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Loan Estimate: Disclosing NO for the rate lock

Question: 
I have a question concerning the Rate Lock disclosure on the Loan Estimate. If we disclose “NO” for the Rate Lock and don’t set the rate until the Closing Disclosure is provided do we have to provide a Revised Loan Estimate before the loan closing? What if the interest rate does not change from the Loan Estimate to the Closing Disclosure?
Answer: 

We call this Fun with TRID! The regulation does not directly address the many different situations that occur so we have to figure out how to provide compliant disclosures in unusual situations. The disclosure format assumes that there is usually a rate lock. But this is not always true. So if you have no rate lock, you disclose “No” on the Loan Estimate, as you have properly done.

Then what happens when the closing is scheduled and the rate is set? (To avoid confusion, we are referring this as setting the rate rather than locking the rate which would have occurred earlier.)

When closing is scheduled and the rate is set, you must provide disclosures to the consumer three days before the actual settlement. This three-days-before-closing loan disclosure should contain the rate for the loan. After this disclosure is provided, you cannot change the rate – or anything else. The closing disclosure operates to inform the borrower of the actual interest rate. The three-day requirement gives the borrower time to look over the final terms and decide whether to go forward. There is no need for a new Loan Estimate. It would not provide any useful information that the borrower isn’t already getting on the closing disclosure.

If you do not have a WRITTEN rate lock agreement that has been executed by the creditor and the applicant, you have not officially locked the rate per the TRID requirements. You may very well honor the rate that is on that Loan Estimate and is also carried over to the Closing Disclosure. But the Rate Lock block for yes or no is NOT to be checked as YES unless you have executed a written rate lock agreement. A verbal commitment is not sufficient to check that box YES.

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First published on 05/22/2016

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