rate lock extension fee on closing disclosure
For example, if a consumer provides the creditor with an application, as defined by 1026.2(a)(3), for a mortgage loan secured by a timeshare on Monday, June 1, and consummation of the timeshare transaction is scheduled for Friday, June 5, the creditor complies with 1026.19(f)(1)(ii)(B) by ensuring that the consumer receives the disclosures required by 1026.19(f)(1)(i) no later than consummation on Friday, June 5. A creditor or other person complies with 1026.19(e)(2)(i)(A) if: i. 1. For determining good faith under 1026.19(e)(1)(i), to be bona fide, charges must be lawful and for services that are actually performed. If, further, the amounts paid by the consumer for services that are subject to the good faith determination under 1026.19(e)(3)(ii) totaled $1,190, but the respective estimates on the disclosures required under 1026.19(e)(1)(i) totaled only $1,000, then the total would exceed the limitations prescribed by 1026.19(e)(3)(ii) by $90. For example, if the list provided pursuant to 1026.19(e)(1)(vi)(C) identifies providers of pest inspections and surveys, but the consumer may select a provider, other than those identified on the list, for only the survey, then the list must specifically inform the consumer that the consumer is permitted to select a provider, other than a provider identified on the list, for only the survey. Denied or withdrawn applications. Instead, disclosures for ARMs may be based upon terms to maturity or payment amortizations of 5, 15 and 30 years, as follows: ARMs with terms or amortizations from over 1 year to 10 years may be based on a 5-year term or amortization; ARMs with terms or amortizations from over 10 years to 20 years may be based on a 15-year term or amortization; and ARMs with terms or amortizations over 20 years may be based on a 30-year term or amortization. For example, in a variable-rate transaction where interest rate changes are made monthly, but payment changes occur on an annual basis, this fact must be disclosed. 1026.35 Requirements for higher-priced mortgage loans. 3. B. Preferred-rate loans where the terms of the legal obligation provide that the initial underlying rate is fixed but will increase upon the occurrence of some event, such as an employee leaving the employ of the creditor, and the note reflects the preferred rate. 1026.14 Determination of annual percentage rate. Differences between the amounts of estimated charges for property taxes or services not required by the creditor disclosed under 1026.19(e)(1)(i) and the amounts of such charges paid by or imposed on the consumer do not constitute a lack of good faith, so long as the original estimated charge, or lack of an estimated charge for a particular service, was based on the best information reasonably available to the creditor at the time the disclosure was provided. The original estimated charge, or lack of an estimated charge for a particular service, complies with 1026.19(e)(3)(iii) if it is made based on the best information reasonably available to the creditor at the time that the estimate was provided. In certain transactions, creditors may use the alternative rule described in comment 19(b)(2)(vi)-1 for disclosure of the frequency of rate and payment adjustments. 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. Section 1026.19(f)(4)(i) requires disclosure of the items that relate to the seller's transaction. This three-day rule also applies where the creditor takes an application over the telephone. The creditor must deliver or place in the mail the disclosures required by 1026.19(e)(1)(i) for only the construction financing no later than Thursday, June 4, the third business day after the creditor received the consumer's application, and not later than the seventh business day before consummation of the transaction. Disclosures provided by a settlement agent in accordance with 1026.19(f)(1)(v) satisfy the creditor's obligation under 1026.19(f)(1)(i). 1. ), 1. Nonetheless, any increases in those other charges unrelated to the rate lock extension may not be used for the purposes of determining good faith under 1026.19(e)(3). 2. 1. If, however, the consumer chooses a provider that is not on the written list, then good faith is determined according to 1026.19(e)(3)(iii). If a creditor chooses to use an average charge for a settlement service for a particular loan within a class, 1026.19(f)(3)(ii)(C) requires the creditor to use that average charge for that service on all loans within the class. Documentation required. Closing Disclosure The services and fees disclosed on the CD should be listed consistently with how they are listed on the LE. If, however, the consumer amends the application because of the creditor's unwillingness to approve it on its original terms, no violation occurs for not providing disclosures based on the original terms. Rate Lock Extensions can only be issued up to 60 days beyond the initial 45-day rate lock. Closing disclosure explainer - Consumer Financial Protection Bureau In such an event, the availability of the booklet or alternate materials for these transactions will be set forth in a notice in the Federal Register. If a creditor ties interest rate changes to a particular index, this fact must be disclosed, along with a source of information about the index. For example, assume consummation is scheduled for Thursday, June 11 and the early disclosures for a regular mortgage transaction disclose an annual percentage rate of 7.00%: i. In cases such as these, the creditor remains responsible for ensuring that the amount collected from consumers does not exceed the total amounts paid for the corresponding settlement services over time. Closing Disclosure ZERO Tolerance 10% Tolerance NO Tolerance Requirement Section A. Or, if the creditor knows that the loan must close on the 15th of the month but estimates prepaid interest to be paid from the 30th of that month, then the under-disclosure does not comply with 1026.19(e)(3)(iii). If the creditor permits the consumer to shop for a settlement service it requires, 1026.19(e)(1)(vi)(C) requires the creditor to provide the consumer with a written list identifying at least one available provider of that service and stating that the consumer may choose a different provider for that service. PDF TILA-RESPA Integrated Disclosures Closing Disclosure Reference Guide The creditor is not required to provide the disclosures required under 1026.19(f)(1)(i) if, before the time the creditor is required to provide the disclosures under 1026.19(f), the creditor determines the consumer's application will not or cannot be approved on the terms requested, or the consumer has withdrawn the application, and, as such, the transaction will not be consummated. A creditor may delay the period by a reasonable amount of time if such delay is needed to perform the necessary analysis and update the affected systems, provided that each subsequent period is scheduled accordingly. An error is considered clerical if it does not affect a numerical disclosure and does not affect requirements imposed by 1026.19(e) or (f). For example, if a creditor uses the weekly average yield on U.S. Treasury Securities adjusted to a constant maturity as its index, the disclosure might read, Your index is the weekly average yield on U.S. Treasury Securities adjusted to a constant maturity of one year published weekly in the Wall Street Journal. If no particular index is used, the creditor must briefly describe the formula used to calculate interest rate changes. 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. See comments 38-4 and 38(h)(3)-2 for additional guidance on disclosing refunds. The cost will depend on the length of the lock period, and will vary by lender. The current interest rate is the interest rate that applies on the date of the disclosure. For the purpose of determining good faith under 1026.19(e)(3)(i) and (ii), revised charges are compared to actual charges if the revision was caused by a changed circumstance. D. The disclosures could be located on the same web page as the application without necessarily appearing on the initial screen, immediately preceding the button that the consumer will click to submit the application. We will extend your rate lock at no cost to you. See comment 17(a)(1)-5.xvi. The disclosures under 1026.19(b)(1) are not applicable to such loans, nor are the following provisions to the extent they relate to the determination of the interest rate by the addition of a margin, changes in the interest rate, or interest rate discounts: 1026.19(b)(2)(i), (iii), (iv), (v), (vi), (vii), (viii), and (ix). Changes at creditor's discretion. 1. The creditor then charges $135 per transaction for 100 transactions from January 1 through April 30, but the actual average cost to the creditor of pest inspections during this period is $115. Timing of fees. 5. 203K Supplemental Origination Fee. Substitute. ), 5. Revisions to the disclosures also are required when the loan program changes. Mortgage Rate Locks: The Complete Guide | Fees, FAQ's & More 2. 2. Rate Lock Information | Wells Fargo Learn which fees can change and which can't. If you have a rate lock, your rate and points should not change, but there are exceptions. 2. The initial rate lock and Loan Estimate reflect a lender credit of $2000.00 with 4.25% interest rate. See comment 17(c)(2)(i)-2 for labeling disclosures required under 1026.19(e) that are estimates. ), 7. After the Closing Disclosure is provided. 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, is one example of a bona fide personal financial emergency. A consumer may modify or waive the right to a waiting period required by 1026.19(a)(2) only after the creditor makes the disclosures required by 1026.18. Written application. Current and new interest rates. Disclosure of services for which the consumer may shop. 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. Creditors using form H-27 in appendix H properly are deemed to be in compliance with 1026.19(e)(1)(vi)(C). (See comments 20(c)(1)(ii)-3.ii, 20(d)(1)(ii)-2.ii, and 30-1 regarding the inapplicability of variable-rate adjustment notices and interest rate limitations to price-level-adjusted or similar mortgages.). Rate caps. Mortgage rates for May 1: Rates tick down, inventory still tight As of April 28, the average for a 30-year fixed-rate mortgage was 6.59%, down from 6.66% on April 21, according to Mortgage News Daily. ii. At this rate, you'd . Form of disclosures. The creditor must deliver or place in the mail the disclosures required by 1026.19(e)(1)(i) for both the construction and permanent financing, disclosed as either one transaction or separate transactions, no later than Thursday, June 4, the third business day after the creditor received the consumer's application, and not later than the seventh business day before consummation of the transaction. 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. See comment 19(e)(1)(iv)-2 for an example in which the creditor emails disclosures and receives an acknowledgment from the consumer on the same day. 1. 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. Section 1026.19(a) requires early disclosure of credit terms in reverse mortgage transactions subject to 1026.33 that are secured by a consumer's dwelling that are also subject to the Real Estate Settlement Procedures Act (RESPA) and its implementing Regulation X. At any time prior to delivery of the disclosures required under 1026.19(e)(1)(i), a creditor or other person may impose a credit report fee in connection with the consumer's application for a mortgage loan that is subject to 1026.19(e)(1)(i) as provided in 1026.19(e)(2)(i)(B). Section 1026.17(c)(2)(i) provides that if any information necessary for an accurate disclosure is unknown to the creditor, the creditor shall make the disclosure based on the best information reasonably available to the creditor at the time the disclosure is provided to the consumer. Term of the loan. 1026.22 Determination of annual percentage rate. However, no new disclosures are required if the only inaccuracies involve estimates other than the annual percentage rate, and no variable rate feature has been added. The number of applications submitted by the broker to the creditor as compared to the total number of applications received by the broker. 1. Under 1026.19(f)(2)(iii), if during the 30-day period following consummation, an event in connection with the settlement of the transaction occurs that causes the disclosures to become inaccurate, and such inaccuracy results in a change to an amount actually paid by the consumer from that amount disclosed under 1026.19(f)(1)(i), the creditor must provide the consumer corrected disclosures, except as described in this comment. Requirements. The statement that the periodic payment may increase or decrease substantially may be satisfied by the disclosure in paragraph 19(b)(2)(vi) if it states for example, your monthly payment can increase or decrease substantially based on annual changes in the interest rate., 1. 2. 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. ), 4. In certain ARM transactions, the interval between loan closing and the initial adjustment is not known and may be different from the regular interval for adjustments. Disclosure of the changed terms does not trigger an additional waiting period, and the transaction may be consummated on June 5 without the consumer giving the creditor an additional modification or waiver. Revision of booklet. In cases where interest rate changes are at the creditor's discretion (see the commentary to 1026.19(b)(2)(ii)), the creditor must provide a history of the rates imposed for the preceding 15 years, beginning with the rates in 1977. If fees have (See the commentary to 1026.20(c) and (d) regarding notices of adjustments.) Whatever method is used, a creditor need not confirm that the consumer has read the disclosures. 1026.55 Limitations on increasing annual percentage rates, fees, and charges. Disclosure of the changed terms does not trigger an additional waiting period, and the transaction may be consummated on Friday, June 19 without the consumer giving the creditor an additional modification or waiver. The reasonably available standard requires that the creditor, acting in good faith, exercise due diligence in obtaining information. Thus, in transactions where interest rate adjustments are implemented more frequently than once per year, a creditor may assume that the interest rate and payment resulting from the index value chosen will stay in effect for the entire year for purposes of calculating the loan balance as of the end of the year and for reflecting other loan program terms. The creditor had received information three weeks before that, because of a changed circumstance under 1026.19(e)(3)(iv)(A), the pest inspection fees increased by an amount totaling five percent of the originally estimated settlement charges subject to 1026.19(e)(3)(ii). Assume the early disclosures are delivered to the consumer in person on Monday, June 1, and at that time the consumer executes a waiver of the seven-business-day waiting period (which would end on Tuesday, June 9) so that the loan can be consummated on Friday, June 5: i. B. Section 1026.19(e)(1)(vi)(A) permits creditors to impose reasonable requirements regarding the qualifications of the provider. The notice required by 1026.19(a)(4) must be grouped together with the disclosures required by 1026.19(a)(1)(i) or 1026.19(a)(2). In that case, or if the consumer withdraws the application within the three-business-day period, the creditor need not make the disclosures under this section. The creditor then provides the estimated disclosures required by 1026.19(e)(1)(i), which do not include an estimated charge for an appraisal. i. For example, a creditor could use values for the first business day in July or for the first week ending in July for each of the 15 years shown in the example. 8. A changed circumstance may also be information specific to the consumer or transaction that the creditor relied upon when providing the disclosures required under 1026.19(e)(1)(i) and that was inaccurate or changed after the disclosures were provided. Revisions. i. ii. 203K Inspection Fee (Lender Makes These Inspections) 203K Supplemental Document Fee. 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. Demand feature. For example, the creditor complies with the requirements of 1026.19(f)(1)(i) and the settlement agent complies with the requirements of 1026.19(f)(1)(v) if the settlement agent agrees to complete only the portion of the disclosures required by 1026.19(f)(1)(i) related to closing costs for taxes, title fees, and insurance premiums, and the creditor agrees to complete the remainder of the disclosures required by 1026.19(f)(1)(i), and either the settlement agent or the creditor provides the consumer with one single disclosure form containing all of the information required to be disclosed pursuant to 1026.19(f)(1)(i), in accordance with the other requirements in 1026.19(f), such as requirements related to timing and delivery. B. Actual term unknown. If a change occurs that does not render the annual percentage rate on the early disclosures inaccurate under 1026.22, the creditor must disclose the changed terms before consummation, consistent with 1026.17(f). 1. iii. Conditions for redisclosure. 15. 2. 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, is one example of a bona fide personal financial emergency. B. 1026.38 Content of disclosures for certain mortgage transactions (Closing Disclosure). For example, separate programs would not exist based on differences in the following loan features: 3. 1. 1. But the amended application is a new application subject to 1026.19(a)(1)(i). 4. See 12 CFR 1024.2. A creditor may also provide a separate disclosure required by 1026.19(e)(1)(i) for the permanent phase before receiving an application for permanent financing at any time not later than the seventh business day before consummation. 2. For transactions secured by a consumer's interest in a timeshare plan described in 11 U.S.C. If, in addition, unrelated terms such as the amount financed or prepayment penalty vary from those originally disclosed, the accurate terms must be disclosed. Receipt of disclosures three business days before consummation. E. The possibility of negative amortization. Under 1026.19(f)(2)(i), if the disclosures provided under 1026.19(f)(1)(i) become inaccurate before consummation, other than as provided under 1026.19(f)(2)(ii), the creditor shall provide corrected disclosures reflecting any changed terms to the consumer so that the consumer receives the corrected disclosures at or before consummation. The creditor should select one date or, when an average of single values is used as an index, one period and should base the example on index values measured as of that same date or period for each year shown in the history. Modification or waiver. Documentation requirement. Or, assume two co-applicants applied for a mortgage loan. Assume that a consumer agrees to lock an interest rate with a creditor in connection with the financing. For example, assume a creditor delivers the early disclosures to the consumer in person or places them in the mail on Monday, June 1, and the creditor then delivers corrected disclosures in person to the consumer on Wednesday, June 3. Requirements. PDF Rate Lock Policy When you lock the interest rate, you're protected from rate increases due to market conditions. Non-specific lender credits are generalized payments from the creditor to the consumer that do not pay for a particular fee on the disclosures provided pursuant to 1026.19(e)(1). If, at the end of July, the creditor recalculates the average cost from February 1 to July 31, and then uses the recalculated average cost for transactions starting August 1, the creditor complies with the requirements of 1026.19(f)(3)(ii), even if the creditor actually collected more from consumers than was paid to providers over time. For example, if a creditor or other person requires the consumer to provide a $500 check to pay for a processing fee before the consumer receives the disclosures required by 1026.19(e)(1)(i), the creditor or other person does not comply with 1026.19(e)(2)(i), even if the creditor or other person had stated that the check will not be cashed until after the disclosures required by 1026.19(e)(1)(i) are received by the consumer and waited until after the consumer subsequently indicated an intent to proceed to cash the check. The same timing concerns related to the four-business day limit apply when either the initial rate lock occurs or an extension of the rate lock period is sought (i.e., once the Closing Disclosure has been issued, the creditor can reset tolerances only if there are less than four business days between the time the revised version of the . If the creditor provides revised disclosures reflecting the new program and including the appraisal fee, then the actual appraisal fee will be compared to the appraisal fee included in the revised disclosures to determine if the actual fee has increased above the estimated fee. On Monday, June 8, the consumer reschedules consummation for Wednesday, June 17. For example, for the loan terms table required to be disclosed under 1026.38(b), the settlement agent would be considered to have exercised due diligence if it obtained such information from the creditor. ), 1. A different schedule of appraisal fees applies to residences located on farms. 1. For purposes of 1026.19(f)(3)(ii)(B), a period of time is appropriate if the sample size is sufficient to calculate average costs with reasonable precision, provided that the period of time is not less than 30 days and not more than six months. 4. iii. See 1026.37(f)(3) regarding the content and format for disclosure of services required by the creditor for which the consumer is permitted to shop. Frequency of adjustments. A changed circumstance may also be an unexpected event specific to the consumer or the transaction. You request a mortgage rate lock extension. Requirement. If interest rate changes will be imposed more frequently or at different intervals than payment changes, a creditor must disclose the frequency and timing of both types of changes. Applicability. The creditor must also disclose the rules relating to the conversion feature, such as the period during which the loan may be converted, that fees may be charged at conversion, and how the fixed rate will be determined. For example, a 3-month discount may be treated as being in effect for the entire first year of the example; a 15-month discount may be treated as being in effect for the first two years of the example. The only exception to the fee restriction allows the creditor or other person to impose a bona fide and reasonable fee for obtaining a consumer's credit history, such as for a credit report(s). Section 1026.19(f)(3)(ii)(B) requires a creditor to use an appropriate period of time, appropriate geographic area, and appropriate type of loan to define a particular class of transactions. 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. If the creditor delivers the disclosures required under 1026.19(f)(1)(i) in person, consummation may occur any time on the third business day following delivery. Pursuant to 1026.19(f)(2)(v), the creditor does not violate 1026.19(e)(1)(i) if the creditor refunds the excess to the consumer no later than 60 days after consummation, and the creditor does not violate 1026.19(f)(1)(i) if the creditor delivers disclosures corrected to reflect the refund of such excess no later than 60 days after consummation. 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. Based on the average cost to the creditor from the May to August period, the average charge to the consumer for the September to December period should be $125. 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. For good faith to be determined under 1026.19(e)(3)(ii) a creditor must permit a consumer to shop consistent with 1026.19(e)(1)(vi)(A). 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. 1. If a consumer provides the creditor with an application for a mortgage loan secured by a timeshare on Monday, June 1 and consummation of the timeshare transaction is scheduled for Tuesday, June 2, then the creditor complies with 1026.19(f)(1)(ii)(B) by ensuring that the consumer receives the disclosures required by 1026.19(f)(1)(i) no later than consummation on Tuesday, June 2.