The CFPB’s mortgage initiative is designed to help consumers understand their loan options, shop for the mortgage that’s best for them, and avoid costly surprises at the closing table.
Making the mortgage process easier
The Know Before You Owe mortgage disclosure rule replaces four disclosure forms with two new ones, the Loan Estimate and the Closing Disclosure. The new forms are easier to understand and easier to use. The rule also requires that you get three business days to review your Closing Disclosure and ask questions before you close on a mortgage.
What are the general requirements for the Loan Estimate disclosure?
For closed-end credit transactions secured by real property (other than reverse mortgages), the creditor is required to provide the consumer with good-faith estimates of credit costs and transaction terms on a new form called the Loan Estimate. This form integrates and replaces the existing RESPA GFE and the initial TIL for these transactions. The creditor is generally required to provide the Loan Estimate within three-business days of the receipt of the consumer’s loan application.
- Loan Estimate must contain a good faith estimate of credit costs and transaction terms. If any information necessary for an accurate disclosure is unknown, the creditor must make the disclosure based on the best information reasonably available at the time the disclosure is provided to the consumer, and use due diligence in obtaining the information.
- Delivery must satisfy the timing and method of delivery requirements. The creditor is responsible for delivering the Loan Estimate or placing it in the mail no later than the third business day after receiving the application.
What information goes on the Loan Estimate form?
The following is a brief, page-by-page overview of the Loan Estimate, generally describing the information creditors are required to disclose. For detailed instructions on the individual fields and calculations for the Loan Estimate.
What is considered a “business day” under the requirements for provision of the Loan Estimate?
For purposes of providing the Loan Estimate, a business day is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions.
When does the seven-business-day waiting period begin?
The seven-business-day waiting period begins when the creditor delivers the Loan Estimate or places it in the mail, not when the consumer receives or is considered to have received the Loan Estimate.
May a creditor revise a Loan Estimate after a Closing Disclosure already has been provided?
No. The creditor may not provide a revised Loan Estimate on or after the date the creditor provides the consumer with the Closing Disclosure. Creditors normally may provide a revised Loan Estimate, so long as they provide the consumer with the seven-business-day waiting period, but once the Closing Disclosure has been provided, the creditor may not redisclose the Loan Estimate. Because the Closing Disclosure must be provided to the consumer no later than three business days before consummation, this means the consumer must receive a revised Loan Estimate no later than four business days prior to consummation.
May a Buyer waive the seven-business-day waiting period?
The consumer may modify or waive the seven-business-day waiting period after receiving the Loan Estimate if the consumer determines that the mortgage loan is needed to meet a bona-fide personal financial emergency.
The consumer must have a bona fide personal financial emergency that necessitates consummating the credit transaction before the end of the waiting period. Whether a consumer has a bona fide personal financial emergency is determined by the facts surrounding the consumer’s individual situation.
- An example of a bona fide personal financial emergency is the imminent sale of the consumer’s home at foreclosure, where the foreclosure sale will proceed unless loan proceeds are made available to the consumer during the waiting period.
- To modify or waive the waiting period the consumer must give the creditor a dated written statement that describes the emergency, specifically modifies or waives the waiting period, and is signed by all consumers primarily liable on the legal obligation.