Integrated Mortgage Disclosures TILA) Policy Manual...

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Table of Contents

AMERICAN FINANCIAL NETWORK

AllRegs by Ellie Mae. 2015 Ellie Mae, Inc. ALL RIGHTS RESERVED. Without the prior written permission of Ellie Mae, Inc., no part of this work may be used, reproduced or transmitted in any form or by any means, by or to any party outside of AMERICAN FINANCIAL NETWORK.

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Table of Contents

Table of Contents ................................................................................................... 1

Chapter 1 Introduction ........................................................................................ 4

1.1 Goals and Objectives ................................................................................... 4

1.2 Required Review ......................................................................................... 4

1.3 Applicability ................................................................................................ 4

Chapter 2 Accountability and Monitoring .............................................................. 6

2.1 Internal Controls ......................................................................................... 6

Chapter 3 Staff and Training ................................................................................. 8

3.1 Ongoing Training ......................................................................................... 8

3.2 New Hire Training ....................................................................................... 9

Chapter 4 Integrated Mortgage Disclosures Under RESPA-TILA .............................. 10

4.1 Summary of the Rule ................................................................................. 10

4.2 A Word of Caution ..................................................................................... 11

4.3 Scope ........................................................................................................ 12

4.4 Effective Dates .......................................................................................... 13

4.4.1 October 3, 2015 Requirements ...................................................... 14

4.5 Definitions ................................................................................................ 14

4.6 TILA Violations .......................................................................................... 17

4.7 Preapplication Estimates of Terms or Costs................................................ 18

4.8 Fee Variance ............................................................................................. 18

4.9 Other Disclosures ...................................................................................... 19

4.9.1 Your Home Loan Toolkit ................................................................. 20

4.9.2 Adjustable Rate/Variable Rate Mortgages ...................................... 20

4.9.3 Appraisal Disclosure & Initial Servicing Transfer Disclosure ............. 20

4.10 Multiple Creditors, Consumers, Properties ............................................... 20

4.11 Annual Percentage Rate (APR) ................................................................. 21

4.12 Delivery of Disclosures ............................................................................. 21




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4.13 Consumer’s Intent to Proceed (§1026.19(e)(2)(i)(A)) ................................ 22

4.14 Disclosure of NMLSR ID# .......................................................................... 22

Chapter 5 The Loan Estimate (12 CFR §1026.37) ................................................... 23

5.1 Good Faith Requirement and Variance ....................................................... 24

5.1.1 Variance Limitations ...................................................................... 24

5.2 Revisions and Corrections to Loan Estimates.............................................. 25

5.2.1 Timing for Revisions to Loan Estimate ............................................ 26

5.3 Breakdown of the Loan Estimate ............................................................... 26

5.3.1 Page 1 of the Loan Estimate ........................................................... 26

5.3.2 of the Loan Estimate ........................................................... 27

5.3.3 Page 3 of the Loan Estimate ........................................................... 28

Chapter 6 Closing Disclosure (12 CFR §1026.38) .................................................... 30

6.1 Preparation of the Closing Disclosure ........................................................ 31

6.2 Preparation of the Closing Disclosure for a Seller ....................................... 31

6.3 Delivery of the Closing Disclosure .............................................................. 31

6.4 Breakdown of the Closing Disclosure ......................................................... 33

6.4.1 Page 1 of the Closing Disclosure ..................................................... 33





6.5 Revised Closing Disclosures ....................................................................... 36

Chapter 7 Disclosures Required Postconsummation .............................................. 38

7.1 Postconsummation Correction to the Closing Disclosure ............................ 38

7.2 Escrow Closing Notice (§1026.20(e)) .......................................................... 38

7.2.1 Timing Considerations ................................................................... 40

7.3 Partial Payment Policies (§1026.39(e)) ....................................................... 41

7.3.1 Notice Contents ............................................................................. 41

Chapter 8 Record Retention ............................................................................... 43




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8.1 Record Retention Requirements for Transfer or Sale of Loans .................... 43

8.2 Maintenance of Records ............................................................................ 43

Chapter 9 Appendix ........................................................................................... 44

9.1 Loan Estimate Sample* ............................................................................. 45

9.2 Model Form – Written List of Settlement Service Providers ........................ 48

9.3 Sample – Written List of Providers Consumers Can Shop ............................ 49

9.4 Sample - Written List of Providers Consumers Cannot Shop ....................... 50

9.5 Closing Disclosure Sample ......................................................................... 51

9.6 Closing Disclosure Sample for a Seller ........................................................ 57

9.7 Model Form – Escrow Cancellation Notice ................................................. 60

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Introduction

Goals and Objectives



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Chapter 1 Introduction

AFN is committed to the highest standards of federal consumer compliance and requires

all management, employees, and third-party vendors to follow these policies and adhere

to these standards.

1.1 Goals and Objectives

The standards set out in this policy represent minimum requirements based on applicable

legal and regulatory guidance and apply throughout AFN’s operations. These

requirements are intended to prevent AFN, our employees, and third-party vendors from

violating federal regulations related to mortgage banking and consumer compliance with

respect to initial, subsequent, and closing disclosures required under the RESPA-TILA

Integrated Mortgage Disclosures Rule in keeping with the Dodd-Frank Wall Street Reform

and Consumer Protection Act.

1.2 Required Review

AFN requires this policy be reviewed no less than annually:

Last date of review – 01/01/20XX

Next due for review – 01/01/20XX

The above required annual review shall include the compliance of this policy with current

law, regulation or directive, the procedural implementation of this policy within the then

current scope of AFN business lines and operations, internal or external audit results

received during the previous year, and then current industry trends or regulatory

guidance.

1.3 Applicability

The purpose of this policy is to implement consumer protection mechanisms as required

by the United States statutes and related federal regulations administered by the CFPB

and other prudential regulators.

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Introduction

Applicability



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Wherever state or local regulations overlap and are stricter than the requirements set

out in this policy, the more conservative approach shall be applied. If any applicable laws

are in conflict with this policy, AFN must consult with the appropriate legal counsel to

resolve the conflict and to set forth AFN’s policies and procedures for compliance.

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Accountability and Monitoring

Internal Controls



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Chapter 2 Accountability and Monitoring

AFN requires that its own organization, its employees, contractors, and its third-party

vendors comply with all requirements of this policy and all underlying policies or

regulations as they exist, or from time to time may be amended.

2.1 Internal Controls

AFN shall ensure that annual independent testing of AFN’s compliance includes

adherence with this policy and all underlying regulations. The required compliance

testing may be conducted by AFN personnel or by an outside party. At minimum, the

annual audit shall include a review to assess the following:

The effectiveness of all communications with borrowers

The effectiveness of staff training

The delivery of all required disclosures in a format and timing compliant with AFN’s

policies

Changes or amendments to AFN’s policies since last audit have been adequately

implemented

AFN’s policies have been properly applied to any new products or services offered

since last audit

All AFN’s third-party service providers have complied with their obligations

applicable to the product or service and AFN’s policies and appropriate

vendor/service provider monitoring procedures are in place

AFN’s policies are being applied equally and appropriately across all departments,

business units, divisions, or branches of AFN

All required records are being maintained in accordance with AFN’s policies

The proper functioning and implementation of AFN’s policies by any automated

tools, systems, or business unit procedures

A review of business protocols for information security, documentation destruction,

and incident preparedness

A review of management and board reports of trend analyses to ensure corrective

actions were implemented if needed

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Accountability and Monitoring

Internal Controls



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The strength, adequacy, or weakness of AFN’s policies to include the identification

of business units, delivery channels or offices for transaction testing:

o Test to confirm that actual practices are consistent with AFN’s policies.

o Test to determine the impact of any procedures identified as weak or deficient.

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Staff and Training

Ongoing Training



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Chapter 3 Staff and Training

AFN requires initial and ongoing training for all management and staff concerning this

policy, other related policies, and underlying laws and regulations.

Training may be conducted in a variety of settings utilizing any established education

modality. Regardless the method of training delivery, all training must include the

following:

Presentation of the subject material oriented for the adult learner

An assessment of the learner to validate command of the subject matter with a

minimum passing grade of 70%

A completion certificate documenting satisfactory completion of all of the above

AFN shall maintain adequate records of this training program to include the following:

A description of all training programs

Evidence of attendance and satisfactory completion for each employee subject to

this policy

Management response relative to additional training, reassignment or other

responses for those employees who may not have achieved a passing grade on the

assessment and/or were not issued a completion certificate

3.1 Ongoing Training

All AFN employees shall receive training to ensure current knowledge of this policy and

the underlying federal regulations, to a degree commensurate with their job function,

which may impact AFN and the current state of law, regulation, and industry best

practice.

At a minimum, annual training should address the following requirements as covered in

this policy:

AFN’s policies and any changes within the last year

The law and regulation underlying this and other policies including, but not limited

to, the following:

o RESPA-TILA Integrated Mortgage Disclosures

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Staff and Training

New Hire Training



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o CAN-SPAM Rules

o Equal Credit Opportunity Act (ECOA, Reg. B)

o Electronic Signatures in Global and National Commerce Act (E-SIGN)

o Fair Credit Reporting Act (FCRA, Reg. V)

o Fair Debt Collection Practices Act (FDCPA, Reg. F)

o Fair Housing Act (FHAct)

o Home Mortgage Disclosure Act (HMDA, Reg. C)

o Mortgage Acts and Practices - Advertising (Reg. N)

o Mortgage Assistance Relief Services (Reg. O)

o National Flood Insurance Program (NFIP)

o Privacy of Consumer Financial Information (GLB, Reg. P)

o Real Estate Settlement Procedures Act (RESPA, Reg. X)

o Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act,

Regs. G & H)

o Truth In Lending Act (TILA, Reg. Z)

o Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)

The implementation of AFN’s policies and the practical application thereof in the

context of the employee’s function or responsibility

Disciplinary consequences up to and including termination for noncompliance

3.2 New Hire Training

New hire employees shall receive the above training, as appropriate for the

responsibilities of the position, as soon as is practicable but in no event later than four

weeks of commencing employment with AFN, unless federal or state law dictates

otherwise.

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Integrated Mortgage Disclosures Under RESPA-TILA

Summary of the Rule



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Chapter 4 Integrated Mortgage Disclosures Under RESPA-TILA

4.1 Summary of the Rule

For more than 30 years, federal law has required lenders to provide two disclosure forms,

in addition to other disclosures, to consumers applying for a mortgage (an initial Truth In

Lending Statement and a Good Faith Estimate). The law also has generally required two

forms at or shortly before closing of the mortgage loan, depending on particular

circumstances, (a final Truth In Lending Statement and a HUD-1 Settlement Statement).

The Truth in Lending Statement is required under the Truth In Lending Act (TILA) which

was originally enforced by the Federal Reserve Board. The Good Faith Estimate and the

HUD-1 are required under the Real Estate Settlement Procedures Act (RESPA); formerly

the responsibility of the Department of Housing and Urban Development (HUD). The

Consumer Financial Protection Bureau (CFPB) now has rulemaking authority under both

Acts.

Over time, Congress became aware that these forms are confusing to many consumers,

which consumer testing confirmed. The information on these forms is overlapping and

the language is inconsistent. Lenders and settlement agents found the forms

burdensome to provide and to explain to consumers.

In keeping with the Dodd-Frank Act, the CFPB was formed, and the Bureau was given

regulatory responsibility for implementing regulations under TILA, RESPA, as well as 17

other consumer protection regulations. The Bureau was mandated to combine TILA and

RESPA disclosures, and to propose new rules by July 21, 2012. The CFPB met this

deadline after having gathered extensive industry and consumer input.

On November 20, 2013, the CFPB released the RESPA-TILA Integrated Mortgage

Disclosures Rule. This was part of a consumer and industry outreach campaign titled, the

“Know Before You Owe” project. The RESPA-TILA Integrated Mortgage Disclosures rule

consolidates six existing disclosures required under TILA and RESPA for most closed-end

transactions secured by real property into two forms. The intended purpose of the

combined/revised disclosures is to allow consumers to more easily shop for a mortgage

loan that makes sense to the consumer and also provides consumers additional

opportunity to better understand the terms of the mortgage loan being offered. The final


A Word of Caution



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rule, amended July 20, 2015, is effective for mortgage loan applications received on and

after October 3, 2015. It is the intention of AFN to comply with this requirement on and

after the effective date.

The Good Faith Estimate (GFE) required under RESPA and the initial Truth In Lending

Statement (TIL) is being combined into one new form, the Loan Estimate (LE). The Loan

Estimate is designed to provide disclosures that will be helpful to consumers in

understanding the key features, costs, and risks of the mortgage for which they are

applying. AFN will provide this form to consumers within three business days after they

receive a mortgage loan application, either directly or through an approved third-party

service provider (a mortgage broker), as applicable.

The final Truth In Lending Statement, required under TILA, and the HUD-1 Settlement

Statement required under RESPA are being replaced with another form, the Closing

Disclosure (CD). The Closing Disclosure is designed to provide disclosures that will be

helpful to consumers in understanding all of the costs of the transaction. AFN will ensure

receipt of this disclosure by consumers at least three business days before consummation

of the loan.

The CFPB has also combined several other mandated disclosures, such as the appraisal

notice under the Equal Credit Opportunity Act and the initial servicing transfer disclosure

under RESPA.

The RESPA-TILA Integrated Mortgage Disclosures Rule provides very detailed instructions

on how these new forms are to be completed and used.

4.2 A Word of Caution

One result of the rule is that the majority of provisions related to disclosures under

RESPA are being transitioned from RESPA to TILA on the October 3, 2015 implementation

date. RESPA’s disclosure accuracy standards are much less stringent than those under

TILA, since TILA provides a private right of action for consumers who receive incorrect

disclosures not available under RESPA. Moving the disclosure requirements language

from RESPA to TILA means creditors will be held to a much higher standard of accuracy,

and will face additional legal risk if the disclosures don’t meet regulatory requirements.


Scope



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Another consequence is that TILA and the implementing rules under Reg. Z contain very

specific directions on how the two new forms are to be completed, and the CFPB has put

lenders on notice that they expect all of this specificity to be correctly applied.

Both the LE and CD have very specific font styles and dollar amount rounding rules. Both

forms have conditional language which makes the forms dynamic (tailoring certain

sections of information included or not based on the nature of the mortgage loan

transaction).

To be compliant, AFN must adhere to all formatting and disclosure details provided in the

Loan Estimate and Closing Disclosure forms and 12 CFR §§ 1026.37 and 1026.38.

4.3 Scope

The RESPA-TILA Integrated Mortgage Disclosure Rule applies to most closed-end

consumer mortgage transactions secured by real property; however, the rule establishes

different requirements for timeshare loans.

Loans secured by interests in timeshare plans are subject to the rule, but these loans may

commonly be consummated within a few days of the consumer’s application. In these

cases, abbreviated timing, delivery, and disclosure obligations are allowed when

consummation occurs within three business days of the application. For these loans,

creditors may forego a Loan Estimate and provide only the Closing Disclosure and AFN is

required to ensure only that the consumer receives the Closing Disclosure no later t han

consummation.

The rule also exempts the following types of transactions:

Home Equity Lines of Credit (HELOCs)

Reverse mortgages

Mortgages not secured by real property (i.e., boat loans, mobile homes, or any

dwelling that is not permanently affixed to real property, etc.)

Loans made by persons who are not considered “creditors” (creditor which makes 5

or fewer loans per year)


Effective Dates



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Certain no-interest second mortgage loans used for down payment assistance,

property rehabilitation, energy efficiency, or foreclosure avoidance

AFN is not prohibited from using the new disclosure forms on loans that are exempt

under the provisions of this rule (i.e., mortgages associated with housing assistance loan

programs for low- and moderate-income consumers). However, AFN may not use the

new disclosure forms instead of the GFE, HUD-1, and the Truth In Lending Statement for

transactions that are covered by TILA or RESPA that require very specific disclosures (i.e.,

reverse mortgages).

For all applications (except those listed above as exempt) received on or after October 3,

2015, AFN will rely on TILA and the associated rules under Reg. Z in determining when an

application has been received. An application includes receipt of the consumer's name,

the consumer's income, the consumer's Social Security number to obtain a credit report,

the property address, an estimate of the value of the property, and the mortgage loan

amount being sought.

Additionally, certain types of loans that are currently subject to TILA, but not RESPA, are

subject to the new disclosure requirements under the rule, including construction-only

loans, loans secured by vacant land, and loans secured by 25 or more acres. Credit

extended to certain trusts for tax or estate planning purposes are also covered

transactions under the rule.

4.4 Effective Dates

For those exempt loans noted above, AFN will continue to use, as applicable, the GFE,

HUD-1/HUD-1A, and the TIL Statement.

Applications that are received prior to October 3, 2015 will continue to be disclosed and

closed using the GFE, TIL Statement, and HUD-1 forms.

AFN will be required to use the Loan Estimate and Closing Disclosure for applications

received from a consumer for a closed-end credit transaction secured by real property on

or after October 3, 2015.

If an application reaches AFN through an intermediary agent or broker, the application is

received when it reaches the intermediary or broker.


Definitions



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The new disclosures will not be used by AFN for loans applications received before

October 3, 2015.

4.4.1 October 3, 2015 Requirements

The rule includes some restrictions on certain activities prior to a consumer’s receipt of

the Loan Estimate. These restrictions take effect on the calendar date October 3, 2015,

regardless of whether an application has been received on that date.

These activities include the following:

Imposing fees on a consumer before the consumer has received the Loan Estimate

and indicated an intent to proceed with the transaction

Providing written estimates of terms or costs specific to consumers before they

receive the Loan Estimate without a written statement informing the consumer

that the terms and costs may change

Requiring the submission of documents verifying information related to the

consumer’s application before providing the Loan Estimate

4.5 Definitions

Affiliate

Any company that controls, is controlled by, or is under common control with

another company, as set forth in the Bank Holding Company Act of 1956 (12 U.S.C.

1841 et seq.).

Application

The submission of a consumer’s financial information for the purpose of obtaining

an extension of credit. For purposes of this rule relative to the use of integrated

disclosures, an application consists of submission of the following:

• Consumer’s name

• Consumer’s monthly income

• Consumer’s Social Security number to obtain a credit report


Definitions



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• Property address

• An estimate of the value of the property

• Mortgage loan amount sought

An application may either be in writing or electronically submitted, including a

written record of an oral application.

Business Day

Regulation Z provides two definitions of a business day. Commonly these are

referenced as the “general” definition and the “specific” definition.

General Definition: A business day is a day on which the creditor’s offices are open

to the public for carrying on substantially all of its business functions.

Specific Definition: A business day includes all calendar days except Sundays and

legal public holidays as specified in 5 U.S.C. 6103(a).

The specific definition additionally applies to right of rescission and high cost

loan provisions.

The federal legal holidays identified in 5 U.S.C. 6103(a) are as follows:

New Year’s Day January 1

Martin Luther King, Jr. Day Third Monday in January

Washington’s Birthday Third Monday in February

Memorial Day Last Monday in May

Independence Day July 4

Labor Day First Monday in September

Columbus Day Second Monday in October

Veteran’s Day November 11

Thanksgiving Day Fourth Thursday in November

Christmas Day December 25


Definitions



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Changed Circumstance (affecting Settlement Charges or Eligibility)

Changed circumstances may cause the estimated charges to increase or, in the case

of estimated charges, may cause the aggregate amount of such charges to increase

by more than 10 percent. “Changed Circumstance’’ means:

An extraordinary event beyond the control of any interested party or other

unexpected event specific to the consumer or transaction;

Information specific to the consumer or transaction that the creditor relied

upon when providing the disclosures that was inaccurate or changed after

the disclosures were provided;

New information specific to the consumer or transaction that the creditor

did not rely on when providing the original disclosures;

The consumer is ineligible for an estimated charge previously disclosed

because a changed circumstance affected the consumer’s creditworthiness

or the value of the security for the loan; and/or,

The consumer requests revisions to the credit terms or the settlement that

cause an estimated charge to increase.

Closed-end Credit

Consumer credit other than “open-end credit”.

Consumer

A natural person to whom consumer credit is offered or extended, primarily for

personal, family, or household purposes. However, for purposes of rescission, the

term also includes a natural person in whose principal dwelling a security interest is

or will be retained or acquired, if that person's ownership interest in the dwelling is

or will be subject to the security interest.

Consummation

The time that a consumer becomes contractually obligated on a credit transaction.

For mortgage transactions, the date of consummation is determined by state law.


TILA Violations



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Escrow Account

Any account that a creditor or servicer establishes or controls on behalf of a

borrower to pay taxes, insurance premiums (including flood insurance), or other

charges, including charges that the borrower and creditor or servicer have

voluntarily agreed that the creditor or servicer should collect and pay. It is

synonymous with “trust account,” “reserve account,” or an “impound account.”

Open-End Credit

Consumer credit extended by a creditor under a plan in which

the creditor reasonably contemplates repeated transactions;

the creditor may impose a finance charge from time to time on an

outstanding unpaid balance; and

the amount of credit that may be extended to the consumer during the term

of the plan (up to any limit set by the creditor) is generally made available to

the extent that any outstanding balance is repaid.

Total Interest Percentage (TIP)

The total amount of interest a consumer pays over the loan term expressed as a

percentage of the requested loan amount.

4.6 TILA Violations

15 U.S.C. 1640(a) clearly defines civil liability for failure to comply with TILA. The

penalties for noncompliance relating to closed-end real estate mortgage transactions

generally include the following:

Any actual damages sustained by the affected parties as a result of the failure to

comply with TILA

In the case of an individual action, twice the amount of any finance charge in

connection with the transaction


Preapplication Estimates of Terms or Costs



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In the case of an individual action relating to a credit transaction not under an open-

end credit plan that is secured by real property or a dwelling, not less than $400

or greater than $4,000

In the case of a class action, such amount as the court may allow, except that as to

each member of the class no minimum recovery shall be applicable and the total

recovery under this subparagraph in any class action or series of class actions

arising out of the same failure to comply by the same creditor shall not be more

than the lesser of $1,000,000 or 1 per centum of the net worth of the creditor

4.7 Preapplication Estimates of Terms or Costs

AFN is permitted to provide prospective applicants with estimates of terms or costs for a

mortgage loan prior to the consumer receiving the Loan Estimate, as long as the creditor,

mortgage broker, or loan originator, has not received all of the information from the

consumer which is defined as an application.

AFN must clearly and conspicuously state at the top of the front of the first page of the

pre-application estimate in a font size that is no smaller than 12-point font, using a black

background and white color font:

The written pre-application estimate of terms or costs also cannot be made with

headings, content, and format substantially similar to the Loan Estimate.

4.8 Fee Variance

Except as described below, the actual charges at settlement are not to exceed the

amounts included on the Loan Estimate for the following:

Fees paid to AFN or a mortgage broker

“Your actual rate, payment, and costs could be higher. Get an official Loan

Estimate before choosing a loan.”


Other Disclosures



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Fees paid to an affiliate of AFN or an affiliate of a mortgage broker

Lender Credits (cannot be reduced)

Transfer taxes

AFN-required settlement services where AFN selects the third-party settlement service provider in which the consumer is not allowed to shop

Except as described below, the sum of the charges at settlement for the following

services may not be greater than 10 percent above the sum of the amounts for the same

services included on the Loan Estimate:

The aggregate amount of charges for any third-party services in which the consumer

is permitted to shop but selected provider from the written list

Recording fees

The amounts of charges for all other settlement services included on the Loan Estimate

may change at settlement. Examples of these charges include the following:

Per-diem (pre-paid) interest

Property insurance premiums

Amounts placed into an escrow, impound, reserve, or similar account

Charges paid for third-party services not required by the creditor (optional

services)(these can include amounts paid to an affiliate of AFN)

Charges paid for third-party services required by AFN for which the borrower

shopped, and the settlement service provider was not included on any list of

settlement service providers provided by AFN or its authorized agent (i.e., a

mortgage broker)

4.9 Other Disclosures

AFN is required to make the disclosures clearly and conspicuously in writing, in a form

that the consumer may keep. The disclosures may be provided to the consumer in

electronic form, subject to compliance with the consumer consent and other applicable

provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act).


Multiple Creditors, Consumers, Properties



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4.9.1 Your Home Loan Toolkit

AFN is required to provide consumers with the revised special information booklet

entitled “Your Home Loan Toolkit,” within three business days (general) of receiving an

application. The revised booklet, a step-by-step guide designed to aid consumers in

understanding the home buying and loan process, is required under Regulation Z for

transactions to purchase a one- to four-family residential property and is to be used in

conjunction with the Loan Estimate and Closing Disclosure.

4.9.2 Adjustable Rate/Variable Rate Mortgages

If the APR may increase after consummation and the transaction is secured by the

consumer's principal dwelling with a term greater than one year, AFN must provide the

following disclosures at the time an application form is provided or before the consumer

pays a non-refundable fee, whichever occurs first

ARM/Variable Rate Disclosure- must be provided to each consumer that expresses

an interest in a particular adjustable/variable rate program

Consumer Handbook on Adjustable Rate Mortgages (CHARM)

For an application that is completed by the consumer online, the disclosure and

handbook may be provided to the consumer in electronic form on or with the application.

4.9.3 Appraisal Disclosure & Initial Servicing Transfer Disclosure

The previous ECOA appraisal disclosure requirement is met by providing the Loan

Estimate. The same is true for the initial Servicing Transfer disclosure previously required

to be provided at application. The separate initial Servicing Transfer disclosure under

RESPA now only applies for disclosing on a reverse mortgage which is exempt from this

rule.

4.10 Multiple Creditors, Consumers, Properties

If a transaction involves more than one creditor, only one set of disclosures is required to

be given and the creditors must agree among themselves which creditor must comply

with the requirements that this regulation imposes on any or all of them.


Annual Percentage Rate (APR)



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If there is more than one consumer, the disclosures may be made to any consumer who is

primarily liable on the obligation. If the transaction is rescindable, however, the Closing

Disclosure must be provided to each consumer who has the right to rescind (in other

words has ownership interest in the real property); however, this requirement does not

apply to the Loan Estimate, but may be provided as a best practice

In the case of a transaction secured by multiple properties, the Loan Estimate and the

Closing Disclosure must include the addresses for all properties securing the loan,

although an addendum may be used for this purpose.

4.11 Annual Percentage Rate (APR)

The APR is a measure of the total cost of credit, expressed as a yearly rate. It relates the

amount and timing of value received by the consumer to the amount and timing of

payments made by the consumer. The disclosure of the APR is found on the final pa ge of

the Loan Estimate and the Closing Disclosure. The RESPA-TILA Integrated Mortgage

Disclosure Rule did not affect the definition or calculation of the APR.

4.12 Delivery of Disclosures

AFN will ensure delivery of the appropriate disclosures in accordance with the timing

requirements for each by one or more of the following methods and in accordance with

the rule, as necessitated for compliance:

In person (or via courier)

Mailing the disclosures, which may include overnight delivery

Via electronic delivery methods subject to compliance with the consumer consent

and other applicable provisions of the Electronic Signatures in Global and National

Commerce Act (15 U.S.C. 7001 et seq.)

Under the timing requirements of the rule, if a creditor provides appropriate disclosures

by mail, electronic delivery or courier, the creditor may presume that the consumer

receives the disclosure three specific business days after they are mailed, transmitted, or

deposited with the courier service, for purposes of determining when the 3-business-day


Consumer’s Intent to Proceed (§1026.19(e)(2)(i)(A))



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waiting period begins. This is commonly referred to as the three-business- day mailbox

rule.

When AFN has evidence that the consumer received the disclosures earlier than three

business days after mailing or delivery, AFN may rely on that evidence under the rule and

consider the disclosures to be received on that date.

4.13 Consumer’s Intent to Proceed (§1026.19(e)(2)(i)(A))

AFN must document, in retainable form, a consumer’s intent to proceed with the

transaction. The consumer may communicate this intent either orally in person, over the

phone, via written communication, including email, or by signing a preprinted form

provided by AFN. A consumer may indicate an intent to proceed with a transaction in any

manner the consumer chooses, unless a particular manner of communication is required

by the creditor.

AFN may not impose any fee, other than a reasonable credit report fee, on any consumer

until the consumer receives the Loan Estimate and indicates their intent to proceed with

the transaction.

Acknowledging receipt of the Loan Estimate does not meet compliance requirements for

documenting the consumer’s intent to proceed.

4.14 Disclosure of NMLSR ID#

Both the Loan Estimate and Closing Disclosure must disclose the name and National

Mortgage Licensing System & Registry (NMLSR) ID number of AFN and the individual loan

originator.

In the case where the NMLSR ID number may not be available at the time of completion

of the Loan Estimate, under certain state allowable conditions to originate loans pending

issuance (such as during the transfer between employers), the state license number must

be provided at a minimum.

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual The Loan Estimate (12 CFR §1026.37)

Disclosure of NMLSR ID#



23

Chapter 5 The Loan Estimate (12 CFR §1026.37)

For closed-end credit transactions secured by real property (other than exempt

transactions), AFN is required to provide the consumer with good-faith estimates of

credit costs and transaction terms on the Loan Estimate.

The Loan Estimate replaces and combines into one form the existing Good Faith Estimate

and initial Truth In Lending Statement. The disclosure is three pages long and may

require use of an addendum if there is more required information than a section of the

form can accommodate.

AFN is responsible for delivering the initial Loan Estimate or placing it in the mail no later

than the third general business day after receiving the six items which define an

application. If AFN determines within the three- general- business-day period that the

consumer’s application will not or cannot be approved and issues an adverse action

notice to the consumer, or if the consumer withdraws the application, AFN does not have

to provide the Loan Estimate. However, if AFN does not provide the Loan Estimate or

does not provide it within the appropriate time frame, it will be in violation of the Loan

Estimate requirements under TILA if it later consummates the transaction.

A mortgage broker may issue the Loan Estimate, but the accuracy of all information

presented on the form is the responsibility of AFN (the creditor named on the disclosure).

The Loan Estimate also incorporates other disclosures that are required under RESPA &

ECOA and no longer need to be provided as a separate disclosure. In addition, it also

incorporates a new disclosure required by the Dodd-Frank Act:

The Total Interest Percentage required under TILA (as amended by the Dodd-Frank

Act; page three - Comparisons)

The appraisal notice required by ECOA and certain Higher-Priced Mortgage Loans

(page three - Other Considerations)

The initial Servicing Transfer disclosure required by RESPA (page three - Other

Considerations)

The initial Loan Estimate must also be delivered or placed in the mail no later than the

seventh specific business day before consummation of the transaction. The consumer

may modify or waive the seven-business-day waiting period after receiving the Loan

Estimate if the consumer has a bona-fide personal financial emergency that necessitates


Good Faith Requirement and Variance



24

consummating the credit transaction before the end of the waiting period. To modify or

waive the waiting period, the consumer must give AFN a dated written statement that

describes the emergency, specifically modifies or waives the waiting period, and is signed

by all consumers primarily liable on the legal obligation. AFN may not provide the

consumer with a preprinted waiver form.

5.1 Good Faith Requirement and Variance

AFN is required to act in good faith and exercise due diligence in obtaining information

necessary to complete the Loan Estimate. However, there may be some information that

is unknown (i.e., not reasonably available to AFN at the time the Loan Estimate is made).

In these instances, AFN may use estimates even though it knows that more precise

information will be available by the point of consummation.

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.

Generally, if the charges paid by or imposed on the consumer exceed the amount

originally disclosed on the Loan Estimate, it is not in good faith, regardless of whether

AFN later discovers a technical error, miscalculation, or underestimation of a charge.

However, a Loan Estimate is considered to be in good faith if AFN charges the consumer

less than the amount disclosed on the Loan Estimate, without regard to any variance

limitations.

5.1.1 Variance Limitations

AFN may charge the consumer more than the amount disclosed in the Loan Estimate in

specific circumstances:

Certain variations between the amount disclosed and the amount charged are

expressly permitted under Regulation Z

The amount charged falls within the explicit variance thresholds and the estimate is

not for a zero variance charge where variations are never permitted

Changed circumstances requiring a revised Loan Estimate permits the specific

charge to be increased


Revisions and Corrections to Loan Estimates



25

If the amounts paid by the consumer at closing exceed the amounts disclosed on the Loan

Estimate beyond the applicable variance threshold, AFN must refund the excess to the

consumer no later than 60 calendar days after consummation.

5.2 Revisions and Corrections to Loan Estimates

AFN is generally bound by the Loan Estimate provided within three business days of the

application, and may not issue revisions to Loan Estimates because it later discovers

technical errors, miscalculations, or underestimations of charges.

AFN is permitted to provide to the consumer revised Loan Estimates (and use them to

compare estimated amounts to amounts actually charged for purposes of determining

good faith) only in certain specific circumstances:

Changed circumstances that occur after the Loan Estimate is provided to the

consumer that cause estimated settlement charges to increase more than the

aggregate 10 percent variance. Loans subject to the RESPA-TILA Integrated

Mortgage Disclosure Rule have any of the characteristics previously defined.

The consumer is ineligible for an estimated charge previously disclosed because a

changed circumstance, as defined above, affected the consumer's

creditworthiness or the value of the security for the loan.

The consumer requests revisions to the credit terms or settlement charges that

cause an estimated charge to increase.

Any points or AFN credits change because the interest rate was not locked when the

initial Loan Estimate was prepared, and a subsequent rate lock has occurred.

The consumer indicates intent to proceed after the closing cost expiration date and

time disclosed on the Loan Estimate (found on page 1 under (“Rate Lock”).

On new construction loan transactions, where the creditor reasonably expects that

settlement will occur more than 60 days after the Loan Estimate is provided, the

creditor may provide a revised Loan Estimate, as long as this fact was clearly and

conspicuously disclosed to the consumer on the Loan Estimate originally

provided. If no such statement is provided, the creditor may not issue revised

disclosures, unless otherwise provided for above.


Breakdown of the Loan Estimate



26

In the case of a revised Loan Estimate (due to a valid changed circumstance), AFN must

ensure that the consumer receives the revised Loan Estimate no later than four specific

business days prior to consummation. If AFN is mailing the revised Loan Estimate, it

would need to place in the mail the Loan Estimate no later than seven specific business

days before consummation of the transaction to allow three specific business days for

receipt.

5.2.1 Timing for Revisions to Loan Estimate

Generally, AFN must deliver or place in the mail the revised Loan Estimate to the

consumer no later than three business days (general) after receiving the information

sufficient to establish that one of the permitted reasons for issuing a revision has

occurred.

AFN may not provide a revised Loan Estimate on or after the date it provides the Closing

Disclosure.

AFN must ensure that the consumer receives the revised Loan Estimate no later than four

business days (specific) prior to consummation. If AFN is mailing the revised Loan

Estimate and relying upon the three-business-day mailbox rule, AFN would need to place

in the mail the revised Loan Estimate no later than seven business days (specific) before

consummation of the transaction to allow three business days for receipt.

The consumer may waive or modify the seven-business-day waiting period after receiving

the Loan Estimate if the extension of credit is needed to meet a bona fide personal

financial emergency. In these cases, the consumer must give AFN a dated hand-written

statement that describes the emergency, specifically modifies or waives the waiting

period, and bears the signature of all consumers who are primarily liable on the legal

obligation as permitted by AFN’s senior management and investors, as applicable.

5.3 Breakdown of the Loan Estimate

Following is a description of the three pages of the Loan Estimate.

5.3.1 Page 1 of the Loan Estimate

Page 1 of the Loan Estimate includes general information, a Loan Terms table with

descriptions of applicable information about the loan, a Projected Payments table, Costs





27

at Closing table, and a link for consumers to obtain more information about loans secured

by real property at a website maintained by the CFPB.

Page 1 also includes the title “Loan Estimate” and a statement of “Save this Loan

Estimate to compare with your Closing Disclosure.”

The top of page 1 also includes the name and address of the creditor. A logo or slogan

can be used along with the creditor’s name and address, so long as the logo or slogan

does not exceed the space provided for that information.

If there are multiple creditors, use only the name of the creditor completing the Loan

Estimate.

If a mortgage broker is providing the Loan Estimate, the name and loan ID of the creditor

must be used, if known. If not yet known, brokers may leave these spaces blank.


Page 2 of the Loan Estimate contains Closing Cost Details. Four main categories of

charges are disclosed on page 2 of the Loan Estimate:

1. A good-faith itemization of the Loan Costs and Other Costs associated with the

loan.

2. A Calculating Cash to Close table to show the consumer how the amount of cash

needed at closing is calculated.

3. For transactions with adjustable monthly payments, an Adjustable Payment (AP)

Table with relevant information about how the monthly payments will change.

4. For transactions with adjustable interest rates, an Adjustable Interest Rate (AIR)

Table with relevant information about how the interest rate will change.

The charges associated with the mortgage are broken down into two general types, Loan

Costs and Other Costs. Generally, Loan Costs are those costs paid by the consumer to the

creditor, a mortgage broker, and third-party providers of services the creditor requires on

its behalf, or to be obtained by the consumer during the origination of the loan. Other

Costs include taxes, governmental recording fees, and certain other payments involved in

the real estate closing process.





28

If state law requires additional disclosures, those additional disclosures may be made on

a document whose pages are separate from, and not presented as part of, the Loan

Estimate.


Page 3 of the Loan Estimate contains Additional Information About the Loan, Contact

Information, a Comparisons table, an Other Considerations table, and, if desired, an

optional Signature Statement for the consumer to sign to acknowledge receipt.

Contact Information provides primary contact information to the consumer. AFN must

include the name and NMLS ID for both the creditor and mortgage broker, if applicable,

and the individual loan officer of both.

AFN will provide loan cost details in the Comparisons Table:

In Five Years – The total paid in principal, interest, mortgage insurance, and loan

costs as well as the amount of principal paid through the end of the 60 th month

after the due date of the first payment.

Annual Percentage Rate (APR) – AFN will provide a brief descriptive statement with

the APR.

Total Interest Percentage (TIP) – The total amount of interest paid over the loan

term, expressed as a percentage of the loan amount; therefore, if the loan amount

requested is $100,000 and the total amount of interest paid over the term of the

loan is $50,000, the TIP is 50%.

The Other Considerations table includes disclosures to the consumer, including the

following statements and disclosures:

Appraisal disclosure (as required for Higher-priced Mortgage Loans (HPMLs) and

loans covered by the ECOA)

Assumption disclosure

Statement that homeowner’s insurance is required but the consumer may choose

the provider

Late Payment provisions

Refinance statement

Servicing disclosure





29

AFN may add an optional Signature Statement for confirmation of Loan Estimate receipt.

If AFN chooses to include this option, the exact language from the form must be used:

“By signing, you are only confirming that you have received this form. You do

not have to accept this loan because you have signed or received this form.”

If AFN does not use the confirmation of receipt, then the Company must include the

following statement at the end of the Other Considerations table in accordance with

§1026.37(n)(2):

“You do not have to accept this loan because you have received this form or

signed a loan application.”

Refer to the Appendix for a Sample Loan Estimate.

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Closing Disclosure (12 CFR §1026.38)

Preparation of the Closing Disclosure



30

Chapter 6 Closing Disclosure (12 CFR §1026.38)

For applicable loans in which a Loan Estimate has been issued and proceed to closing,

AFN must provide a final disclosure reflecting the actual terms of the transaction called

the Closing Disclosure.

The Closing Disclosure replaces and combines into one form the existing final Truth In

Lending Statement and HUD-1 disclosures. The disclosure is five pages long and may

require use of an addendum if there is more required information than a section of the

form can accommodate.

In addition to the disclosures required on the Loan Estimate, the Closing Disclos ure also

incorporates other mandated information, including

more specific transaction information regarding any property seller;

settlement agent;

mortgage insurance certificate number;

real estate agents (including commissions);

information relative to any potential for negative amortization;

acceptance of any partial mortgage payments made by the borrower during the loan

servicing;

contract details;

liability after foreclosure;

refinancing statement;

a tax deductibility clause; and

greater detail regarding escrow accounts.

In addition, the Closing Disclosure has information previously found on the Truth in

Lending Statement such as the following:

Total of Payments (The Total of Payments disclosed on the LE and the CD is

calculated differently than the total of payments disclosed on the 1026.18 TIL

Disclosure Statement and used to the APR.)

Total Finance Charges

Total Amount Financed (together with the APR previously known as the “federal

box”)


Preparation of the Closing Disclosure



31

The Closing Disclosure, similar to the Loan Estimate, applies to closed-end loans that are

secured by real property.

6.1 Preparation of the Closing Disclosure

The settlement agent or AFN can produce and provide the Closing Disclosure, or the

responsibility can be divided between the two entities. AFN will require information

from the settlement agent to complete the disclosure; however, AFN retains all liability

for any errors found on the document.

6.2 Preparation of the Closing Disclosure for a Seller

For a purchase transaction, the settlement agent is required to provide the seller with the

Closing Disclosure reflecting the actual terms of the seller’s transaction. The settlement

agent may comply with this requirement by providing the seller with a copy of the Closing

Disclosure provided to the consumer (buyer) if it also contains information relating to the

seller’s transaction. The settlement agent may also provide the seller with a separate

disclosure, including only the information applicable to the seller’s transaction from the

Closing Disclosure. However, if the seller’s disclosure is provided in a separate

document, the settlement agent must provide AFN with a copy of the Closing Disclosure

provided to the seller. The settlement agent must provide the seller its copy of the

Closing Disclosure no later than the day of consummation.

Form H-25(I) found in Appendix H of the rule provides illustration of the details provided

to a seller. A two-page model form is also included in the Appendix.

6.3 Delivery of the Closing Disclosure

The Closing Disclosure must be received by the consumer at least three business days

(specific) prior to consummation.

For transactions involving multiple consumers, AFN will ensure that the Closing Disclosure

is provided separately to each consumer having the right to rescind under TILA, either

directly or via the settlement agent, as appropriate. For transactions that are not


Delivery of the Closing Disclosure



32

rescindable, AFN will provide the CD to the consumer with primary liability for the

mortgage transaction.

For timeshare transactions, AFN must ensure that the consumer receives the Closing

Disclosure no later than consummation.

AFN will ensure delivery of the appropriate disclosures in accordance with the timing

requirements for each by one or more of the following methods and in accordance with

the rule, as necessitated for compliance:

In person (or via courier)

Mailing the disclosures, which may include overnight delivery

Via electronic delivery methods subject to compliance with the consumer consent

and other applicable provisions of the Electronic Signatures in Global and National

Commerce Act (15 U.S.C. 7001 et seq.)

Under the timing requirements of the rule, if a creditor provides appropriate disclosures

by mail, electronic delivery or courier, the creditor may presume that the consumer

receives the disclosure three specific business days after they are mailed, transmitted, or

deposited with the courier service, for purposes of determining when the 3 -business-day

waiting period begins. This is commonly referred to as the three-business- day mailbox

rule.

When AFN has evidence that the consumer received the disclosures earlier than three

business days after mailing or delivery, AFN may rely on that evidence under the rule and

consider the disclosures to be received on that date.

If the Closing Disclosure is provided in person, it is considered received by the consumer

on the day it is provided. If it is mailed or delivered electronically, the consumer is

considered to have received the Closing Disclosure three specific business days after it is

delivered or placed in the mail (3-day mailbox rule).

The consumer may waive or modify the three-business-day waiting period if the

extension of credit is needed to meet a bona fide personal financial emergency. In thes e

cases, the consumer must give AFN a dated hand-written statement that describes the

emergency, specifically modifies or waives the waiting period, and bears the signature of

all consumers who are primarily liable on the legal obligation as permitted by AFN’s


Breakdown of the Closing Disclosure



33

senior management and investors, as applicable. AFN may not provide the consumer

with a preprinted waiver form.

A consumer has the right to inspect the Closing Disclosure during the business day before

consummation. If a consumer asks to inspect the Closing Disclosure the business day

before consummation, the Closing Disclosure presented to the consumer must reflect any

adjustments to the costs or terms that are known to AFN at the time the consumer

inspects it.

6.4 Breakdown of the Closing Disclosure

Following is a description of the pages contained in the Closing Disclosure.

6.4.1 Page 1 of the Closing Disclosure

Page 1 of the Closing Disclosure contains general information (closing, transaction and

loan information), the Loan Terms table, the Projected Payments table, and the Costs at

Closing table.


Page 2 of the Closing Disclosure contains loan costs and other costs.

The Loan Costs and Other Costs tables are disclosed under the heading Closing Cost

Details. The number of items in the Loan Costs and Other Costs tables can be expanded

and deleted to accommodate the disclosure of additional line items, but must keep the

Loan Costs and Other Costs tables on page 2 of the Closing Disclosure. This can be

accommodated by removing unused individual lines from under other sections, but each

section cannot exceed a maximum number of line items per section as detailed under

Regulation Z.

However, items that are required to be disclosed even if they are not charged to the

consumer (such as Points in the Origination Charges subheading) cannot be deleted.

Likewise, descriptions for charges that are static on the form itself cannot be moved or

removed (refer to lines E. 01; F. 01-04; and G. 01-03). In addition, the aggregate

adjustment charge regarding escrows (found in the model form under section G.08), must

remain as the last line item of section G, regardless of whether lines are removed or

added to this section.





34

The Loan Costs and Other Costs tables can be disclosed on two separate pages of the

Closing Disclosure, but only if the page cannot accommodate all of the costs required to

be disclosed on one page, exceeding the maximum limits allotted for each section. When

used, these pages are numbered 2a and 2b. Refer to form H-25(h) of Appendix H to

Regulation Z for an example as provided in §1026.38(t)(5)(iv)(B).


Page 3 provides a Calculating of the Cash to Close table, Summaries of Transactions

tables, and alternatives for transactions without a seller.

For transactions without a seller, a Payoffs and Payments table may be substituted for

the Summaries of Transactions table and placed before the alternative Calculating Cash

to Close table.

Similar to Page 2, there are specific fees and charges that are statically placed on the

model form which cannot be altered or removed.


Page 4 of the Closing Disclosure contains additional information about the loan. Page 4

contains the Loan Disclosures, Adjustable Payment (AP), and Adjustable Interest Rate

(AIR) tables which are shown with the heading Additional Information About This Loan.

In the Loan Disclosures table, AFN will disclose the following information:

Assumption by a subsequent purchaser

Demand Feature regarding early payment of the loan

Late Payment fee imposition, including timing, amount, and how the fee is

calculated

Negative Amortization caused by any increase in principal balance via regular

periodic payments

AFN’s partial payment policy

Security Interest statement granted by consumer

Escrow Account details relative to funds held by the servicer (or a statement that an

Escrow Account has not been established with a description of estimated property

costs during the first year after consummation). (§ 1026.38(l)(1)-(7))





35

AFN will only disclose information in the Adjustable Payment (AP) Table when the

periodic principal and interest payment will change after consummation but not because

of a change to the interest rate or of a seasonal payment product.

AFN will only disclose the Adjustable Interest Rate (AIR) Table when the loan’s interest

rate may increase after consummation.

The AP Table and the AIR Table will include the same information as disclosed in the Loan

Estimate, updated to reflect the terms of the loan at consummation, as applicable.


Page 5 of the Closing Disclosure contains loan calculations, other disclosures , and contact

information. Page 5 discloses tables for Loan Calculations, Other Disclosures, Questions

Notice, Contact Information, and, if desired by AFN, Confirmation Receipt.

AFN will disclose the following in the Loan Calculations table:

Total of Payments

Finance Charge

Amount Financed

APR – updated from the amount disclosed on the LE

Total Interest Percentage (TIP) – updated from the amount disclosed on the LE

AFN will provide the following disclosures in the Other Disclosures table:

Appraisal disclosure (as required for Higher-priced Mortgage Loans (HPMLs) and

loans covered by the ECOA in relation to consumer rights)

Consequences of nonpayment statement to the consumer pursuant to contract

details (default, acceleration, and prepayment penalties and rebates)

Statement for state law provision of consumer liability after foreclosure

Statement of consumer’s ability to refinance the loan

Tax deductibility of the mortgage loan interest by the consumer

AFN will disclose its contact information, including the NMLS ID or state license ID and

the same information for the individual primary contact for the consumer, as well as that

of the mortgage broker, real estate brokerage of the consumer and the seller, as

applicable, and the settlement agent in the Contact Information table.


Revised Closing Disclosures



36

AFN may add an optional Signature Statement for confirmation of Closing Disclosure

receipt. If AFN chooses to include this option, the exact language from the form must be

used:

“By signing, you are only confirming that you have received this form. You do not

have to accept this loan because you have signed or received this form.”

If AFN does not include the confirmation of receipt, then the company must include the

following statement with the Other Disclosures table concerning Loan Acceptance in

accordance with §§1026.38(s)(2) and 1026.37(n)(2):

“You do not have to accept this loan because you have received this form or signed

a loan application.”

Refer to the Appendix for a Sample Closing Disclosure.

6.5 Revised Closing Disclosures

Once a Closing Disclosure is delivered or mailed to the consumer, consummation cannot

occur until three specific business days after the disclosure is considered received by the

consumer. There are three categories of changes that require a corrected Closing

Disclosure containing all changed terms:

1. Changes that occur before consummation that will require a new three-business-

day (specific) waiting period:

a. The disclosed APR becomes inaccurate (is out of tolerance under

Regulation Z §1026.22(a)) and a revised Closing Disclosure with the

correct APR and all other associated terms that have changed needs to be

provided.

b. The loan product previously disclosed becomes inaccurate and a revised

Closing Disclosure with the correct loan product and all other associated

terms that have been changed needs to be provided.

c. A prepayment penalty is added to the transaction and a revised Closing

Disclosure with the prepayment penalty provisions and all other

associated terms that have changed needs to be provided.


Revised Closing Disclosures



37

2. Changes that occur before consummation that do not require a new three-

business-day (specific) waiting period (any changes not covered above); however,

the revised Closing Disclosure must be provided at or before consummation.

3. Changes that occur after consummation (Refer to Section 7.1 Postconsummation

Correction to the Closing Disclosure.)

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Disclosures Required Postconsummation

Postconsummation Correction to the Closing Disclosure



38

Chapter 7 Disclosures Required Postconsummation

AFN shall make the following disclosures clearly and conspicuously in writing, in a form

that the consumer may keep.

7.1 Postconsummation Correction to the Closing Disclosure

When changes occur after consummation, a corrected Closing Disclosure must be

delivered or placed in the mail not later than 30 calendar days after receiving information

sufficient to establish that such an event has occurred.

If the Closing Disclosure contains non-numeric clerical errors, AFN must deliver or

mail a corrected Closing Disclosure no later than 60 days after consummation.

In the case where a refund of excessive fees paid by the consumer are necessary,

related to good faith analysis, the refund amount must be provided to consum er no

later than 60 calendar days after consummation. In addition, AFN must deliver or

mail the corrected Closing Disclosure reflecting such refund no later than 60 days

after consummation.

7.2 Escrow Closing Notice (§1026.20(e))

The Escrow Closing Notice must be provided prior to cancelling an escrow account to any

consumers for whom an escrow account was established in connection with a closed -end

consumer credit transaction secured by a first lien on real property or a dwelling, except

for reverse mortgages.

There are two exceptions to the requirement to provide the notice:

1. Creditors and servicers are not required to provide the notice if the escrow

account that is being cancelled was established solely in connection with the

consumer’s delinquency or default on the underlying debt obligation.

2. Creditors and servicers are not required to provide the notice when the

underlying debt obligation for which an escrow account was established is

terminated, including by repayment, refinancing, rescission, and foreclosure.


Escrow Closing Notice (§1026.20(e))



39

The Notice must contain certain information and be preceded with a heading that is more

conspicuous than the following:

The date on which the account will be closed.

That an escrow account may also be called an impound or trust account.

The reason why the escrow account will be closed.

That without an escrow account, the consumer must pay all property costs, such as

taxes and homeowner’s insurance, directly, possibly in one or two large payments

a year.

A table, titled “Cost to You,” that contains an itemization of the amount of any fee

the creditor or servicer imposes on the consumer in connection with the closure

of the consumer’s escrow account, labeled “Escrow Closing Fee,” and a statement

that the fee is for closing the escrow account.

Under the reference “In the future” the following must appear:

The consequences if the consumer fails to pay property costs, including the

actions that a state or local government may take if property taxes are not

paid and the actions the creditor or servicer may take if the consumer does

not pay some or all property costs, such as:

o Adding amounts to the loan balance

o Adding an escrow account to the loan

o Purchasing property insurance on behalf of the consumer that may be

more expensive and provide fewer benefits than the consumer may

be able to obtain directly with an insurer

A telephone number that the consumer can use to request additional

information about the cancellation of the escrow account

Whether the creditor or servicer offers the option of keeping the escrow

account open and, as applicable, a telephone number the consumer can use

to request that the account be kept open

Whether there is a cut-off date by which the consumer can request that the

account be kept open


Partial Payment Policies (§1026.39(e))



40

Formatting considerations must include the following:

Language must be clear and conspicuous, in reasonably understandable form

Minimum font size of 10-point type or larger

Contained on a one-page document, separated from all other materials, with

headings, content, order, and format substantially similar to model form provided

in the Appendix.

Optional Additions to the formatting include:

o [Sample Clients]’s name or logo – which may be placed above the heading

“Escrow Closing Notice”

o The following information can be included in the notice, however, must be

placed under the heading indicated above and prior to the required

disclosures listed under this section.

Refer to the Appendix for the Model Form – Escrow Cancellation Notice.

7.2.1 Timing Considerations

If the escrow account is being closed at the consumer’s request, then AFN (as creditor) or

the servicer must ensure that the consumer receives the Escrow Closing Notice at least

three business (specific) days before the escrow account is closed.

If the escrow account is being closed for any other reason (other than the two exceptions

listed above), then AFN (as creditor) or servicer must ensure that the consumer receives

the Escrow Closing Notice at least 30 business (specific) days before the escrow account

is closed.

If the Escrow Cancellation Notice is provided by mail, the 3-day mailbox rule applies for

determination of the date in which the notice is considered received.





41

7.3 Partial Payment Policies (§1026.39(e))

Regulation Z has a requirement to notify consumers when ownership of the mortgage

loan changes. This disclosure requirement applies to AFN if it becomes the owner of an

existing mortgage by acquiring legal title to the debt1, but does not include a mortgage

loan servicer which holds title to the loan or to whom title is assigned if solely for

convenience in servicing the loan.

AFN is required to deliver the notice of ownership transfer to the consumer on or before

the 30th calendar day following the date of the transfer.

This notice of ownership transfer, in addition to existing required disclosures (see Notice

Contents below), must include a partial payment disclosure. This postconsummation

partial payment disclosure is required for a closed-end consumer credit transaction

secured by a dwelling or real property.

7.3.1 Notice Contents

The partial payment disclosure must include the heading “Partial Payment” over all of the

following additional information, as applicable:

If periodic payments that are less than the full amount due are accepted, a

statement that AFN, using the term “lender,” may accept partial payments and

apply such payments to the consumer’s loan.

If periodic payments that are less than the full amount due are accepted but not

applied to a consumer’s loan until the consumer pays the remainder of the full

amount due, a statement that AFN, using the term “lender,” may hold partial

payments in a separate account until the consumer pays the remainder of the

payment and then apply the full periodic payment to the consumer’s loan.

If periodic payments that are less than the full amount due are not accepted, a

statement that AFN, using the term “lender,” does not accept any partial payments.

A statement that, if the loan is sold, the new covered person, using the term

“lender,” may have a different policy.

1 Includes the purchase, assignment, or other transfer of mortgage loans





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The complete disclosure must identify the mortgage loan sold, assigned, or otherwise

transferred and include the following information:

The name, address, and telephone number of the new owner of the mortgage

o If the ownership transfer of the loan is to more than one owner the name,

address and telephone number must be provided for each unless only one

owner or authorized agent is disclosed to the consumer regarding the

entity in which they would send a notice of the right to rescind the loan,

and resolve issues concerning payments on the loan

The date of transfer

The name, address, and telephone number of an agent or party authorized to

receive notice of the right to rescind and resolve issues concerning the

consumer's payments on the loan (if other than the owner whose name, address

and telephone number are disclosed above)

Where transfer of ownership of the debt is or may be recorded in public records, or,

alternatively, that the transfer of ownership has not been recorded in public

records at the time the disclosure is provided

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Record Retention

Record Retention Requirements for Transfer or Sale of Loans



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Chapter 8 Record Retention

To evidence compliance with the RESPA-TILA Integrated Mortgage Disclosure rule

provisions of Reg. Z (including the Loan Estimate and all related documents), AFN must

retain records for three years after: consummation of the transaction; or, the date the

disclosures are required to be made or action is required to be taken (i.e., the loan is

withdrawn, cancelled, closed for incompleteness or receives notice of adverse action) .

AFN must retain copies of the Closing Disclosure (and all documents related to the

Closing Disclosure) for five years after consummation.

AFN must retain the Postconsummation Escrow Cancellation Notice (Escrow Closing

Notice) and the Postconsummation Partial Payment Policy disclosure (contained in the

transfer of ownership as noted above) for two years.

8.1 Record Retention Requirements for Transfer or Sale of Loans

If AFN sells, transfers, or otherwise disposes of its interest in a mortgage and does not

service the mortgage, AFN must provide a copy of the Closing Disclosure to the new

owner or servicer of the mortgage as part of the transfer of the loan file.

Both AFN and the new owner or servicer must retain the Closing Disclosure for the

remainder of the five-year period.

8.2 Maintenance of Records

Both TILA and RESPA permit, but do not require, electronic recordkeeping. AFN can

maintain records by any method that reproduces disclosures and other records

accurately, including computer programs, unless otherwise prohibited by state law.

Integrated Mortgage Disclosures (RESPA–TILA) Policy Manual Appendix

Maintenance of Records



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Chapter 9 Appendix

Review these sample model forms for meeting disclosure requirements under the rule on

the following pages:

9.1 Loan Estimate Sample

9.2 Model Form – Written List of Settlement Service Providers

9.3 Sample – Written List of Providers Consumers Can Shop

9.4 Sample – Written List of Providers Consumers Cannot Shop

9.5 Closing Disclosure Sample

9.6 Closing Disclosure Sample for a Seller

9.7 Model Form – Escrow Cancellation Notice

For additional variations, including Spanish language versions and various versions for

specific types of transactions, please refer to the TILA-RESPA Integrated Disclosure Rule

implementation web page located at http://www.consumerfinance.gov/regulatory-

implementation/tila-respa/.

http://www.consumerfinance.gov/regulatory-implementation/tila-respa/

http://www.consumerfinance.gov/regulatory-implementation/tila-respa/


Loan Estimate Sample*



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9.1 Loan Estimate Sample*


Loan Estimate Sample*



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Model Form – Written List of Settlement Service Providers



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Model Form – Written List of Settlement Service Providers



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* This page incorporates other disclosures including the Total Interest Percentage, the

appraisal notice, and the servicing notice.

9.2 Model Form – Written List of Settlement Service Providers

This list is provided separate from the Loan Estimate, but AFN must comply with the same

timing requirements as the Loan Estimate.


Sample – Written List of Providers Consumers Can Shop



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9.3 Sample – Written List of Providers Consumers Can Shop


Sample - Written List of Providers Consumers Cannot Shop



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9.4 Sample - Written List of Providers Consumers Cannot Shop


Closing Disclosure Sample



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9.5 Closing Disclosure Sample





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Closing Disclosure Sample for a Seller



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9.6 Closing Disclosure Sample for a Seller





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Model Form – Escrow Cancellation Notice



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9.7 Model Form – Escrow Cancellation Notice





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