The Revised Loan Estimate That Came Too Late
On Monday, March 3, a mortgage broker receives a complete application for a refinance. The initial Loan Estimate is delivered to the borrower on Wednesday, March 5. On Thursday, March 6, the borrower locks the rate; the lock changes the disclosed interest rate and increases points by $900. The broker delivers a revised Loan Estimate on Monday, March 10. On Wednesday, March 12, the appraiser reports that the appraisal fee will be $450 higher than disclosed. The broker delivers a second revised Loan Estimate on Tuesday, March 18. Consummation is scheduled for Friday, March 21. No federal holidays fall in this period. The broker wants to rely on both revised estimates to avoid tolerance violations and to reset the waiting period.
1. Was the initial Loan Estimate timely, and can the March 10 revised estimate be used to reset the tolerance for the rate-lock points? Explain the counting and the effect.
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The initial Loan Estimate was timely. For the three-business-day delivery rule, the count runs from the day after application and includes Saturday. Application on Monday, March 3, gives Tuesday, Wednesday, and Thursday as the delivery/mailing window, so delivery on Wednesday, March 5, is within the rule.
The March 10 revised estimate can reset the tolerance for the rate-lock points. A rate lock is a valid changed circumstance because it changes the disclosed rate and points. The broker received the lock information on Thursday, March 6, and delivered the revised estimate on Monday, March 10, within three business days (Friday, Saturday, Monday). It was also delivered before consummation. The broker should retain the lock confirmation, the revised estimate, and proof of delivery. The $900 points increase tied to the lock may then be treated under the revised estimate rather than as a tolerance violation.
2. Can the March 18 revised estimate reset the tolerance for the $450 appraisal fee? What must the broker do before the March 21 closing?
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No. The broker received the appraisal information on Wednesday, March 12. The revised estimate was due within three business days, which would have been no later than Saturday, March 15, under the delivery rule. Delivering it on Tuesday, March 18, was too late to reset the tolerance for the appraisal fee.
The timing also fails the waiting-period rule. A revised estimate that resets tolerances must be received no later than four business days before consummation. For that waiting period, business days are all calendar days except Sundays and federal holidays. From Tuesday, March 18, to Friday, March 21, there are only Wednesday and Thursday as waiting days, not four. The broker cannot rely on the March 18 estimate to avoid a tolerance violation.
Before closing, the broker should determine whether the $450 increase causes a tolerance violation, recalculate the tolerance, and arrange a cure by lender credit or refund to the borrower if needed. The cure should be reflected on the Closing Disclosure, and the file should document the calculation. The broker should not backdate or create a later revised estimate to avoid the problem.
3. What documentation should the broker maintain for the changed circumstances, and what should the broker avoid doing?
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The broker should document each changed circumstance with a date-stamped record of when the information was received, the appraiser's report or lock confirmation, the reason the prior estimate was no longer accurate, a copy of each revised estimate, and proof of when each was delivered or placed in the mail. The file should show the specific fee or term that changed and the amount.
The broker should avoid backdating documents, creating a revised estimate after consummation, or treating a late estimate as effective. The broker should also avoid telling the borrower that a tolerance is automatically reset simply because a revised estimate was issued. If a violation exists, the broker should correct it through an appropriate cure and keep evidence of the credit to the borrower.