Chapter 10: Mortgage Loan Disclosures
Overview
Mortgage loan disclosures are legally mandated documents
provided to borrowers throughout the loan process. These disclosures ensure
transparency, help borrowers understand their loan terms, and protect against
unfair lending practices. In this chapter, we explore key disclosure forms,
timing requirements, compliance rules, and best practices for mortgage
professionals.
Section 1: Importance of Disclosures
1.1 Purpose
- Educate
borrower about loan terms and costs
- Fulfill
federal and state regulatory requirements
- Establish
record of informed consent
1.2 Governing Laws and Agencies
- TILA
(Truth in Lending Act)
- RESPA
(Real Estate Settlement Procedures Act)
- TRID
Rule (TILA-RESPA Integrated Disclosure)
- CFPB
(Consumer Financial Protection Bureau)
Section 2: Key Disclosure Documents
2.1 Loan Estimate (LE)
- Replaces
GFE and initial TIL
- Delivered
within 3 business days of application
- Summarizes:
- Interest
rate
- Monthly
payment
- Closing
costs
- Prepayment
penalties
- Adjustable
rate features
2.2 Closing Disclosure (CD)
- Replaces
HUD-1 and final TIL
- Provided
3 business days before closing
- Includes:
- Final
loan terms
- Total
closing costs
- Cash
to close
- Escrow
information
2.3 Intent to Proceed
- Borrower
must express intent before fees (except credit report) are charged
- Typically
collected electronically or signed form
2.4 Affiliated Business Arrangement (AfBA)
- Required
if lender refers borrower to an affiliated service provider
- Must
disclose:
- Nature
of relationship
- Estimated
charges
- Statement
that use of provider is not required
2.5 Home Loan Toolkit
- Required
for purchase transactions
- Provided
within 3 days of application
- Educates
borrower about:
- Loan
process
- Key
terms
- Tips
for comparison shopping
Section 3: Additional Disclosures
3.1 ARM Disclosure
- Required
for adjustable-rate mortgages
- Must
explain:
- How
rate and payment can change
- Index
and margin
- Interest
rate caps and floors
3.2 CHARM Booklet
- Consumer
Handbook on Adjustable Rate Mortgages
- Required
with ARM loans
3.3 Servicing Disclosure Statement
- Advises
borrower if servicing may be transferred
- Provided
within 3 days of application
3.4 ECOA Notice
- Equal
Credit Opportunity Act
- Informs
borrower of non-discrimination rights
3.5 Adverse Action Notice
- Required
when credit is denied
- Explains
reason for denial
- Provides
credit score details and agency contact info
Section 4: TRID Timing Requirements
4.1 Loan Estimate Timing
- Must
be delivered within 3 business days of application
- Cannot
be provided before borrower submits application
4.2 Closing Disclosure Timing
- Must
be received 3 business days before closing
- New
CD required if:
- APR
changes by more than 1/8%
- Loan
product changes
- Prepayment
penalty added
4.3 Re-Disclosure Scenarios
- Changes
in circumstances may require revised LE or CD:
- Change
in loan amount
- Revised
property taxes
- Borrower
rate lock
Section 5: Compliance and Best Practices
5.1 Recordkeeping
- Lenders
must retain:
- LE
and CD for 3–5 years
- Intent
to proceed
- Affiliated
business disclosures
5.2 Delivery Methods
- May
use mail, email (with consent), or physical delivery
- Must
allow sufficient time for borrower review
5.3 Avoiding Violations
- Train
staff on TRID rules
- Use
checklists to confirm timing
- Monitor
rate locks and fees closely
Section 6: Real-World Examples
Case 1: Late LE Delivery
- Borrower
received LE on day 5 instead of day 3
- Resulted
in regulatory violation and fine
Case 2: Changed Loan Program
- Borrower
switched from FHA to Conventional
- New
LE and CD issued, and closing date delayed 3 days
Case 3: Affiliated Title Company
- Disclosure
showed lender ownership in title company
- Borrower
informed they may choose alternate provider
Final Notes
- Disclosures
are critical for compliance and borrower trust
- Timely,
accurate delivery is non-negotiable
- Always
double-check disclosure packages before sending
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