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As you know by now, under the new TRID rules there is no longer an allowable tolerance for the fees disclosed for the lender required services for which a consumer cannot shop. This means the lender is bound by what is disclosed for these costs on their initial Loan Estimate unless there is a bona fide change. Lenders are expected to know these fees. So what’s a “bona fide change”?
For all intents and purposes, this is a change which would result in a fee increase caused by an event or activity over which the lender has no direct control and/or about which they had no knowledge when they took the application and disclosed the fee. Okay, so what does that mean? Let’s look at a couple of examples…
The lender takes a loan application to finance a 2-story, 4-bedroom, single family detached suburban home. The lender discloses an appraisal fee of $450. The borrower wants a quick close so the lender orders a rush appraisal. In return, the appraiser charges a $50 “rush” fee (okay, probably wouldn’t happen but this is an example so go with me here). In this case, the lender could not pass along the rush fee as the lender should have known when the consumer had to close and that, under such circumstances, their appraisers charge this fee. It should have been disclosed upfront. Eat the fee.
However, same circumstances, but instead of a “rush” fee the appraiser comes back and advises of needed repairs which will necessitate a final completion inspection. The lender can issue a revised Loan Estimate to disclose the new required inspection fee because the lender would not have known the property required these repairs. If they had, then they could not charge for the final inspection.
This raises one more question. When is the revised disclosure required? If a lender chooses to send a revised Loan Estimate, it must be issued within 3 general business days (normally, not including Saturdays) from becoming aware of the change. So, in this case, when did the lender become aware of the need for the repair inspection; the date they received the appraisal report or the date it was reviewed by their underwriter? If I were a betting man, I’d bet CFPB will say it is the date the lender received the report. Now, that’s just my opinion, so you can decide for yourself. But, it might be a good idea to have someone reviewing the appraisal reports as they come in to identify the need for any such changes. You decide…
It depends on what the lender knew at application and initial disclosure and then what changes thereafter, and when the lender found out about the change. BTW, you can only change a fee directly related to what changed. In the example, the lender could not have changed the credit report fee or any other unrelated fees. You cannot change a fee because of a mistake made when disclosing the initial fees, only in the event of a legitimate change in circumstances.
This may seem simple, but you would be surprised what we find in the world or pre and post-close audits. In some cases, fees get changed at the last minute only so they will match up to what gets charged at the closing.
Now, the lender should be monitoring all changes to ensure their last initial Loan Estimate is accurate, any changes thereafter are legitimate and their last Loan Estimate matches their initial Closing Disclosure. Any changes thereafter must be the result of a circumstance over which the lender has no control and was not aware of previously.
Oh yeah, pay attention to any changes made after the Closing Disclosure gets issued to determine if they require a new 3 business day waiting period. That should be fun when trying to explain the need to delay the closing.
TRID lightly my friend!
If a rate lock has to be extended after the Closing Disclosure(CD)is issued can the bank issue a revised CD to disclose the fees that have to charged to the borrower?
Chris, This is the million dollar question. If the rate needs to be extended through no fault of the lender then a new CD may be issued to collect the rate extension fee, as long as there is less than 3 business days prior to consummation from the date the creditor learns of the need for the rate extension and related fee. The law indicates a revised CD may be issued to cover a change when there is not the time that would allow for the issuance of a revised LE. Normally a revised LE must be issued within 3 business days of the creditor’s learning of a change. So technically if the loan consummation gets extended for more than 3 days from when the creditor learns of the need for new fee the creditor would have sufficient time to issue a revised LE for the fee change. However the law does not allow a creditor to issue an LE after the issuance of the CD. So the question remains how does a creditor disclose and collect a rate extension fee when consummation gets extended to a time that would be more than 3 days from the creditor learning of the fee change once they have issued their Closing Disclosure? At present I do not have that answer. Sorry, this is something the CFPB must clarify…