Mortgage Loan Application Disclosures

Application Disclosures

• Application triggers disclosure requirements
• Disclosures may be issued by the MLO, processor, or other personnel, depending on the lender
• Loan Estimate disclosure triggered by RESPA and lender receiving six pieces of information
• Six pieces: borrower's name, gross monthly income, Social Security number, property address, property value estimate, and mortgage loan amount
• Disclosures required at application or within 3 business days
• Business days exclude Sundays and public holidays; Saturdays may or may not be included based on lender schedule
• Loan Estimate (LE) details in Chapter 1 TRID section
• Interest rates quoted on LE, based on MLO options from lender(s)
• Loan choices include terms (30-year, 15-year), interest rates, discount points/lender credits, and programs (ARM, fixed, FHA, Conventional)
• Par Rate: interest rate without discount points or lender credits
• Discount points/buydown points: borrower paid to reduce interest rate
• Lender credit/premium: lender credited to borrower for accepting over-par interest rate
• Temporary buydowns: lower payments in first few years, then final note rate applies
• Rate lock (lock-in): interest rate unchangeable between initial offer and closing, dependent on closing time frame and application terms
• Floating rate: interest rate can change until locked or closing date determined
• Lock-in term: number of days between lock date and closing date
• LE expires if borrower doesn't proceed within 10 business days; lender can offer revised terms
• Monthly payments calculated by software based on interest rate and loan amount
• LE must be delivered/mailed at least 7 business days before consummation (doesn't apply to reverse mortgages)
• LE not needed if borrower withdraws application or adverse action taken before 3-day RESPA window

Loan Costs

• Mortgage insurance/guarantee costs
• Private Mortgage Insurance (PMI) costs depend on LTV, credit score, term, program
• PMI premium quoted when commitment issued; estimated at application if cost unknown
• PMI premiums typically initial and renewal premiums
• Lender Paid Mortgage Insurance (LPMI) or upfront borrower-paid PMI: percentage of loan amount (like discount points)
• FHA upfront and monthly MIP: consistent based on term and down payment, may vary with loan changes
• VA Funding Fees, USDA Guarantee Fee (vary for veterans' service status/program use), should be known upfront; may adjust with new information
• Credit report cost, tax service fee, flood certification
• Title insurance costs: one-time expense at closing based on loan amount
• Lender flat fees: underwriting, processing, administration fee, loan origination fee (percentage or flat), discount points, lender credit, temporary buydown cost
• Discount points and lender credit in points (1% = 1 point); basis points (1/100th of a point)
• Lender credit may be flat amount
• Buydown period determines temporary buydown cost
• Examples used in study guide

Escrow Deposits

• Escrow account for taxes, insurance, mortgage insurance payment, if relevant
• Funding for escrow account collected at closing
• Property and insurance costs: collected for two months in advance

Per Diem Interest

• Mortgage interest paid in arrears
• Lender collects interest from funding date to end of closing month
• Calculation steps provided for determining per diem interest

Additional Disclosures

• Mortgage Loan Servicing disclosure, optional for reverse mortgages
• Consumer Handbook on Adjustable Rate Mortgages (CHARM) for ARM
• CFPB Home Loan Toolkit for purchase transactions
• List of settlement service providers
• Applicant's right to appraisal review
• Affiliated business arrangement disclosure required if lender has ownership interest
• Homeownership counseling disclosure with available local counseling services

Disclosure Methods

• Electronic if agreed upon
• In-person
• Standard mail (must meet RESPA, TILA deadlines)
• Overnight delivery