TILA-RESPA INTEGRATED DISCLOSURES (TRID)EXTERNAL TRID TRAINING – DETAILED REVIEW OF THE LOAN ESTIMATE

JUNE 11, 2015

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

On Wednesday, June 17, 2015, the Consumer Financial Protection Bureau (CFPB) announceda proposal to delay the effective date of the TILA-RESPA Integrated Disclosure (TRID) ruleuntil October 3, 2015.

On Tuesday, July 21, 2015 the CFPB issued the final rule moving the effective date of TRIDfrom August 1, 2015 to October 3, 2015.

SPECIAL NOTICE

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

Introduction

Presenter - Terri Cammarata-Brakebill, VP Corporate Compliance

TRID Training - Series of Regulatory Compliance Webinars

1. TRID Rule Overview

2. Detailed Review of the Loan Estimate (LE) – Part 1 and 2

3. Detailed Review of the Closing Disclosure (CD) – Part 1 and 2

4. Timing Requirements for the LE and CD

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

The information contained in this document is designed to provide Franklin American Mortgage Company (FAMC) specific and general information on the regulatory changes regarding TILA –RESPA Integrated Disclosures (TRID).

This information should not be construed as legal advice or legal opinion on any specific facts or circumstances contained within. FAMC is not authorized to provide legal advice and encourages you to seek individual counsel.

The information contained in this document is effective as of the date of the document and is subject to change.

Information contained within this document is considered proprietary non‐public information and is provided to FAMC approved partners for internal use only. Distribution of this document or communication of any of the information contained herein to third‐parties without the prior written consent of FAMC is strictly prohibited.

Disclaimer

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

We encourage you to ask questions related to this presentation, or the rule and the potential impact on your business via your specific FAMC contact or TRID@franklinamerican.com.

Questions

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

• FAMC Policy Statement

• Loan Estimate Overview

• Content

• Delivery Methods and Requirements

• Timing Requirements

• Other Important Information

• Revisions and Corrections to Loan Estimates

• Changed Circumstances

• Timing Requirements

• Documentation of LE Revisions

• Restrictions on a Revised LE

• Loan Estimate Variances

• Tolerances

• Charges on the LE for Services Not Performed

• Excess Charges Cure Provisions

• Variances Allowed After Issuing a Closing Disclosure

• Shopped Services

• Wrap-Up

Table of Contents

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

Franklin American Mortgage Company (FAMC) originates and purchases loans that are in compliance with the requirements of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). FAMC will purchase and originate loans that are in compliance with the TILA RESPA Integrated Disclosures (TRID) requirements as specified in this presentation and published policy.

This policy statement applies to applications taken on and after August 1, 2015.

FAMC Policy Statement

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

The creditor/lender is responsible for providing the consumer with good-faith estimates of credit costs and transaction

terms on the Loan Estimate (LE). The creditor must ensure the LE is delivered or placed in the mail no later than the

third business day after receiving an application and the disclosure must comply with all prescribed information within

the Rule. The creditor must ensure the LE contains the correct and specific content for that transaction.

It is a 3 page disclosure that generally contains the following:

Loan Estimate Overview - Content

Page Description1 General information of the specific loan transaction including creditor information.

Loan Terms table with descriptions of applicable information about the loan. Projected Payments table Costs at Closing table A link for consumers to obtain more information about loans secured by real property at a website

maintained by the CFPB. A required statement “Save this Loan Estimate to compare with your Closing Disclosure.”

2 A good-faith itemization of the Loan Costs and Other Costs associated with the loan and paid by the applicant/borrower.

A Calculating Cash to Close table to show the consumer how the amount of cash needed at closing is calculated.

Adjustable Payment Loans - an Adjustable Payment Table detailing how the monthly payments will change.

Adjustable Rate Loans – an Adjustable Interest Rate Table detailing how the interest rate will change.3 Creditor contact information.

A Comparisons table reflecting an estimated 5 year payment breakdown, the APR, and the Total Interest Paid (TIP).

An Other Considerations table including the ECOA Right to Receive a Copy of the Appraisal statement, Assumption requirements, Late Payment information, and the Servicing Statement disclosure.

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

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

Alternative Costs at Closing Table

For transactions without a seller, an Alternative Costs at Closing table together with an Alternative Calculating Cash to Close table on page 2 of the LE can be used.

The Alternative Costs at Closing table contains a variation that places checkboxes with Estimated Cash to Close in order to indicate whether the cash is due from or to the consumer. If the Alternative Costs at Closing table is used, then the Alternative Calculating Cash to Close on page 2 of the LE also must be used.

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

Alternative Calculating Cash to Close Table

An optional Alternative Calculating Cash to Close table can be disclosed for transactions without a seller. This Alternative Calculating Cash to Close table must be used in conjunction with the optional Alternative Costs at Closing table on page 1 of the LE.

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

Adjustable Interest Rate (AIR) Table

Field DescriptionIndex + Margin The index upon which adjustments to the interest rate will be based and the margin that is added to the index

to determine the interest rate. The index must be described such that a consumer can reasonably identify it.For example, LIBOR may be used instead of the London Interbank Offered Rate. The margin should be disclosedas a percentage.

Initial Interest Rate Interest rate at consummation.

Minimum/Maximum Interest Rate

The minimum and maximum interest rate for the loan after any introductory period expires.

Change Frequency • First – month of the first rate change after consummation• Subsequent – frequency of adjustments after the initial adjustment

Limits on Rate Changes • First – maximum possible change for the first rate change after consummation• Subsequent – maximum possible change after the initial adjustment

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

Loan Estimate Delivery Requirements The creditor is responsible for ensuring that it delivers or places in the mail the LE no later than the third business day

after receiving the application. MDIA waiting periods apply; therefore the LE must also be delivered or placed in the

mail no later than the seventh business day before consummation of the loan. Refer to the TILA MDIA Policy for

further information.

Loan Estimate Overview – Delivery

Type Description Proof of Delivery

In Person If the application is taken face to face, it is acceptable to deliver the disclosure in person.The disclosure is considered “delivered” once the disclosure has been given to the borrower.

Signed and dated copy of the disclosure.

Email Email delivery is allowed provided it is E-Sign compliant with an FAMC approved vendor.NOTE: If email delivery was not in compliance with the E-Sign Act, all timing requirementsdefault to First Class Mail.

E-Sign compliant acknowledgement received by the creditor.

Overnight It is acceptable to deliver the LE via UPS, Fed-Ex, or other national delivery services. Thedisclosure is considered “delivered” once the overnight package containing the disclosurehas been signed for.

Signed and dated copy of the delivery notice

1st Class Mail Delivery of the disclosure via first class mail delivery is acceptable. For timing purposes, four(4) business days for mailing including the day the document was mailed is required. Thedocument is assumed to be/considered “delivered” on the 4th day. For example, if thedocument was mailed on Monday, count Monday, Tuesday, Wednesday and Thursday of thesame week. Delivery is assumed to be on Thursday.

No proof of delivery is required; however a copy of the disclosure must still be maintained in the file.

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

Loan Estimate Timing Requirements The Loan Estimate must be delivered or placed in the mail to the consumer no later than the third

business day after the creditor receives the application.

Application DefinitionAn application means the submission of a consumer’s financial information for purposes of obtaining an extension of

credit. An application consists of the submission of the following six pieces of information:

• 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 sought.

An application can be submitted in written, electronic, and/or oral format.

NOTE: For brokered transactions, the 3 business days start when the broker receives the information.

Business Day DefinitionFor purposes of providing the LE, a business day is a day on which the creditor’s offices are open to the public for

carrying out substantially all of its business functions.

FAMC business days are defined as Monday through Friday. Saturday and/or Sunday are not considered business.

Loan Estimate Overview – Timing

PROPRIETARY NON-PUBLIC INFORMATION - NOT TO BE COPIED OR DISTRIBUTED WITHOUT CONSENT

Notice of Intent to ProceedAfter the consumer has received the initial LE, the issuer of the LE is responsible for obtaining and documenting the consumers expressed intent to proceed with the transaction.

Collection of Documentation No other information and/or documentation may be collected or verified as a condition to provide the

LE. This includes, but is not limited to:

• Income documentation;• Ability to repay documentation; and

• Asset documentation.

Collection of Fees At the time an initial LE is issued, no monies can be collected from the applicant(s) except for the actual

cost of a credit report. Refer to the TILA MDIA policy for specific fee collection requirements.

Brokered TransactionsWhile TRID requirements do allow a broker to provide the LE to the consumer on behalf of the creditor, FAMC will only allow the broker to generate an LE through FAMC’s Broker Portal.

Loan Estimate Overview – Other Important Information