Loan Disclosure Procedures Quiz

Loan Disclosure and Redisclosure Procedures

• Loan Estimates (LEs) and initial disclosures must be issued within three business days of application.
• Changes in loan application circumstances may necessitate revised LEs.
• A revised LE must be issued within three days of the lender learning of the need for an adjustment.
• A legitimate change of circumstance is one the lender didn't know or couldn't have known at the time of the initial disclosure.
• Changes might include appraisal values differing from sales prices, inability to include irregular income, choosing an alternative loan type, or altering down payment amounts.

Tolerance Limits and Redisclosure

• Tolerance limits determine the need for LE redisclosure due to cost variances from the original disclosure.
• "Zero Tolerance" category: lender/affiliate charges or transfer taxes change only with a valid change of circumstances.
• 10% Tolerance: refers to an aggregate total change; exceeding 10% requires a change of circumstance and new disclosure. Usually covers bona fide third-party charges.
• Some differences between disclosed and charged amounts are permitted (e.g., prepaid interest, insurance, settlement services from third-party providers not on the lender’s list).

Revised Loan Estimate (LE) Requirements

• A revised LE must be issued at least 4 days prior to loan consummation.
• A revised LE and initial Closing Disclosure (CD) cannot be issued on the same day.
• If the tolerance limit is exceeded without a valid change of circumstance, lenders provide a lender credit at closing (or refund within 60 days after closing if the violation is detected later).
• The method for delivering a revised LE is the same as that used for the original LE.

Other Post-Application Disclosures

• Commitment letters detail loan approval terms (required in some states).
• Notice of Action Taken: lenders must act within 30 days of a complete application.
• Loan approval is delivered after underwriting, governed by lender policy or state law.
• Counteroffers: the lender offers different terms from the original application.
• Denials (adverse action): normally at the direction of an underwriter.

Handling Incomplete Applications

• Incomplete files may result in adverse action or written notice of missing items.
• Applicants get a reasonable time to provide missing information.
• Failure to respond may result in adverse action.