The Loan Estimate, Part 2

As we mentioned yesterday, while the go-live date of the TRID (Truth-in-Lending/RESPA Integrated Disclosure) rules may be have been delayed from Aug. 1 to Oct. 3*, there are many resources that Realtors® should be aware of to prepare for the change.

A lot of attention has been paid (and rightfully so) to the changing timelines and to becoming familiar with the Closing Disclosure Form, or the CD. The CD is only half of the TRID Form, however. The other half of the form, the half for which the lenders are responsible, is the Loan Estimate Form, or the LE. Even though the lenders are responsible for the LE, there are some important aspects of the LE of which Realtors® – especially buyers’ agents – need to be aware.

1. The timelines for the LE under the TRID Rule are the same as the current timelines for the GFE. The LE is replacing the Good Faith Estimate (GFE) and the early Truth-in-Lending disclosure. Like the GFE, it must be delivered by the lender to the consumer within three business days of the lender taking an application. (We will leave the discussion of business days for a different day). The consumer then has 10 days to consider whether the terms of the loan are acceptable, and if so, notify the lender so the lender can process the application.
2. Lenders will continue to prepare and provide pre-qualification or pre-approval letters, and they will still have the same value under the TRID Rule as they do today. The definition of an ‘application’ has changed with the TRID Rule. Today’s definition of an application includes seven pieces of information: address, loan amount, income, estimated value, name, social security number and anything else the lender deems necessary. Under the TRID Rule, the last criterion (the catch-all) has been eliminated. Lenders today can take the six criteria (ALIENS) above and develop preliminary information about the consumer, including issuing a pre-qualification or pre-approval letter. Most lenders are expected to modify their practices to collect only five pieces of information, the loan amount, income, estimated value, name and social security numbers (LIENS).
3. Calling a lender back ‘tomorrow’ is no longer a good option, especially if you know your buyer is in the process of applying for a loan. Once lenders have ALIENS, the LE must be issued within three business days. The TRID Rule permits lenders to rely on third parties, specifically Realtors®, to obtain information necessary for the LE. Expect lenders to look to you for information about realty transfer tax, real estate and school taxes, seller credits, homeowners association fees, et cetera. You will not know where in the three-day process the lender is, so your return call is critical for your buyers.

While the obligations and timelines pertaining to generating the LE focus principally on lenders, these changes do impact buyers and buyers’ agents. It is important to recognize that while the timelines have not changed, the elements that trigger the timelines are different. Lenders may be turning to Realtors® for information critical to the LE process, a process that is essential if your buyers are to be approved for their loan. While the generation and delivery of the CD is a topic worthy of much attention, don’t forget the first half of the TRID Form… the Loan Estimate.

Thank you Anne L. Anastasi, CLTP, NTP, for her contributions to this article.

*The Consumer Financial Protection Bureau (CFPB) has delayed the rule’s effective date to Oct. 3, 2015.