1026.37, Content of the loan estimate. Assume consummation is scheduled for Thursday, the consumer received the disclosures required under 1026.19(f)(1)(i) on Monday, and a walk-through inspection occurs on Wednesday morning. Amount of discount or premium. The broker is responsible for only a small percentage of the applications received by that creditor. For example, assuming that there are no intervening legal public holidays, a creditor that receives the consumer's written application on Monday and mails the early mortgage loan disclosure on Tuesday may impose a fee on the consumer after midnight on Friday. If fees have The statement that the periodic payment may increase or decrease substantially may be satisfied by the disclosure in paragraph 19(b)(2)(vi) if it states for example, your monthly payment can increase or decrease substantially based on annual changes in the interest rate., 1. This section requires a creditor to provide an historical example, based on a $10,000 loan amount originating in 1977, showing how interest rate changes implemented according to the terms of the loan program would have affected payments and the loan balance at the end of each year during a 15-year period. Estimates. ii. 1. 2. On Thursday, June 11, the annual percentage rate will be 7.15 percent and corrected disclosures were not received by the consumer on or before Monday, June 8 because the annual percentage rate is inaccurate pursuant to 1026.22. For example, in a five-year loan, a creditor would show the payments and loan balance for the five-year term, from 1977 to 1981, with a zero loan balance reflected for 1981. The creditor must deliver or place in the mail the disclosures required by 1026.19(e)(1)(i) for both the construction and permanent financing, disclosed as either one transaction or separate transactions, no later than Thursday, June 4, the third business day after the creditor received the consumer's application, and not later than the seventh business day before consummation of the transaction. The creditor must make corrected disclosures such that the consumer receives them on or before Monday, June 8. 2. 4. If an actual term is unknown, the creditor may utilize estimates using the best information reasonably available in making disclosures even though the creditor knows that more precise information will be available at or before consummation. Similarly, the amount disclosed for property taxes must be based on the best information reasonably available to the creditor at the time the disclosure was provided. If, however, the creditor estimates consistent with the best information reasonably available that the loan will close on the 30th of the month and bases the estimate of prepaid interest accordingly, but the loan actually closed on the 1st of the next month instead, the creditor complies with 1026.19(e)(3)(iii). In certain transactions, a creditor may use the alternative rule for disclosure of the frequency of rate and payment adjustments described in comment 19(b)(2)(vi)-1. F. The possibility of interest rate carryover. ORIGINATION FEE - FLAT Y A Zero Tolerance A one-time flat fee payable at loan closing to a mortgage broker or the creditor as compensation for the originating and/or processing of the loan. For example, if the creditor emails the disclosures at 1 p.m. on Tuesday, the consumer emails the creditor with an acknowledgement of receipt of the disclosures at 5 p.m. on the same day, the creditor could demonstrate that the disclosures were received on the same day. Charges subject to the ten percent tolerance category. Assume a creditor elects to use an average charge for appraisal fees. Graduated-payment mortgages and step-rate transactions without a variable-rate feature are not considered variable-rate transactions. In illustrating the effect of the discount or premium, creditors should adjust the value of the interest rate in the historical example, and should not adjust the margin or index values. Section 1026.19(f)(4)(i) requires the settlement agent to provide the seller with the disclosures required under 1026.38 that relate to the seller's transaction reflecting the actual terms of the seller's transaction. For purposes of the disclosures required under 1026.18, the creditor may nevertheless treat the two phases either as separate transactions or as a single combined transaction in accordance with 1026.17(c)(6). The settlement agent normally may rely on the representations of other parties in obtaining information, but if information about actual terms is not reasonably available, the settlement agent also must satisfy the best information reasonably available standard. If a consumer who has received program disclosures subsequently expresses an interest in other available variable-rate programs subject to 1026.19(b)(2), or the creditor and consumer decide on a program for which the consumer has not received disclosures, the creditor must provide appropriate disclosures as soon as reasonably possible. Federally related mortgage loan is defined under RESPA (12 U.S.C. See comment 2(a)(6)-2. The creditor normally may rely on the representations of other parties in obtaining information. To ensure timely and accurate compliance with the requirements of 1026.19(f)(1)(v), the creditor and settlement agent need to communicate effectively. ii. Actual costs will vary depending on the length of the extension. In certain transactions, creditors may use the alternative rule described in comment 19(b)(2)(vi)-1 for disclosure of the frequency of rate and payment adjustments. The creditor is required to provide corrected disclosures containing the actual terms of the transaction at or before consummation under 1026.19(f)(2), subject to the exceptions provided for in that paragraph. For example, assume that the consumer decides to grant a power of attorney authorizing a family member to consummate the transaction on the consumer's behalf after the disclosures required under 1026.19(e)(1)(i) are provided. See 12 CFR 1024.2(b). However, a type of loan would be appropriately defined if both products had a relatively normal distribution of recording fees, even if the distribution for each product ranges from below $80 to above $130. Assume a creditor receives a consumer's application for construction financing only on Monday, June 1. Disclosures provided by a settlement agent in accordance with 1026.19(f)(1)(v) satisfy the creditor's obligation under 1026.19(f)(1)(i). 5. Requirements. (This factor is applicable only if the creditor has such information.) Assume consummation is scheduled for Thursday, June 11 and the disclosure for a regular mortgage transaction received by the consumer on Monday, June 8 under 1026.19(f)(1)(i) discloses an annual percentage rate of 7.00 percent: A. As a result of consumer and seller negotiations, the total amount due from the buyer increases by $500. 1026.43 Minimum standards for transactions secured by a dwelling. The three-business-day period provided in 1026.19(e)(1)(iv) applies to methods of electronic delivery, such as email. Receipt of disclosures three business days before consummation. Although the rules relating to the conversion option must be disclosed, the effect of exercising the option should not be reflected elsewhere in the disclosures, such as in the historical example or in the calculation of the initial and maximum interest rate and payments. Typically, this initial rate charged to consumers is lower than the rate would be if it were calculated using the index or formula. 1. See comment 17(c)(2)(i)-2 for labeling disclosures required under 1026.19(e) that are estimates. C. The amount of work (such as document preparation) the creditor expects to be done by the broker on an application based on the creditor's prior dealings with the broker and on the creditor's requirements for accepting applications, taking into consideration the customary practice of brokers in a particular area. Requirements. The creditor does not satisfy the requirements of 1026.19(f) if it provides duplicative disclosures. iii. 1026.54 Limitations on the imposition of finance charges. (See comments 19(b)(2)(viii)(A)-6 and 19(b)(2)(viii)(B)-3 for an explanation of the additional requirements for a creditor using this alternative rule for disclosure of periodic and overall rate limitations.). However, while the creditor spent $700 more than it collected during the May to August period, it collected $1,300 more than it spent from January to August. If the creditor instead mailed paper disclosures to the consumer, this requirement would not be met. In such cases, the creditor must base the calculations of the initial and maximum rates and payments upon the earliest possible first adjustment disclosed under 1026.19(b)(2)(vi). The general definition of business day in 1026.2(a)(6) - a day on which the creditor's offices are open to the public for substantially all of its business functions - is used for purposes of 1026.19(a)(1)(i). 203K Supplemental Origination Fee. The creditor receives the appraisal report, which indicates that the value of the home is significantly lower than expected. For example, if revised disclosures are provided because of a changed circumstance under 1026.19(e)(3)(iv)(A) affecting settlement costs, the creditor must be able to show compliance with 1026.19(e) by documenting the original estimate of the cost at issue, explaining the reason for revision and how it affected settlement costs, showing that the corrected disclosure increased the estimate only to the extent that the reason for revision actually increased the cost, and showing that the timing requirements of 1026.19(e)(4) were satisfied. Best information reasonably available. ii. To comply with this requirement, the creditor must arrange for delivery accordingly. See 1026.19(f)(2)(ii) and associated commentary regarding changes before consummation requiring a new waiting period. (See 1026.30 for the rule requiring that a maximum interest rate be included in certain variable-rate transactions.) This provision requires an explanation of how the creditor will determine the consumer's interest rate and payment. Frequency of adjustments. In such an event, the availability of the booklet or alternate materials for these transactions will be set forth in a notice in the Federal Register. The creditor must deliver or place in the mail the disclosures required by 1026.19(e)(1)(i) for the construction financing no later than Thursday, June 4, the third business day after the creditor received the consumer's application for the construction financing only, and not later than the seventh business day before consummation of the construction transaction.