Revised Loan Estimate Expiration Date

Adam explains how the rule changes for completing the expiration date for a revised Loan Estimate could quite possibly be the biggest change to TRID 2.0. This is definitely something every creditor needs to review and ensure they understand the new rules so that they don't end up with violations during their next audit report.

An in-depth article on this topic can be found here. 

The following is a transcript of this free TRID training Compliance Clip (video):

This Complaints Clip is going to focus on the expiration date for a revised Loan Estimate. This is a TRID 2.0 topic.

The question is, how is the expiration date of fees disclosed on the revised Loan Estimate when an applicant already gave their intent to proceed?

The answer to this is a bit tricky.  

In order to answer this, we really need to look at the history of the expiration date for fees in regards to the rules. TRID 1.0 really was not clear. In fact, it was silent in regards to guidance on this topic. Of course, our question is relating to the expiration date of fees which is the spot on the loan estimate that tells a customer when their quoted fees will expire.  

Of course we always had this date on their first Loan Estimate, but what date do we use on a revised loan estimate?

As I said, TRID 1.0 was not clear. So, what a lot of us in the compliance industry did was to fall back to previous Guidance which from HUD in relationship to the Good Faith Estimate (GFE) which is the form prior to the Loan Estimate. HUD said that when you have a revised good faith estimate, the date you list for the expiration date of fees, you actually default back to the date on the original Good Faith Estimate - meaning that you had to list the same expiration date on the revised GFE that was listed on the original GFE.

This was confusing for bankers, auditors, and for consumers because often times the date disclosed was a day that was in the past.

Here is an example of how the rule worked. You issued a good faith estimate on January 1st in the expiration of fees was good through the January 15th let's say the receipt was received on January 10th, and then on February 1st when a bank was issuing a revised Loan Estimate, the date listed on that LE would have to be January 15, which is a date in the past. This is very confusing and did not make sense.

The good news is that TRID 2.0 gave us guidance on what date to provide on a revised Loan Estimate when the intent to proceed has already been received. It really has to be received before the date/fees have expired. What the new guidance has done is to create a new comment in the commentary which says to leave the expiration date blank.

Technically speaking, the commentary is new comment #4 to 1026.37(a)(13) of Regulation Z. What this comment now says is that once the consumer indicates in intent to proceed by the time specified by the creditor - which is the 10 business days or a longer period if the Creditor chooses a longer period - the date and time at which the estimated closing cost expire are left blank on any subsequent revised disclosures.

The preamble tells us the CFPB's reasoning on this. They say that once a consumer has expressed an intention to proceed, the expiration date is a moot point for the purposes of a Loan Estimate because the amounts disclosed provide the applicable baseline for the good faith tolerance requirements. This means that this date has nothing to do with being able to reset fees as the fees are locked in already - it is a moot point, so just be sure to leave it blank.

I believe this is going to be a huge piece for TRID 2.0, at least initially, because auditors and examiners throughout the country have long been citing violations for not listing the date on the original Loan Estimate because they have been referring back to that HUD guidance I mentioned previously. In my opinion this is a huge change from the perspective that you must get this right from the time it is required because your auditors and examiners will find this as “low-hanging fruit” that they can easily site violations for. You need to make sure this is in place by the implementation date, which, of course, is October 1st of 2018.

Now, if you are an auditor examiner, this is a little tip for you to look at during your next TRID review.  (Sorry everyone else!) That this will have a big impact, at least initially even though it is low-risk. It is low-hanging fruit that could show up on audit reports for audits where loan estimates go out after October 1st of 2018.