Frequently Asked Questions

Know Before You Owe (KBYO or TRID)

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Closing Disclosure – Variances versus Loan Estimate

occurring after consummation. If, during the 30-day period following consummation, an event in connection with the settlement of the transaction occurs that causes the disclosures required under paragraph (f)(1)(i) of this section to become inaccurate, and such inaccuracy results in a change to an amount actually paid by the consumer from that amount disclosed under paragraph (f)(1)(i) of this section, the creditor shall deliver or place in the mail corrected disclosures not later than 30 days after receiving information sufficient to establish that such event has occurred.

Changes due to clerical errors. A creditor does not violate paragraph (f)(1)(i) of this section if the disclosures provided under paragraph (f)(1)(i) contain non-numeric clerical errors, provided the creditor delivers or places in the mail corrected disclosures no later than 60 days after consummation.

Refunds related to the good faith analysis. If amounts paid by the consumer exceed the amounts specified under paragraph (e)(3)(i) or (ii) of this section, the creditor complies with paragraph (e)(1)(i) of this section if the creditor refunds the excess to the consumer no later than 60 days after consummation, and the creditor complies with paragraph (f)(1)(i) of this section if the creditor delivers or places in the mail corrected disclosures that reflect such refund no later than 60 days after consummation.

Inaccurate APR is defined under Regulation Z (§1026.18 & §1026.22) and depends on whether the loan is a “regular” (.125%) or "irregular" (.25%) transaction.

Refund of fees paid in excess of actual amount may be shown on the closing disclosure as lender credit. In addition, a statement regarding the differences with a reference to the variation compared to the Loan Estimate must be prominently displayed identifying the section in which the consumer can identify this difference.

If amounts paid by the consumer exceed the amounts specified in the loan estimate, the creditor complies with the good faith estimate requirements if the creditor refunds the excess to the consumer no later than 60 days after consummation, and the creditor complies with the closing disclosure requirements if the creditor delivers or places in the mail corrected disclosures that reflect such refund no later than 60 days after consummation.

To conduct the good faith analysis required under §1026.19(e)(3)(i) and (ii) the creditor should use unrounded numbers to compare the actual charge paid by or imposed on the consumer for a settlement service with the estimated cost of the service. It’s recommended that you develop a method for performing these calculations either by customizing a solution using your Loan Origination System (LOS) or in a manner separate from the LOS.

See response to previous question regarding when the APR becomes inaccurate. You should additionally seek legal counsel or your compliance expert’s policy guidance regarding this scenario, as well as consult with any investor policies if you sell loans in the secondary market.

Fees can decrease for all categories except for Lender Credits.

When an interest rate is locked between the consumer and the creditor, a revised Loan Estimate must be provided within three business days from the date of rate locking. If there are revisions to interest rate dependent charges (meaning: the revised interest rate, the points disclosed pursuant to §1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms), this must be reflected on the revised Loan Estimate. That being said, there is no prohibition on increasing or adding a Lender Credit upon delivery of the Closing Disclosure (rather than the Loan Estimate). See next response also.

Increasing (or in this case adding) a Lender Credit is allowable under Regulation Z which states in part, “For example, if the creditor discloses a $750 estimate for "lender credits" pursuant to §1026.19(e), but only $500 of lender credits is actually provided to the consumer, the creditor has not complied with §1026.19(e)(3)(i) because the actual amount of lender credits provided is less than the estimated "lender credits" disclosed pursuant to §1026.19(e), and is therefore, an increased charge to the consumer for purposes of determining good faith under §1026.19(e)(3)(i). However, if the creditor discloses a $750 estimate for "lender credits" identified in §1026.37(g)(6)(ii) to cover the cost of a $750 appraisal fee, and the appraisal fee subsequently increases by $150, and the creditor increases the amount of the lender credit by $150 to pay for the increase, the credit is not being revised in a way that violates the requirements of §1026.19(e)(3)(i) because, although the credit increased from the amount disclosed, the amount paid by the consumer did not. However, if the creditor discloses a $750 estimate for "lender credits" to cover the cost of a $750 appraisal fee, but subsequently reduces the credit by $50 because the appraisal fee decreased by $50, then the requirements of §1026.19(e)(3)(i) have been violated because, although the amount of the appraisal fee decreased, the amount of the lender credit decreased.” In disclosing Lender Credit’s in “good faith” Regulation Z additionally states, “For purposes of conducting the good faith analysis required under §1026.19(e)(3)(i) for lender credits, the total amount of lender credits, whether specific or non-specific, actually provided to the consumer is compared to the amount of the "lender credits" identified in §1026.37(g)(6)(ii). The total amount of lender credits actually provided to the consumer is determined by aggregating the amount of the "lender credits" identified in §1026.38(h)(3) with the amounts paid by the creditor that are attributable to a specific loan cost or other cost, disclosed pursuant to §1026.38(f) and (g).”

If a Lender Credit is used to offset an excess limitation on a fees, Commentary ¶38(h)(3)-2 states that if a Lender Credit is used to offset fees in violation of stated limitations they “are disclosed pursuant to §1026.38(h)(3), along with a statement that such amount was paid to offset an excess charge, with funds other than closing funds.” Additionally, Commentary ¶38(h)(3)-1 identifies that an excess amount and any credit to the consumer, “requires a statement that an increase in closing costs exceeds legal limits by the dollar amount of the excess and a statement directing the consumer to the disclosure of lender credits….”

If the APR becomes "inaccurate" under section §1026.22 of Regulation Z (“regular” (.125%) or "irregular" (.25%) transaction), then the three business day waiting period applies.

Yes. APR tolerances are not changing under this rule.

Under certain circumstances. The creditor shall not provide a revised Loan Estimate on or after the date on which the creditor provides the Closing Disclosure. The consumer must receive a revised Loan Estimate not later than four business days prior to consummation. If the revised Loan Estimate is not provided to the consumer in person, then the consumer is considered to have received the revised Loan Estimate three business days after the creditor delivers or places such version in the mail. If, however, there are less than four business days to consummation, creditors are in compliance if the revised disclosures are reflected in the Closing Disclosure. See below for illustrative examples:

  1. If the creditor is scheduled to meet with the consumer and provides the Closing Disclosure on Wednesday and the APR becomes inaccurate on Tuesday, then the creditor is in compliance by providing the Closing Disclosure reflecting the revised APR on Wednesday. However, the creditor is not in compliance if both a revised Loan Estimate reflecting the revised APR and the Closing Disclosure are provided on Wednesday.
  2. If the creditor is scheduled to email the Closing Disclosure to the consumer on Wednesday and the consumer requests a change to the loan that would result in a revised Loan Estimate on Tuesday, then the creditor is in compliance by providing the Closing Disclosure reflecting the consumer-requested changes on Wednesday. However, the creditor is not in compliance if both the revised Loan Estimate and also the Closing Disclosure are provided on Wednesday.

No, we have no information on the potential of such an event at this time.

Regulation Z states:

“As a general rule, the annual percentage rate shall be considered accurate if it is not more than 1/8 of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.

In an irregular transaction, the annual percentage rate shall be considered accurate if it is not more than ¼ of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.

For purposes of paragraph (a)(3) of this section, an irregular transaction is one that includes one or more of the following features: multiple advances, irregular payment periods, or irregular payment amounts (other than an irregular first period or an irregular first or final payment).

Mortgage loans. If the annual percentage rate disclosed in a transaction secured by real property or a dwelling varies from the actual rate determined in accordance with paragraph (a)(1) of this section, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, the disclosed annual percentage rate shall also be considered accurate if:

The rate results from the disclosed finance charge; and the disclosed finance charge would be considered accurate under §1026.18(d)(1) or §1026.38(o)(2), as applicable; or for purposes of rescission, if the disclosed finance charge would be considered accurate under §1026.23(g) or (h), whichever applies.”

Yes. A creditor shall retain evidence of compliance with the requirements of §1026.19(e) and (f) for three years after the later of the date of consummation, the date disclosures are required to be made, or the date the action is required to be taken. A creditor shall retain each completed Closing Disclosure, and all documents related to such disclosure, for five years after consummation. The creditor must retain evidence that it performed the required actions, as well as made the required disclosures. This includes, for example, evidence that the creditor properly differentiated between affiliated and independent third-party settlement service providers for determining good faith under §1026.19(e)(3).

Section 1026.19(e)(3)(ii) provides that if the creditor requires a service in connection with transaction and permits the consumer to shop for that service, but the consumer either does not select a settlement service provider or chooses a settlement service provider identified by the creditor on the list, then good faith is determined pursuant to §1026.19(e)(3)(ii) (10% category), instead of §1026.19(e)(3)(i) (0% category). For example, if a creditor discloses an estimated fee for an unaffiliated settlement agent and permits the consumer to shop for that service, but the consumer either does not choose a provider or chooses a provider identified by the creditor on the written list provided pursuant to §1026.19(e)(1)(vi)(C), then the estimated settlement agent fee is included with the fees that may, in aggregate, increase by no more than 10% for the purposes of §1026.19(e)(3)(ii). If, however, the consumer chooses a provider that is not on the written list, then good faith is determined according to §1026.19(e)(3)(iii). If, however, the creditor identifies on the written list providers services for which the consumer is not permitted to shop, that service would remain in the 0% tolerance category.

Yes, there are some variance differences effective on 10/3/15 for applicable loans under the new rule. Here are the new variances:

Variance Categories

  • Zero % Variance Category
    • Fees paid to creditor or mortgage broker
    • Fees paid to affiliate of creditor or mortgage broker
    • Fees paid for services for which consumer not permitted to shop
    • Transfer Taxes
    • Lender Credits
  • 10% Variance Category (Aggregate Variance)
    • Recording Fees
    • Fees paid for 3rd-party services consumer permitted to shop for
  • Charges that Can Change
    • Prepaid interest
    • Property insurance premiums
    • Amounts placed into escrow
    • Fees paid to 3rd-party service providers selected by consumer not on list provided by creditor
    • Fees paid for 3rd-party services not required by creditor. These fees may be paid to affiliates.

To conduct the good faith analysis required under §1026.19(e)(3)(i) and (ii), the creditor should use unrounded numbers to compare the actual charge paid by or imposed on the consumer for a settlement service with the estimated cost of the service. It’s recommended that you develop a method for performing these calculations either by customizing a solution using your Loan Origination System (LOS) or in a manner separate from the LOS.



Disclaimer: The following information is intended for general information purposes with the goal of assisting ICE Mortgage Technology’s customers in complying with the new KBYO regulations. This information is provided as a courtesy to ICE Mortgage Technology’s customers and ICE Mortgage Technology makes no representation or warranty regarding the accuracy of the information set forth herein, and you may not rely on this information to ensure your company’s compliance with the KBYO regulations. This FAQ should not be construed as legal advice or opinion on any specific facts or circumstances, including the application of the KBYO regulations. You are advised to consult your own compliance staff or attorney regarding your specific residential mortgage lending questions or situation to ensure your compliance with all applicable laws and regulations.