Mortgage Loan Origination Activities
What you must know
Know the origination sequence and the disclosure clock that runs alongside it. An application exists once you have six pieces of information: consumer name, income, Social Security number, property address, estimated value, and loan amount. The Loan Estimate must be delivered or placed in the mail within three business days of application, and the borrower must receive it no later than four business days before consummation. The Closing Disclosure must be received at least three business days before consummation. For the Loan Estimate, a business day means a day the creditor's office is open and mail is delivered; for the Closing Disclosure, it means every day except Sundays and federal holidays.
Know the tolerance categories: zero tolerance for lender-selected services and fees paid to affiliates, 10% cumulative tolerance for services the borrower can shop for and for recording fees, and unlimited for items like prepaid interest, escrow deposits, and services the borrower shops for from a provider not on the written list. Changed circumstances justify a revised Loan Estimate, but a revised estimate may never be delivered on or after the Closing Disclosure.
Traps
- "Received" versus "delivered" - revised disclosures shift to a receipt standard.
- A revised Loan Estimate delivered the same day as the Closing Disclosure is not permitted; timing resets and the closing may be delayed.
- Rate locks longer than ten business days require a revised estimate reflecting the lock.
Rule of thumb
Work backwards from the closing date: CD three days before, final revised LE four days before, and never the same day.
Worked example
A borrower shops for and selects her own title company not on the written list. That fee sits in the unlimited bucket, while a lender-chosen appraisal fee is zero tolerance.