TRID Timing and Tolerance on a Condo Purchase
Priya, an MLO at Cedar Point Mortgage (a nonbank lender), takes a purchase application on Monday, March 3, for a $420,000 home with 20% down. The initial Loan Estimate lists a $1,150 origination fee, $500 appraisal, $90 credit report, and $1,700 title insurance from an affiliated title agency. On Wednesday the borrower locks. On Thursday the lender learns the condo association requires a $275 certification fee and the appraiser reports the value at $405,000, so the borrower reduces the loan to $324,000 and adds a $95/month PMI premium. A revised Loan Estimate is prepared the following Tuesday and emailed; the closing disclosure is delivered two business days before the scheduled Friday closing. No fees are cured at closing. The processor asks Priya whether the file can close as scheduled.
1. Identify the disclosure-timing and tolerance issues in this file and explain what should have happened.
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The Thursday information is a valid changed circumstance: the HOA certification fee and the lower appraisal value changed the loan terms. A revised Loan Estimate generally must be delivered or placed in the mail within three business days of receiving the information. Thursday to Tuesday is three business days (Friday, Monday, Tuesday), so the timing can be acceptable. But email delivery is only valid if the borrower consented to electronic delivery; otherwise the revised LE was not properly delivered. More serious, the closing disclosure was delivered only two business days before consummation. Under TRID, the borrower must receive the CD no later than three business days before consummation, so Friday closing cannot proceed unless the CD is re-delivered and the waiting period is satisfied. The processor should also compare actual fees to the LE before closing, because the file shows no cure even though zero-tolerance fees may have increased.
2. Assume the affiliated title company's actual fee rises from $1,700 to $1,785 and the appraisal rises from $500 to $560, with no valid changed circumstance for either increase. What cure is required, and by when?
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Both the appraisal fee and the title insurance from an affiliated title agency fall in the zero-tolerance category. A zero-tolerance fee may not increase unless a valid changed circumstance supports a revised disclosure. Here there is no valid changed circumstance for those increases, so the lender must cure the full amount of each overage: $85 on title insurance and $60 on the appraisal, for $145 total. The cure must be refunded to the borrower and reflected on a corrected Closing Disclosure, generally within 60 days after consummation. The lender should not net the overage against an unrelated fee decrease unless the fees are in the same tolerance bucket and the rules permit aggregation. Priya should escalate this to compliance before the file closes.
3. What should Priya tell the processor about closing on Friday, and what alternatives exist?
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Priya should say the file cannot close Friday on the current CD. The CD must be received by the borrower at least three business days before consummation; delivery two business days before is a violation. The practical options are to delay closing until the waiting period is satisfied or to re-deliver a corrected CD and wait the full three business days. Priya should also verify electronic-delivery consent for the revised LE and correct any fee cure before closing. If the seller will not extend, the parties can amend the contract, but the lender cannot waive the CD waiting period. The processor should document the changed-circumstance analysis and recalculate all tolerance buckets, because the PMI addition, loan-amount change, and HOA fee may affect disclosures.