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Question: When disclosing the initial Loan Estimate on an unlocked loan, do we need to disclose the discount points that would be charged as if the loan were locked at the time the Loan Estimate was disclosed?
Answer: Yes, under the TILA-RESPA Integrated Disclosure (TRID) Rule, the disclosures always need to be made in “good faith”. Therefore, the rate and fees set forth on the Loan Estimate (LE) must be accurate (to the best of lender’s knowledge) on the day the disclosure is delivered to the borrower.
Omitting a discount fee or adding a credit for a rate that is inconsistent with the lender’s rate sheet on the day the LE is disclosed to the borrower, is deceptive and not in good faith. In essence, the lender would be making it appear to the borrower that the rate is available without a discount or with a credit, which would be inaccurate. Not only would these actions violate the spirit of TRID (viz., the “Know Before You Owe” consumer disclosure requirements), but it may also be considered an instance of Unfair, Deceptive, or Abusive Acts or Practices (UDAAP).
Michael Barone is director of legal and regulatory compliance for Lenders Compliance Group. He may be reached by phone at (516) 442-3456.