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#2248517 - 02/01/21 11:49 PM Valid Changed Circumstance?
Vive Accommodare Offline
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Vive Accommodare
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Compliance
Trying to create a flow-chart of sorts regarding our changed circumstance process and we're struggling on the topic of reducing the loan amount due to the max cash-out being exceeded based on the loan program. Would this fall under a valid changed circumstance?
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#2248520 - 02/02/21 11:49 AM Re: Valid Changed Circumstance? Vive Accommodare
rlcarey Online
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rlcarey
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Galveston, TX
A changed circumstance involves an increase in the fees subject to the 0% or 10% aggregate tolerance tests. Lowering the loan amount usually does not cause that to occur.
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#2248568 - 02/02/21 09:07 PM Re: Valid Changed Circumstance? Vive Accommodare
Truffle Royale Offline

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I think tying the definition of a changed circumstance to an increase in fees only causes understanding issues for people.
First you have to determine if you have a valid CC.
It would seem to me that you should have known from the time of original application that the loan amount requested minus the balance of the loan being paid off was going to exceed your program limits so I would say you do not have a valid CC. At this point, the issue is over. It doesn't matter if a fee goes up or down. You don't have the valid CC to continue on.

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#2248577 - 02/02/21 09:36 PM Re: Valid Changed Circumstance? Vive Accommodare
Dan Persfull Offline
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It would seem to me that you should have known from the time of original application that the loan amount requested minus the balance of the loan being paid off was going to exceed your program limits

Program is limited to 75% LTV cash out. Based on estimated value at the time of application the 75% LTV was met. Appraisal comes back lower than estimated so now the LTV is 78% which exceeds the program limitation.
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#2248636 - 02/03/21 07:08 PM Re: Valid Changed Circumstance? Vive Accommodare
John Burnett Offline
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John Burnett
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Cape Cod
Thanks, Dan.

That could result in a reduced loan amount to get back under that 75% cap. But again, it is not technically a changed circumstance unless the result is an increase in a cost triggered by the reduced loan amount and the increase will result in a tolerance violation.

See 1026.19(e)(3)(iv)(A) and (B).
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#2248637 - 02/03/21 07:21 PM Re: Valid Changed Circumstance? Vive Accommodare
Dan Persfull Offline
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Bloomington, IN
Oh I agree John. I was just giving an example of what could have happened to cause the loan amount to have to be reduced after the initial disclosures.

At the time of the application they (the MLO) were basing everything on the information known at that time which made it appear the applicant qualified for the program. That information changed when the appraisal came back with a lower value than estimated causing them to either having to reduce the loan amount or change programs.
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#2248835 - 02/08/21 03:51 PM Re: Valid Changed Circumstance? Vive Accommodare
Truffle Royale Offline

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My answer was to the information provided in the OP's question. It didn't state any triggering issue for the max cash out being more than the loan program allows. Without one the OP does not have a valid CC.

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#2248924 - 02/09/21 06:56 PM Re: Valid Changed Circumstance? Vive Accommodare
John Burnett Offline
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John Burnett
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Cape Cod
A changed circumstance involves (1) a change in some aspect of the loan or borrower that had not occurred at the time the last LE was issued or the lender was not made aware of until after the last LE* was issued AND (2) an increase in a closing cost (or reduced lender credit) estimate that exceeds a tolerance limit for that cost (or group of costs for "10% bucket" items) resulting from that changed aspect. Both (1) and (2) must apply.

* - The lender must provide good faith estimates. A lender error cannot be "fixed" as a changed circumstance, nor can the lender's failure to make a good faith effort to determine and use current information.
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