![]() The benefit is just avoiding a $1.00 refund – is it worth it to you?īut theory aside – the regulatory requirement is that a revised LE is necessary to avoid a cure tolerance refund only when costs previously disclosed increase above any applicable tolerance. But, assuming there is a valid changed circumstance, you can increase your estimate by $1.00. If a 0% tolerance fee disclosed on the initial LE goes up by $1.00, there is nothing that says you MUST redisclose. I think that’s helpful to understand theoretically. If you’re willing to issue refunds – you can avoid revised LEs altogether. So the next step towards using the LE more effectively is to clearly understand when a revised LE is not necessary. Let’s do that now.įirst of all, strictly speaking a revised LE is never required. That means, every time we revise an LE we’re taking a risk about making another mistake. Increased risk – every time a Loan Estimate is issued, no matter the reason, the lender has the obligation to use all reasonably available information as of that moment in time to provide a good faith estimate of costs and fees. Inefficiency – you might be surprised how much time would be saved, when you apply a several minutes, several times, across thousands of loans (and this is especially true if disclosing is being done in a very thorough, proficient manner) ![]() The downsides of issuing revised LEs too often include: CD is issued in plenty of time before closing. ![]() Why not? Because we have a Closing Disclosure! Unlike under the GFE regime, now we have a disclosure that’s primary purpose is to provide a more accurate disclosure in advance of closing and that is prepared (normally) by the lender. There is no need for us to issue an LE in many cases because the borrower is going to get a CD (from us) in plenty of time to avoid surprises at closing. And even then the GFE was often over-used (But, of course, carrying only RESPA, not TILA, penalties, the industry felt more comfortable with a quick trigger for redisclosure on the GFE than it should with the current LE).īut the Loan Estimate is not designed to update the consumer with every change in loan term at every stage in the process. After all, the GFE may be the only document the borrower sees that really helps explain the loan’s terms until they get to closing table. Indeed, the GFE (and related regulations) were such that the GFE served as the primary method of updating the borrower with any and all changes to the loan terms, and at almost any stage in the process. Previously, we had the “magic GFE”, which could be updated all the way up until the closing itself. I believe that, while there are certainly cases where it makes sense to issue a revised LE for customer-service purposes only, that in many cases lenders would ben efit from issuing revised LEs less often (increase in efficiency and decrease in risk of mistakes). ![]() I believe this is, in part, because the industry sti ll considers the LE a replacement for the GFE. I believe some lenders are issuing revised Loan Estimates too frequently, certainly more often than required by regulation. Seems like a good time to revisit this, as lenders continue to get more comfortable with TRID requirements and start to shred over-conservative policies and cut out instances of “over-compliance.” Article By: Ben Giumarra, Spillane Consulting Associates, Inc.
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