ii. For example, if the creditor sends the disclosures via overnight mail on Monday, and the consumer signs for receipt of the overnight delivery on Tuesday, the creditor could demonstrate that the disclosures were received on Tuesday. If consummation occurs within three business days after a creditor's receipt of an application for a transaction that is secured by a consumer's interest in a timeshare plan described in 11 U.S.C. Provided that the revised version of the disclosures required under 1026.19(e)(1)(i) reflect any revised points disclosed under 1026.37(f)(1) and lender credits, the actual points and lender credits are compared to the revised points and lender credits for the purpose of determining good faith under 1026.19(e)(3)(i).
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