Loan Disclosures and Tolerance Limits

Loan Disclosures and Redisclosures

• Loan Estimates (LEs) and initial disclosures must be issued within 3 business days of application.
• Changes in loan circumstances may necessitate revised LEs. A legitimate reason for change is one the lender did not know or could not have known during the initial disclosure.
• Examples of changing circumstances include appraisal value, borrower's income source, loan type, down payment, or requested rate lock after the initial LE.
• Revised LEs must be issued within 3 days of the lender learning of the need for adjustment.
• Tolerance limits determine when a redisclosure is required due to cost variances.

Tolerance Limits

• "Zero Tolerance" category: Lender/affiliate charges or transfer taxes; only change if circumstances impacting the charge/tax change.
• Ten Percent Tolerance: Aggregate total of third-party charges; if exceeding 10%, a change of circumstances is required for a new disclosure, resetting the tolerance limit.
• Permitted differences: TRID allows certain differences between disclosed and charged amounts (e.g., prepaid interest, insurance). These are often classified as "no tolerance" items.

Timelines and Procedures

• Revised LEs must be issued at least 4 days before loan closing.
• Revised and initial disclosures cannot happen on the same day.
• Revised LE may not be issued after a Closing Disclosure (CD) has been issued.
• If tolerance limits are exceeded without valid circumstances, a lender credit is provided as a 'cure'. If detected after closing the refund must be issued within 60 days.
• APR accuracy: Quoted APR cannot be more than 1/8 of a percentage point above or below the APR (0.25% for ARMs).
• Method of delivery: Revised disclosure can be delivered by the same method as the original LE.
• Additional disclosures possible: Post-application disclosures (prior to closing and/or underwriting) may be necessary, including commitment letters (detailed loan approval terms) and notices of action taken (for complete applications).

Application Processing and Outcomes

• Loan approval timeframes: Lenders must act within 30 days of receiving a complete application.
• Loan approvals normally occur after underwriting; timing is determined by lender policies or state laws.
• Counteroffers: Written notifications that a lender can offer a loan with different terms, if initial application terms are not accepted.
• Adverse action (denials): A lender provides written notification of rejection to the applicant. Reasons can be provided from the underwriter.
• Incomplete applications: Lenders can request missing information; a reasonable time period must be given and if the application is not completed further consideration may be considered or adverse action may take place if the applicant does not respond appropriately.