The new Loan Estimate replaces the early TILA disclosure and the Good Faith Estimate. The Creditor must provide the Loan Estimate to the Borrower within three days of application. An application is considered received when the consumer provides the following information:
- Social Security number to obtain a credit report
- Address of the subject property
- Estimate of the value of the property
- Mortgage loan amount sought
Unlike the Good Faith Estimate, the Creditor is not allowed to revise and re-disclose if charges go up or down prior to the closing. The Creditor can only reissue a Loan Estimate based on six events which qualify as changed circumstances. Creditor errors are not legitimate reasons for revising Loan Estimates. The CFPB commented, “If a creditor is allowed to reset the estimate used for good faith analysis every time there is a changed circumstance, it weakens the tolerance rules.”
The Loan Estimate must be delivered to the Borrower with an attached provider list for those services the Borrower is permitted to shop for. the provider list reflects the required services to be performed, the approximate cost for the service, the suggested company to provide that service, and the company’s contact information. If the Consumer selects the provider named on the list, the fee for that service cannot increase at closing.
Lenders are responsible for ensuring the figures stated in the Loan Estimate are made in good faith and consistent with the best information reasonably available at the time the Loan Estimate is issued to the Borrower. The settlement service providers identified on the list must match up with the services the borrower can shop for as disclosed on the Loan Estimate. The lender may also identify on the written list of providers those services for which the Borrower is not permitted to shop, as long as they are clearly distinguished from those services for which the Borrower can shop for.
What Determines Good Faith
Whether or not a Loan Estimate was made in good faith is determined by calculating the difference between the estimated charges originally provided in the Loan Estimate and the actual charges paid by or imposed on the Consumer in the Closing Disclosure. The charges on both forms must be alphabetized in each section by the charge description. Title and Escrow charges must all be grouped together by the preceding word “Title”, with the exception of the owners policy which is categorized as “other” on both forms and set apart from the balance of the title and escrow charges.