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Under TRID, lenders need to make sure they disclose their fees within 3 days of receipt of the loan application. For the lender’s fees and charges and those for which the borrower cannot shop there is a zero tolerance at the closing table.
That means that the fees disclosed on the new Loan Estimate must be the same fee charged for the service on the final Closing Disclosure at closing. No more 10% tolerance for slight variations.
This presents a few challenges. First, the lender must make sure the Loan Estimate is issued on time; within 3 general business days of “receipt of the application”. Lenders need to know when their originators have an application so the Loan Estimate can be issued on time. If it isn’t, the lender may not charge any fees at the closing. Bummer!
Second, the fees disclosed must be accurate and reasonable for the services provided. Changes may only be made to these fees once disclosed in the event of a bona fide (legitimate) change in circumstances which directly affects the fee. How will this be monitored and accomplished?
CFPB doesn’t oversee title agents or appraisers. So, they have placed the responsibility on the lender when it comes to their charges. The lender must disclose fees associated with these services within 3 days of application.
The Lender needs to know what the fee will be for the service when they issue the Loan Estimate at application. To do so, they may need to negotiate a fee schedule with providers for certain services in the various areas in which they lend. This negotiation will tend to become competitive, reducing the fees for these services, which ultimately should benefit the consumer. You do the math…
Appraisers have some concerns that their fees may get squeezed in this process. They say that appraisal fees will vary based on the type and location of a property. Makes sense. The cost of an appraisal of a traditional townhouse in the inner cities would be less than that of a much larger single home in a more rural setting.
Will a one size fits all fee schedule work? Not according to the appraisers. If not already done so, lenders may need to establish a fee schedule with their appraisers to identify the varying appraisal costs associated with the type of property being financed, where it is located, the square footage of the property, and any special characteristics.
That means the loan originator may need to identify these property characteristics when taking the application, or the lender would need to have some way to do so within 3 days after receipt of the application, so the Loan Estimate can be issued on time, with an accurate fee.
Some appraisal providers have introduced calculators, which, based on some property characteristics, will produce the estimated cost of the appraisal. Sounds good but will lenders have and/or obtain the information or take the time to enter the data in the calculator to obtain the advance fee estimate before issuing the Loan Estimate? Regardless, the fee once disclosed is binding on the lender. No later adjustments for an error made when making the disclosure. The lender must live (or die) with what they disclose.
You can see that TRID places more than just the challenges of creating and issuing some new forms. The lender is now fully responsible for the entire lending process and for much of the fees and costs that go with that process.
Loan quality is now more important than ever. Lenders must have written policies and procedures, with trained employees and the systems and technology to create and issue the new disclosures accurately and on time. They also must accurately disclose and then monitor the fees associated with their loans throughout the process, while conducting the required pre and post-closing reviews.
Oh, and don’t forget the borrowers must receive their new required Closing Disclosure at least 3 full, specific business days prior to the loan’s consummation. That’s another story…
Loading ...The game has surely changed…
