NORTH
AMERICAN
TITLE
COMPANY
Like Clockwork ®
www.nat.com/CFPB
UNDERSTANDING THE NEW
LOAN ESTIMATE AND CLOSING
DISCLOSURE FORMS
At
CLOSING DISCLOSURE
North American Title, we want to
make sure all of our customers
have the information they need to
understand the new Loan Estimate
and Closing Disclosure, the two
new mortgage disclosures that will go into effect
on August 1, 2015. This brochure will provide a brief
overview of the various sections of these two forms.
There are many disclosures required to transact
a mortgage. These disclosures were created
over many years under the auspices of different
federal regulators. In 2010, Congress passed the
Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act), which mandated
these disclosures be combined and streamlined
so it would be easier for consumers to understand
the terms of their loan and to shop for the best
loan terms.
The new forms were created to combine the
traditional Good Faith Estimate, Truth in Lending
disclosure and the HUD-1 Settlement Statement
currently required under the federal Truth in
Lending Act (TILA) and Real Estate Settlement
Procedures Act (RESPA). The new forms must be
used for most closed-end consumer mortgages.
However, certain types of loans, such as home
equity lines of credit, reverse mortgages, and
mortgages secured by a mobile home or by a
dwelling that is not attached to real property, must
continue to use current disclosure forms required
by TILA and RESPA.
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LOAN ESTIMATE
The Loan Estimate is provided to
the buyer within three business
days of applying for a mortgage
loan. It includes the terms of the
loan, the projected payments and
an estimate of the closings costs.
Since the Loan Estimate is uniform
from lender to lender, it can be used
to compare and shop around for the
best mortgage to fit a borrower’s
situation.
Under the new regulations, the
Closing Disclosure must be provided
to the borrower at least three business
days before he or she becomes
contractually obligated for the
loan (generally when the final loan
documents are signed). Just like the
Loan Estimate, the Closing Disclosure
lists information about the loan terms,
monthly payments and closing costs.
These are not estimates, however, but
the actual and final terms of the loan.
REMEMBER: The Closing Disclosure is designed to work with the Loan
Estimate so borrowers can easily compare the two documents and ensure
they are getting the terms promised to them.
IMPORTANT NOTICE REGARDING LIMITATION ON USE OF INFORMATION
The information in this brochure is provided for general educational purposes only and should
not be construed or relied upon as legal advice. This information is provided “as is” without any
representations or warranties, express or implied, including, but not limited to, any representation
that the information is complete, true, accurate, up-to-date or non-misleading. If you have
specific questions about any information provided herein, you should consult your attorney or
other professional legal services provider.
PA G E 1
APPLICANT, PROPERTY
AND LOAN INFORMATION
Identifies the borrowers, the
property address, the sale price
(or appraised value or estimated
value if the loan is a refinance), the
length of the loan and the terms.
LOAN ESTIMATE
LOAN TERMS
PROJECTED PAYMENTS
COSTS AT CLOSING
Lists the amount the borrower is
proposing to borrow, the interest
rate, and the monthly principal
and interest. Indicates whether
the loan has any special features
such as a prepayment penalty or
a balloon payment.
Combines the principal and
interest, mortgage insurance
and estimated escrow to show
the estimated monthly payment.
Escrow can include taxes,
homeowners insurance and other
assessments, if any.
The estimated closing costs and
the estimated cash the borrower
will need to close, which includes
closings costs plus the down
payment. (Explained in more
detail on page 2.)
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PA G E 2
LOAN ESTIMATE
ORIGINATION
CHARGES
Fees the lender
charges to process,
underwrite and
fund the loan.
SERVICES
YOU CANNOT
SHOP FOR
Fees for services
provided by
persons other
than the lender
but required by
the lender in order
to determine if it
will fund the loan.
SERVICES YOU
CAN SHOP FOR
Additional services
provided by persons
other than the lender
and required to finalize
the loan, but for
which the borrower
is permitted to select
his or her own service
providers.
TAXES AND OTHER
GOVERNMENT
FEES
Fees required by the local
or state government for
the transfer of property
or for recording the
mortgage in the
county records.
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PREPAIDS
Insurance, taxes
and other items
required to be
pre-paid at
the time of the
closing of the
mortgage.
INITIAL ESCROW
PAYMENT AT CLOSING
The lender requires the creation
of an escrow account from which
to pay various recurring periodic
payments, such as mortgage
insurance, homeowners insurance
and property taxes. This is a listing
of initial payments into the escrow.
OTHER
Additional payments,
such as homeowner’s
association fees
associated with transfer
of ownership, home
warranty fees, real
estate commissions and
owner’s title insurance.
CALCULATING CASH
TO CLOSE
Cash the borrower will
need to bring to the
closing, including the
total closing costs plus the
borrower’s down payment.
It can also include any
credits or adjustments.
PA G E 3
LOAN ESTIMATE
LENDER INFORMATION
COMPARISONS
OTHER CONSIDERATIONS
CONFIRM RECEIPT
Contact and licensing
information for the lender,
loan officer and, if applicable,
mortgage broker.
This information provides a
basis of comparison should
the borrower choose to shop
further for a loan.
This section details particular
requirements of the lender and
may change from lender to
lender.
The borrower signs to confirm
that he or she has received the
Loan Estimate. This is NOT a
final loan application and does
NOT obligate the borrower to
accept the loan.
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PA G E 1
CLOSING,
TRANSACTION
AND LOAN
INFORMATION
The closing date and
location, information
about the transaction,
and the loan length
and terms.
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CLOSING DISCLOSURE
LOAN TERMS
PROJECTED PAYMENTS
COSTS AT CLOSING
The amount to be
borrowed, the interest
rate, and the cost of
the monthly principal
and interest. Indicates
whether the loan has a
prepayment penalty or
a balloon payment.
The monthly principal and interest payments. This number,
combined with the mortgage insurance and monthly escrow
payment, equals the estimated total monthly payment. Since
escrow requirements can change over time with the increase of
property taxes or homeowner’s insurance, the escrow portion of
the payment can vary from year to year. Not all fees are paid out
of escrow. In this example, the homeowner’s association fees are
not paid out of escrow and are the responsibility of the borrower.
Total closing costs and
the estimated cash the
borrower will need to
close, which includes
closing costs plus the
down payment. This is
explained in more detail
on page 2.
PA G E 2
CLOSING DISCLOSURE
CLOSING COST
DETAILS
This page details all of
the final closing costs,
who is responsible
for each fee and what
fees have already
been paid.
ORIGINATION
CHARGES
Fees the
lender charges
to process,
underwrite and
fund the loan.
SERVICES
BORROWER DID
NOT SHOP FOR
Fees for services
the lender
ordered to make
an underwriting
determination.
SERVICES
BORROWER DID
SHOP FOR
Additional services
required by the
lender but selected
by the borrower.
TAXES AND OTHER
GOVERNMENT FEES
Fees required by the local
and state government for
the transfer of property or
for recording the mortgage
in the county records.
PREPAIDS
Fees the borrower
is required to pay
up front, such
as homeowner’s
insurance, mortgage
insurance,
pre-paid interest
and property taxes.
INITIAL ESCROW
PAYMENT AT CLOSING
The lender requires the creation
of an escrow account from
which to pay future amounts
due for mortgage insurance,
homeowners insurance and
property taxes. This is a listing of
initial payments into the escrow.
OTHER
Other payments,
such as homeowner’s
association fees,
home warranty
fees, real estate
commissions
and owner’s title
insurance.
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PA G E 3
CALCULATING CASH TO CLOSE
Cash the borrower will need to bring to the
closing, and includes the total closing costs
plus the borrower’s down payment. It can
also include any credits or adjustments.
8
SUMMARIES OF TRANSACTION
Summarizes the transaction for both the
buyer and the seller.
CLOSING DISCLOSURE
CALCULATION
Cash the borrower must bring to the closing,
and how much the seller will be paid after
all mortgages, judgments, liens and fees due
from seller are paid at the closing.
PA G E 4
CLOSING DISCLOSURE
LOAN DISCLOSURES
ESCROW ACCOUNT
ESCROW ACCOUNT DETAILS
FUTURE CONSIDERATIONS
Special features of the loan
that are required to be
disclosed to the borrower.
Explanation of the purpose
of an escrow account.
Fees required upfront to provide a
“cushion” for the escrow account and
the portion of the monthly payment
that is put towards escrow. It also lists
those fees that are NOT in escrow and
will be paid directly by the borrower.
Additional information about the escrow
account, including what changes may
occur in the escrow account in the future
and your responsibility to make sure taxes
and insurance are paid.
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PA G E 5
10
CLOSING DISCLOSURE
LOAN CALCULATIONS
OTHER DISCLOSURES
CONTACT INFORMATION
CONFIRM RECEIPT
The total cost to the
borrower over the life of
the loan.
Additional general disclosures
about the loan.
Important contact information for
the service providers who assisted
in the property purchase (if
applicable), as well as processing,
funding and closing of the loan.
The borrower signs to confirm that
he or she has received the Closing
Disclosure. This does NOT obligate
the borrower to accept the loan.
TITLE
ESCROW
WHAT IS TITLE INSURANCE?
WHAT IS ESCROW?
Over the years with each new possession of a property, events
affecting the title can take place – such as a refinancing, a tax lien, an
encroachment by a neighbor, or the marriage, divorce or death of an
owner. That’s the case even when buying a newly built home.
Escrow is the depositing of funds and documents with a neutral
third party for delivery upon completion of the terms of the escrow
instructions. When the parties deliver documents and money to the
Escrow Officer, we say the documents are held “in escrow.” Each of
the principals of the escrow (seller, buyer and lender) provide written
instructions setting out the conditions under which further delivery
is to be made.
When a buyer and seller agree on a home or land purchase transaction,
a title professional searches public records to see if any outstanding
issues could affect the new buyer’s rights. This process, called a title
search, provides warnings of title flaws that must be resolved before
the property changes hands. At that point, title professionals work to
remedy problems that could prevent the new owners from having a
“clear” title.
However, the best title search performed by the most experienced
and capable experts cannot ensure that no title hazards exist. To help
protect the homebuyer, the title professional issues a title insurance
policy to insure against most of these unforeseen problems.
There are two kinds of title insurance policies. An Owner’s Policy assures
the title company will be there to help pay valid claims and cover the
costs of defending an attack on the homebuyer’s title. A homebuyer
must request an Owner’s Policy, since it isn’t always an automatic part
of the closing process. In addition, the mortgage lender has a great
financial interest in the property. A Loan Policy ensures unforeseen
title problems will not negatively impact a lender’s rights under the
mortgage agreement.
In addition, it’s important to understand title insurance is different
from other kinds of insurance, such as homeowners or auto insurance.
The premium paid just once for title insurance buys coverage that
lasts the entire time the homebuyers or their heirs own the home.
The common use of an escrow is to enable the parties in a real estate
transaction to deal with each other with less risk, since the escrow
holder acts as custodian for funds and documents, as well as the
clearing house for payment of all demands.
Typically, an escrow begins with the Escrow Officer opening the order
for title work. Based on the information provided, North American
Title searches all public records relating to the property and prepares
either a preliminary report or a commitment, providing the customer
with the conditions on which the title insurer will issue a policy.
Upon receipt of the preliminary report or commitment, an analysis
is made to determine the necessary action and documents required
to complete the transaction: demands for satisfaction of liens
not acceptable to buyer and/or lender; documents for recording;
instructions; and requirements of the new lender. In most areas,
buyers and sellers instructions are prepared for signature from the
information gathered. When all the title and financial requirements
are met, and instructions from all parties can be fully complied
with, the escrow is said to be “in perfection” and can close. Then the
financial settlement takes place, the documents are recorded and the
title insurance policies are issued.
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IMPORTANT NOTICE REGARDING LIMITATION
ON USE OF INFORMATION
The information in this brochure is provided for general
educational purposes only and should not be construed
or relied upon as legal advice. This information is provided
“as is” without any representations or warranties, express or
implied, including, but not limited to, any representation
that the information is complete, true, accurate, up-to-date
or non-misleading. If you have specific questions about
any information provided herein, you should consult your
attorney or other professional legal services provider.
Contact your professionals at North American Title today!
NORTH
AMERICAN
TITLE
COMPANY
Cherry Creek/Commercial | 303.316.3400
Like Clockwork ®
DTC | 303.220.1112
Colorado Springs - Downtown | 719.578.4100
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Greeley | 970.304.9012
Highlands Ranch | 303.683.3100
Lakewood | 303.920.3680
Loveland | 970.679.1699
Westminster | 303.920.3677
www.nat.com/Colorado
www.nat.com/CFPB
©2015 North American Title Group and its subsidiaries. All Rights Reserved. North AmericanV Title Group and its subsidiaries are not
responsible for any errors or omissions, or for the results obtained from the use of this information. | CO CFPB 15-7084 R 04.16.15