As part of the implementation of the final rules of the Dodd-Frank Act, one of the most contested issues regarding the changes under the Truth-In-Lending and Real Estate Settlement and Procedures Act Integration Disclosure (aka TRID) is the question of whether or not a lender can review loan documents prior to issuing a Loan Estimate. The Consumer Financial Protection Bureau has issued clarification on this and many other questions that lenders, realtors, closing agents, and borrowers have through the Federal Reserve System’s audio conference series on consumer compliance issues that can be found here: Index of TRID Questions Addressed During Webinars-2.
The short answer to the above question is yes. A lender CAN review loan documents prior to issuing a Loan Estimate if the borrower volunteers the information.
Borrowers: When shopping for a home loan, ask your loan officer for a Pre-Application Cost Estimate for any loan program you wish to consider. This is non-binding to the lender and allows you to view different options prior to deciding which loan program, rate, and terms are best for you. Information quoted is based on many assumptions including: loan amount, intended occupancy, credit score, property type, valuation, timing of rate lock, and whether or not your debt-to-income ratio falls under 43%. Changes to any of these assumptions may result in changes to quoted terms or access to loan programs.
Lenders: If you haven’t programmed Pre-Application Cost Estimates for your loan officers to assist borrowers in their selection process, you’re behind the 8-ball and may be exposing yourself to unnecessary compliance and fair lending risks. Also, take a moment and remember when you were buying your first home. Didn’t you want to see all the closing costs in writing before you made your buying decision? Before you gave a stranger your social security number? Allow your LOs to provide the proper tools for borrower decisioning and train your LOs to go over the above mentioned assumptions. With a clear explanation of risks, an educated borrower will appreciate the lesson and identify you’ve earned their business.
Sylvia M. Gutiérrez is author of Mortgage Matters: Demystifying the Loan Approval Maze. RealWorks Press: 2015. Available at Amazon, Barnes & Noble, iTunes, and independent booksellers everywhere. Distributed by Ingram.
Licensed and registered mortgage loan officer with NMLS id: 372427
Diversity & Inclusion Co-chair, NAMB – Association of Mortgage Professionals
Government Affairs Chair, South Florida Mortgage Bankers Association
Associate Member, National Association of Real Estate Editors