Chapter 22 — Exercises
Items marked † have worked solutions in the answers appendix. Everything else is for your own practice, your study group, or your instructor. Assume the Linden Street file's frozen figures throughout unless an item says otherwise. Where an item asks about a current regulatory value, say what you would verify and where — "verify with your compliance department" is a complete and correct part of many of these answers.
A. Recall and definitions
22.1 Name the four disclosure forms TRID replaced, and identify which statute and which regulation each came from.
22.2 State both Regulation Z definitions of "business day," word for word as closely as you can, and give one everyday example of a day that is a business day under one and not the other.
22.3 † For each of the following, say which definition of "business day" governs: (a) delivering the Loan Estimate after a completed application; (b) the seven-business-day waiting period before consummation; (c) the presumption of receipt for a mailed Closing Disclosure; (d) the three-day period before consummation after Closing Disclosure receipt; (e) the right of rescission where one exists.
22.4 How many federal legal public holidays are named in the statute the precise definition refers to? Name as many as you can without looking.
22.5 What is the difference between the Loan Estimate's rate-lock expiration and its closing-costs expiration? Which one does a borrower lose money by missing?
22.6 List the ten lettered blocks (A through J) on page 2 of the Closing Disclosure and say in one phrase what each holds.
22.7 Name the five figures in the Loan Calculations box on page 5 of the Closing Disclosure.
22.8 Which two of those five also appear on the Loan Estimate, and on which page?
22.9 † State the three — and only three — changes that require a new three-business-day waiting period after a Closing Disclosure has been delivered.
22.10 What does a borrower's signature on the Confirm Receipt line of a Closing Disclosure establish, and what does it not establish?
B. Business-day counting
For every item in this section, show your count day by day. An answer without the count is not an answer.
22.11 † A complete application is received on Wednesday. The creditor's offices are open Monday through Friday and closed on weekends. What is the deadline to deliver or place the Loan Estimate in the mail?
22.12 Same facts as 22.11, except the creditor is a bank whose branches are open Monday through Saturday for substantially all business functions. Does the deadline change? Explain.
22.13 † A Loan Estimate is hand-delivered on Thursday. No federal holiday falls in the next three weeks. What is the earliest date consummation may occur under the seven-business-day rule?
22.14 A Closing Disclosure is hand-delivered and signed for on Monday. What is the earliest date of consummation?
22.15 † A Closing Disclosure is hand-delivered and signed for on Friday. What is the earliest date of consummation? Compare your answer to 22.14 and explain why the two counts differ by more than the four calendar days between Monday and Friday.
22.16 A Closing Disclosure is placed in the mail on Tuesday and the creditor has no evidence of actual receipt. What is the earliest date of consummation? How many business days did the mailing consume in total?
22.17 † A Closing Disclosure is hand-delivered on the Tuesday before Thanksgiving. What is the earliest date of consummation? Show which days you excluded and why.
22.18 On the Linden Street file, the Closing Disclosure was received on day 48 and closing was day 51. Reproduce the count. Then state what the earliest closing date would have been if the Closing Disclosure had been received one day later, on day 49.
22.19 A borrower asks to close on a Saturday. The Closing Disclosure will be hand-delivered on Wednesday. Is a Saturday closing permissible under the three-business-day rule? Under what circumstances would your answer change?
22.20 Explain, in two sentences a real estate agent would understand, why mailing a Closing Disclosure typically consumes about six business days rather than three.
C. Tolerance classification
22.21 † Classify each of the following into zero tolerance, ten percent cumulative, or unlimited. For any item where the answer depends on a fact not given, say what the missing fact is.
(a) underwriting fee · (b) appraisal fee · (c) recording fees · (d) prepaid interest · (e) transfer taxes · (f) owner's title insurance the borrower elected to buy · (g) discount points · (h) the first-year homeowners insurance premium · (i) a survey fee · (j) the initial escrow deposit · (k) a rate-lock extension fee · (l) the credit report fee · (m) a settlement agent's fee · (n) a pest inspection the creditor did not require
22.22 Two charges sit one line apart in Section C of a Closing Disclosure. One is a ten-percent-bucket item and the other has unlimited tolerance. Explain how that is possible and what document in the file determines the answer.
22.23 † A Loan Estimate discloses: recording fees \$220, lender's title insurance \$1,400, settlement fee \$650, and a survey fee \$500. The borrower selected the title company and the settlement agent from the creditor's written list, and selected the surveyor independently. At closing the charges are: recording \$265, lender's title \$1,455, settlement \$700, survey \$610. Run the cumulative test. Is there a violation? If so, state the exact refund.
22.24 In 22.23, the recording fee rose 20.45%. Explain to a colleague, in three sentences, why that number is not the test.
22.25 † A Loan Estimate discloses an underwriting fee of \$1,095. At closing it is \$1,295, and there is no documented changed circumstance. State the bucket, the violation, the exact amount owed, the form that must be corrected, and the deadline.
22.26 A creditor gave the borrower a written list of service providers that named exactly one title company, and the borrower used it. Argue both sides of whether that charge belongs in the ten-percent bucket. What would you ask your compliance department?
D. Changed circumstances
22.27 † For each event, state whether it is a valid changed circumstance permitting a revised Loan Estimate, and if so which category it falls under; if not, say who pays.
(a) The rate was floating and is now locked, adding a discount point. (b) The lock expires because the file took longer than the lock term, and an extension costs 0.250 point. (c) The appraisal discovers the property is in a flood zone, requiring flood insurance and a second inspection fee. (d) The borrower asks to switch from a 30-year fixed to a 15-year fixed. (e) The title search reveals a prior owner's lien, which the seller pays to release. (f) The county reassesses the property after sale and the escrow deposit rises \$45. (g) The borrower's employer confirms a promotion, raising qualifying income. (h) The borrower did not indicate intent to proceed until fourteen business days after receiving the Loan Estimate.
22.28 A revised Loan Estimate is issued because the rate was locked. A colleague says, "Good — now all our numbers reset." Correct them, and say precisely which charges did and did not reset.
22.29 † On the Linden Street file, the lock extension was purchased on day 42 and the borrowers' undisclosed furniture debt was discovered on day 44. Explain in a short paragraph why those two dates decide who pays \$914.38, and what would have been different — and what would still have been uncertain — if the dates had been reversed.
22.30 Write the one-sentence changed-circumstance note you would enter into the loan origination system for item (c) in 22.27. It must name what changed, when the creditor learned it, and which charge it justifies.
E. Read the document and find the problem
22.31 † A Closing Disclosure page 2 shows: A \$4,910.00, B \$742.00, C \$2,180.00, D \$7,822.00, E \$198.00, F \$1,940.00, G \$1,880.00, H \$900.00, I \$4,918.00, J \$12,750.00, lender credits \$0.00. Find the error, name which subtotal is wrong, and give the correct figure.
22.32 A Closing Disclosure page 5 shows Amount Financed \$402,180.00, Finance Charge \$561,440.00, and Total of Payments \$964,220.00. Is the box internally consistent? Show the check.
22.33 A borrower calls, alarmed: "The APR on my Closing Disclosure is 7.253% but my rate is 6.625%. Which one am I actually paying?" Write your answer in no more than sixty words.
22.34 † A Closing Disclosure shows a lock-extension fee of \$914.38 in Section A. The Loan Estimate's Section A total was \$5,486.25 and there is no documented changed circumstance. Draft the three-sentence memo you would send your closer before the package goes out.
F. Does this restart the three-day wait?
22.35 † The Closing Disclosure was received Tuesday; closing is Friday. For each event occurring on Wednesday, state whether it requires (i) nothing, (ii) a corrected Closing Disclosure received at or before consummation, or (iii) a new three-business-day waiting period. Give your reason in one line each.
(a) The seller agrees to increase their closing-cost credit by \$1,200. (b) The borrower switches from a 30-year fixed to a 5/6 ARM. (c) The recording fee comes back \$38 higher than disclosed. (d) A prepayment penalty is added at the investor's request. (e) The borrower's middle name is misspelled on page 1. (f) The borrower decides to bring an extra \$5,000 and reduce the loan amount by that much, changing the APR by 0.04 percentage points. (g) The homeowners insurance premium comes in \$210 higher. (h) The loan term changes from 30 years to 25 years at the borrower's request.
22.36 In 22.35(f), the APR moved 0.04 percentage points. State the accuracy tolerance you are comparing that against for a regular transaction, and say what would have to be true for the answer to change.
22.37 A buyer's agent asks you to "just add the seller credit and we'll sign Friday like planned." Write the two sentences you say before you agree or refuse.
G. Judgment, ethics, and the borrower
22.38 † Your branch manager suggests that because the borrowers "will never notice," the \$914.38 lock extension should be added to Section A of the Closing Disclosure and, if anyone complains later, refunded. Write your response. Address the compliance exposure, the borrower's position three days before closing, and what you would do if the instruction were repeated.
22.39 The three-business-day waiting period exists for the borrower's benefit. Describe a specific way a loan officer can misuse it as operational buffer, and say what that costs the borrower even when nothing goes wrong.
22.40 A borrower with a genuine hardship asks to waive the three-business-day waiting period so they can close a day early. Describe the standard that applies, what the waiver must contain, and three situations that people routinely — and wrongly — believe qualify.
H. NMLS-style exam questions
22.41 † A creditor whose offices are open Monday through Friday receives a complete application on Thursday, October 2. Under the general definition, the Loan Estimate must be delivered or placed in the mail no later than: (a) Monday, October 6 · (b) Tuesday, October 7 · (c) Wednesday, October 8 · (d) Saturday, October 4
22.42 Which of the following charges carries a zero tolerance? (a) the initial escrow deposit · (b) prepaid interest · (c) transfer taxes · (d) a survey fee where the borrower selected the surveyor independently
22.43 A consumer receives a Closing Disclosure on Wednesday. Consummation may occur no earlier than: (a) Friday · (b) Saturday · (c) Monday · (d) Tuesday
22.44 † Which change to a delivered Closing Disclosure requires a new three-business-day waiting period? (a) the cash to close increases by \$2,400 · (b) the loan product changes from fixed to adjustable · (c) the seller credit increases · (d) a recording fee increases by 30%
22.45 A creditor must retain the Closing Disclosure and documents related to it for: (a) 25 months · (b) 2 years · (c) 3 years · (d) 5 years
I. The Loan File extension
22.46 † Rebuild the Chapter 22 tolerance table for the Linden Street file from the Closing Disclosure in §22.4 without looking at the completed version. Classify all seventeen charges, run the ten-percent cumulative test in dollars, and state the cushion remaining.
22.47 Suppose the Linden Street file's lock had been taken for 45 days on day 12 instead of 30, at a cost of 0.125 point. Compute that cost, compare it to the \$914.38 actually spent, and write two sentences on what the comparison says about how you would price lock terms on a file with eleven conditions and a forty-one-day contract.
22.48 The borrowers compared the Closing Disclosure to the day-5 Loan Estimate rather than the day-12 revision, and saw cash to close rise \$1,773.82. Write the ninety-second phone call. You may not use the words "tolerance," "changed circumstance," or "baseline."
22.49 † Extend the file: assume the lender had charged the \$914.38 and the borrowers had funded it. State the borrowers' cash to close at the table, the exact refund owed, the deadline in calendar days and as a date given an October 24 closing, and what the corrected Closing Disclosure must show.
22.50 Draw the day 45 to day 51 portion of the calendar from memory, marking weekends and the three-business-day count, and write one sentence explaining what the weekend cost this file.