As it should be with everything we do, it is important to start at the beginning. Sometimes we get so wrapped up in what’s happening or going to happen, we jump in without looking where we leap. This can be dangerous.
With all the concentration on the upcoming TRID changes and the two new TRID forms, it’s important to be prepared to start at the beginning, the loan Application. The current rules for the GFE, indicate that a lender must provide the new Loan Estimate (LE) within 3 business days of receipt of a loan application. However, two important things come into play here; 1) what is considered “receipt” of the applications and 2) what is a “business” day?
A lender is considered to have a received a loan application when they have 6 specific items. These are:
- The consumer’s name
- The applicant’s income
- Their SS#
- A property address
- A verbal estimate of the property’s value
- The amount of the loan requested
When a lender has these 6 items, obtained verbal or otherwise, even if these are obtained in connection with a pre-approval, the lender is considered to have received a loan application. The lender is then required by law to issue the LE within 3 business days.
For issuance of the LE, a business day is a day on which the lender’s offices are open to the public for carrying on substantially all of its business functions. This usually would not include Saturday, but it could. Be careful.
What’s the big deal? Basically, the rules are the same as the current rules for the issuance of the GFE with one big exception: The definition of the loan application.
No longer will a lender be able to add “other” information or documentation that the lender may require. If you get the above 6 items, you have an application; no ifs, ands or buts…you gotta issue the LE.
This means a lender must have a way to identify when an originator obtains this data so that it can ensure the LE gets issued on time. If the lender offers an online application, this should trigger a notice/flag whenever this information is entered and be monitored, so the LE can be issued in a timely manner. Otherwise, the lender is in violation of the law. Not a good way to start.
A lender may phase in receipt of the 6 items to avoid the need to issue the LE. But, you must be careful when doing so. A lender, or its originator, may not intentionally omit or ignore items that may be presented to them by a consumer just to avoid issuance of the LE.
The best thing to do is gather the items and issue the LE timely. It doesn’t hurt to do so, even for preapprovals, as it provides the opportunity for the company and/or its originators to work with the consumer to build a relationship by explaining the LE and the entire loan process. This helps to become a trusted advisor; the “go to” entity for any information and advice about the mortgage.
As an alternative, a lender may decide to exclude one of the items in their information request for a preapproval. An example would be either a property address or value. The lender can obtain the other information and do an analysis to provide the consumer with a maximum loan for which they could qualify.
The consumer can then work with the lender, and Realtor/Builder to find a property they like and can afford. Once they do, the lender can then complete the application and issue the LE. The preapproved buyer also helps the lender build better relationships with Realtors and Builders.
Know the rules, understand the rules, benefit from the rules, and play by the rules. Not just for the issuance of the LE, but for the entire loan process.
Just a little TRID-bit to help you on your way. Stay compliant my friends.