Demystifying the Loan Estimate 3-Day Rule: A Step-by-Step Guide

The questions and answers below pertain to compliance with the TILA-RESPA Integrated Disclosure Rule (TRID or TRID Rule).

This is a Compliance Aid issued by the Consumer Financial Protection Bureau. The Bureau published a Policy Statement on Compliance Aids, available here, that explains the Bureau’s approach to Compliance Aids.

Corrected closing disclosures and the three business-day waiting period before consummation

It depends on the type of change. As discussed below, there are three types of changes that require a creditor to ensure that the consumer receives a corrected Closing Disclosure at least three business days before consummation. For other types of changes, a creditor is not required to ensure that the consumer receives a corrected Closing Disclosure at least three business days before consummation, but is required to ensure that the consumer receives a corrected Closing Disclosure at or before consummation.

A creditor must ensure that a consumer receives an initial Closing Disclosure no later than three business days before consummation. 12 CFR § 1026.19(f)(1)(ii)(A). If the disclosed terms change after the creditor has provided the initial Closing Disclosure to the consumer, the creditor must provide a corrected Closing Disclosure to the consumer. Unless the change is one of the three types of changes discussed below, it is sufficient if the consumer receives the corrected Closing Disclosure at or before consummation. 12 CFR § 1026.19(f)(2)(i). This means that, for most types of changes, the creditor can consummate the loan without waiting three business days after the consumer receives the corrected Closing Disclosure.

However, the creditor must ensure that a consumer receives the corrected Closing Disclosure at least three business days before consummation of the transaction if: (1) the change results in the APR becoming inaccurate; (2) if the loan product information required to be disclosed under the TRID Rule has become inaccurate; or (3) if a prepayment penalty has been added to the loan. 12 CFR § 1026.19(f)(2)(ii). Any of these three types of changes triggers a new three business-day waiting period, and the creditor must wait three business days after the consumer receives the corrected Closing Disclosure to consummate the loan.

More information on the timing requirements for providing initial Closing Disclosures and corrected Closing Disclosures is available in Sections 11 and 12 of the TILA-RESPA Rule Small Entity Compliance Guide .

Updated Jan. 25, 2019

The answer depends on whether the overstated APR that was previously disclosed on the Closing Disclosure is accurate or inaccurate under Regulation Z. If the overstated APR is accurate under Regulation Z, the creditor must provide a corrected Closing Disclosure, but the creditor is permitted to provide it at or before consummation without a new three business-day waiting period. 12 CFR § 1026.19(f)(2)(i). If the overstated APR is inaccurate under Regulation Z, the creditor must ensure that a consumer receives a corrected Closing Disclosure at least three business days before the loan’s consummation (i.e., the inaccurate APR triggers a new three-business day waiting period). 12 CFR § 1026.19(f)(2)(ii).

A disclosed APR is accurate under Regulation Z if the difference between the disclosed APR and the actual APR for the loan is within an applicable tolerance in Regulation Z, 12 CFR § 1026.22(a). For transactions secured by real property or a dwelling, Regulation Z includes several tolerances that might apply, including a tolerance whereby the disclosed APR is considered accurate if it results from the disclosed finance charge being overstated. See 12 CFR § 1026.22(a)(4). For example, if the APR and finance charge are overstated because the interest rate has decreased, the APR is considered accurate. Thus, the creditor may provide the corrected Closing Disclosure to the consumer at consummation, and is not required to ensure that the consumer receives the corrected Closing Disclosure at least three business days before consummation.

Additional information related to APR accuracy is available in the Federal Reserve’s Consumer Compliance Outlook, First Quarter 2011 available at: www.consumercomplianceoutlook.org/2011/first-quarter/mortgage-disclosure-improvement-act/ .

Updated Jan. 25, 2019

No. Section 109(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (2018 Act) did not change the timing for consummating transactions if a creditor is required to provide a corrected Closing Disclosure under the TRID Rule.

Section 109(a) of the 2018 Act, which is titled “No Wait for Lower Mortgage Rates,” amends Section 129(b) of the Truth in Lending Act (TILA). TILA Section 129(b) governs when certain disclosures must be provided for high cost mortgages and the waiting periods for consummating a transaction after the creditor has provided those high cost mortgage disclosures. 15 U.S.C. § 1639. For more information on high cost mortgages, see Regulation Z, 12 CFR §§ 1026.31, .32, and .34.

As discussed in the FAQs above, if the APR disclosed pursuant to the TRID Rule becomes inaccurate, the creditor must ensure that a consumer receives the corrected Closing Disclosure at least three business days before consummation of the transaction. 12 CFR § 1026.19(f)(2)(ii). This requirement arises from TILA Section 128, 15 U.S.C. § 1638, and is separate and distinct from the waiting period requirement in TILA Section 129(b). Therefore, Section 109(a) of the 2018 Act did not create an exception to the waiting period requirement under TILA Section 128, and does not affect the timing for consummating transactions after a creditor provides a corrected Closing Disclosure under the TRID Rule.

However, as noted in the FAQ above, an overstated APR is not inaccurate if it results from the disclosed finance charge being overstated, and a creditor is not required to provide a new three-business day waiting period in these circumstances. Thus, if the disclosed APR decreases due to a decrease in the disclosed interest rate, a creditor is not required to provide a new three-business day waiting period under the TRID Rule.

Updated Jan. 25, 2019

Yes. As the Bureau noted in finalizing the 2017 changes to the TRID Rule, a creditor is deemed to be in compliance with the disclosure requirements associated with the Loan Estimate and Closing Disclosure if the creditor uses the appropriate model form and properly completes it with accurate content. 82 Federal Register 37,761-62. See also 15 U.S.C. § 1604(b).

Appendix H to Regulation Z includes blank model forms illustrating the master headings, headings, subheadings, etc., that are required by Regulation Z, 12 CFR §§ 1026.37 and 1026.38. These blank model forms for the Loan Estimate are H-24(A) and (G) and H-28(A) and (I). For the Closing Disclosure, they are H-25(A) and (H) through (J), and H-28 (F) and (J).

Appendix H to Regulation Z also includes non-blank model forms. These non-blank model forms for the Loan Estimate are H-24(B) through (F) and H-28(B) through (E). For the Closing Disclosure, they are H-25(B) through (G) and H-28(G) and (H).

To the extent that the appropriate model form is properly completed with accurate content, the safe harbor is met. The safe harbor applies even if the model form does not reflect the changes to the regulatory text and commentary that were finalized in 2017.

For example, the regulatory text provides that the percentage amount required to be disclosed on the Loan Estimate line labeled “Prepaid Interest ( ___ per day for __ days @__ %)” is disclosed by rounding the exact amount to three decimal places and then dropping any trailing zeros that occur to the right of the decimal point. 12 CFR § 1026.37(g)(2)(iii) and (o)(4)(ii). However, on page 2 of model form H-24(C), section F, the interest rate disclosed on the line for prepaid interest includes two trailing zeros that occur to the right of the decimal point. Thus, a creditor could claim the safe harbor by disclosing the interest rate on the “Prepaid Interest” line by including two trailing zeros, or otherwise could comply with § 1026.37(o)(4)(ii) by rounding the exact amount to three decimal places and dropping any trailing zeros that occur to the right of decimal point. For example, assuming that the interest rate for the transaction being disclosed is four percent, the creditor could claim the safe harbor by disclosing “4.00%” (consistent with the model form) although it also could disclose “4%” (consistent with the regulatory text and commentary).

Updated Jan. 25, 2019

Yes, most closed-end consumer mortgage loans to finance home construction that are secured by real property are covered by the TRID Rule. 12 CFR § 1026.19(e)(1)(i). Both construction-only loans (i.e., usually shorter term loans with several fund disbursements where the consumer pays only accrued interest until construction is completed) and also construction-permanent loans (i.e., construction loans that convert to permanent financing once construction is completed in which the loan amount is amortized just as in a standard mortgage transaction) can be covered by the TRID rule if the coverage requirements are met. Comment 17(c)(6)-2. Additionally, both initial construction and subsequent construction can be covered by the TRID Rule. Comment 17(c)(6)-2. Generally, a loan, including a construction-only and construction-permanent loan, is covered by the TRID Rule if it meets the following coverage requirements:

• is made by a creditor as defined in Regulation Z, 12 CFR § 1026.2(a)(17);
• is secured in full or in part by real property (a construction loan may be secured by both real and personal property) or a cooperative unit;
• is a closed-end, consumer credit (as defined in § 1026.2(a)(12)) transaction;
• is not exempt for any reason listed in § 1026.3; and
• is not a reverse mortgage subject to § 1026.33.

More information on the coverage of the TRID Rule and disclosing Construction Loans is available in Section 4 and Section 14, respectively, of the TILA-RESPA Rule Small Entity Compliance Guide .

Updated May 31, 2019

Yes. Among others, special disclosure provisions in Regulation Z are contained in:

• § 1026.17(c)(6);
• Appendix D; and
• § 1026.19(e)(3)(iv)(F) (for new construction only).

Note that § 1026.17(c)(6) and Appendix D existed prior to the TRID Rule. The TRID Rule amended the text of Appendix D and the commentary to both pre-existing provisions.

The three special provisions listed above for construction-only or construction-permanent loans work in conjunction with the other generally applicable disclosure provisions of the TRID Rule. They are available to any creditor, regardless of whether or not the creditor typically considers themselves a construction loan lender. Further, these provisions apply even if the creditor does not necessarily label the product as construction-only or construction-permanent, so long as the product meets the requirements discussed in each provision.

Section 1026.17(c)(6): Separate or Combined Disclosures for Construction Loans

Section 1026.17(c)(6) permits a creditor to treat a construction-permanent loan as either one transaction, combining the construction and permanent phases, or multiple transactions, where each phase is a separate transaction. For purposes of complying with the TRID Rule, § 1026.17(c)(6) means the creditor may provide separate construction phase and permanent phase financing Loan Estimates and Closing Disclosures or may disclose a construction-permanent loan on one, combined Loan Estimate and Closing Disclosure.

Appendix D to Part 1026: Methods of Estimating Disclosures for Construction Loans

Appendix D provides methods that may be used for estimating the construction phase financing disclosures, whether disclosed separately or combined with the permanent phase financing. Because many disclosure items for the construction financing would otherwise be based on the best information reasonably available at the time of disclosure, Appendix D provides special procedures and assumptions creditors may use to provide consistent and compliant disclosures. For example, in cases where the timing of advances or the amount of advances in the construction phase is unknown at or before consummation, Appendix D provides methods to estimate the amounts used for the disclosure of periodic payments for the loan, which typically are interest-only payments for the construction phase, or the disclosure of amounts based on the periodic payment.

Section 1026.19(e)(3)(iv)(F): Optional Disclosure for New Construction Loans

Section 1026.19(e)(3)(iv)(F) permits creditors, in certain instances involving new construction, to use a revised estimate of a charge for good faith tolerance purposes. A new construction loan is a loan for the purchase of a home that is not yet constructed or the purchase of a new home where construction is currently underway, not a loan for financing home improvement, remodeling, or adding to an existing structure. Nor is it a loan involving a home for which a use and occupancy permit has been issued prior to the issuance of a Loan Estimate. 12 CFR § 1026.19(e)(3)(iv)(F), Comment 19(e)(3)(iv)(F)-1.

In transactions involving new construction where the creditor reasonably expects that settlement will occur more than 60 days after the original Loan Estimate is provided, the creditor may provide revised disclosures at any time prior to 60 days before consummation if the creditor states that possibility clearly and conspicuously on the original Loan Estimate. The statement, “You may receive a revised Loan Estimate at any time prior to 60 days before consummation” under the master heading “Additional Information About This Loan” and the heading “Other Considerations” pursuant to § 1026.37(m)(8) satisfies these statement requirements. Comment 37(m)(8)-1. If no such statement is provided, the creditor may not issue revised disclosures, except as otherwise provided in § 1026.19(e)(3)(iv).

More information on good faith tolerances, § 1026.17(c)(6) and Appendix D for Construction Loans is available in Section 7 and Section 14 of the TILA-RESPA Rule Small Entity Compliance Guide .

Updated May 31, 2019

Providing Loan Estimates to Consumers

Generally, a creditor is responsible for ensuring that a Loan Estimate is delivered to a consumer or placed in the mail to the consumer no later than the third business day after receipt of the consumer’s “application” for a mortgage loan subject to the TRID Rule. 12 CFR §1026.19(e)(1)(iii).

For transactions subject to the TRID Rule, an “application” consists of the submission of the following six pieces of information:

• The consumer’s name;
• The consumer’s income;
• The consumer’s social security number to obtain a credit report;
• The property address;
• An estimate of the value of the property; and
• The mortgage loan amount sought.

If the consumer submits these six pieces of information, the requirement to provide a Loan Estimate is triggered, and the creditor must ensure that the Loan Estimate is delivered or placed in the mail within three business days. The creditor or, if a mortgage broker receives a consumer’s application, either the creditor or the mortgage broker may mail or deliver the Loan Estimate.

Because the definition of application refers to the ‘‘submission” of the six pieces of information, merely maintaining such information from a previous transaction or business relationship does not constitute receipt of an application (unless the consumer indicates that the information maintained by the creditor should be used as part of an application). Additionally, if a consumer starts filling out a form online, enters the six pieces of information that constitute an application for purposes of the TRID Rule, but then saves the form to complete at a later time, the consumer has not submitted the six pieces of information that constitute an application for purposes of the TRID Rule. See 78 Federal Register 79730, 79768 (Dec. 31, 2013).

See also TRID Providing Loan Estimates to Consumers Question 4 discussing information submitted in connection with a request for a pre-approval or pre-qualification letter.

More information on the timing for delivering a Loan Estimate is available in Section 6 of the TILA-RESPA Rule Small Entity Compliance Guide .

Updated Jul. 31, 2019

No, creditors cannot require consumers to provide additional information in order to receive a Loan Estimate. Thus, a creditor cannot condition provision of a Loan Estimate on the consumer submitting anything other than the six pieces of information that constitute an application under the TRID Rule. A consumer must be permitted to submit the six pieces of information that constitute an application for purposes of the TRID Rule without providing additional information. For example, an online application system cannot be designed to reject or refuse to accept an application (as defined under the TRID Rule) on the basis that it lacks other information that a creditor normally would prefer to have beyond the six pieces the information.

Additionally, if the creditor or another person represented to the consumer that it will not provide a Loan Estimate without the consumer first submitting additional information beyond the six pieces of information that constitute an application for purposes of the TRID Rule, the Bureau or another supervisory or enforcement agency could analyze the conduct under the prohibitions against unfair, deceptive, or abusive acts or practices in the Dodd-Frank Act. See 12 U.S.C. §§ 5531, 5536.

For more information on the six pieces of information that constitute an application for purposes of the TRID Rule, see TRID Providing Loan Estimates to Consumers Question 1.

Updated Jul. 31, 2019

No, creditors cannot require a consumer to provide verifying documents in order to receive a Loan Estimate. 12 CFR §1026.19(e)(2)(iii); comment 19(e)(2)(iii)-1. Thus, a creditor cannot condition provision of Loan Estimate on the consumer submitting any verifying documents. Additionally, if the creditor or another person represented to the consumer that it will not provide a Loan Estimate without the consumer first submitting verifying documents, the Bureau or another supervisory or enforcement agency could analyze the conduct under the prohibitions against unfair, deceptive, or abusive acts or practices in the Dodd-Frank Act. See 12 U.S.C. §§ 5531, 5536.

Updated Jul. 31, 2019

Yes. If a consumer submits the six pieces of information that constitute an application for purposes of the TRID Rule to obtain a pre-approval or pre-qualification letter for a mortgage loan subject to the TRID Rule, the creditor is responsible for ensuring that a Loan Estimate is provided to the consumer within three business days of receipt of the last of the six pieces of information. 12 CFR §1026.19(e)(1)(iii). See comment 2(a)(3)-1. The fact that a consumer submits the six pieces of information to obtain the pre-approval or the pre-qualification letter does not change the obligation to ensure a Loan Estimate is provided. The consumer has submitted the six pieces of information that constitute an application for purposes of the TRID Rule and, thus, the requirement to provide the Loan Estimate has been triggered.

However, if the consumer does not submit all six of the pieces of information that constitute an application for purposes of the TRID Rule (i.e., does not submit the sixth piece of information, for example, the property address), a Loan Estimate is not required. The creditor may simply provide a pre-approval or a pre-qualification letter in compliance with the creditor’s practices and applicable law. For example, the letter may need to comply with 12 CFR §1026.19(e)(2)(ii) depending on its content and when it is provided to the consumer.

Once the consumer submits the sixth piece of information that constitutes an application for purposes of the TRID Rule, the requirement to provide the Loan Estimate is triggered. Comment 2(a)(3)-1. For example, if after receiving the pre-qualification letter, the consumer submits the property address (i.e., the sixth of the six pieces of information that constitute an application under the TRID Rule), the creditor is obligated to ensure the Loan Estimate is provided to the consumer by the third business day after submission of the property address.

For more information on the six pieces of information that constitute an application for purposes of the TRID Rule, see TRID Providing Loan Estimates to Consumers Question 1.

Updated Jul. 31, 2019

The TRID Rule does not prohibit a creditor from requesting and collecting additional information (beyond the six pieces of information that constitute an application under the TRID Rule) or verifying documents it deems necessary in connection with a request for a mortgage loan, including a request for a pre-approval or a pre-qualification letter. Consumers may voluntarily submit such information and documents prior to receiving a Loan Estimate. However, a creditor cannot condition provision of a Loan Estimate on the consumer submitting additional information (beyond the six pieces of information that constitute an application for purposes of the TRID Rule) or any verifying documents. It also must allow the consumer to submit the six pieces of information that constitute an application for purposes of the TRID Rule (without any verifying documents or additional information). See also TRID Providing Loan Estimates to Consumers Question 2 and Question 3.

For example, a creditor’s pre-approval process may entail a consumer to submitting the six pieces of information that constitute an application for purposes of the TRID Rule, additional pieces of information about the consumers credit history and the collateral value, and some verifying documents. If the consumer submits the six pieces of information that constitute an application for purposes of the TRID Rule (either alone or with some of the other information and documents that the creditor requires), the creditor must ensure that a Loan Estimate is provided to the consumer within three business days, even though the creditor requires additional information and documents to process the consumers request for a pre-approval or pre-qualification letter. See Comment 2(a)(3)-1.

Conversely, a creditor’s pre-approval process may entail a consumer submitting five (or fewer) of the six pieces information that constitute an application for purposes of the TRID Rule, other pieces of information about the consumer’s credit history and the collateral value, and some verifying documents. As long as the consumer does not submit all six pieces of information that constitute an application for purposes of the TRID Rule, the requirement to provide a Loan Estimate is not triggered. In that case, the creditor may simply provide a pre-approval letter in compliance with the creditor’s practices and applicable law. For example, the letter may need to comply with 12 CFR §1026.19(e)(2)(ii) depending on its content and when it is provided to the consumer.

However, if the creditor or another person represented to the consumer that it will not provide a Loan Estimate without the consumer first submitting verifying documents or any information beyond the six pieces of information that constitute an application, the Bureau or another supervisory or enforcement agency could analyze the conduct under the prohibitions against unfair, deceptive, or abusive acts or practices in the Dodd-Frank Act. See 12 U.S.C. §§ 5531, 5536.

For more information on the six pieces of information that constitute an application for purposes of the TRID Rule, see TRID Providing Loan Estimates to Consumers Question 1.

Updated Jul. 31, 2019

Every Home Buyer Will Get This Document (Your Loan Estimate Explained Line-By-Line)

FAQ

What is the 3 day loan estimate rule?

How do you count the 3 day trid rule?

What happens if a loan estimate is not sent within the 3 days?

What is the 3 day rule for closing?

When does the three-day loan period start?

The three-day loan period starts on the day of consummation, which is typically the same day as closing (12 C.F.R. §§ 1026.2 (a) (13) & 1026.38 (a) (3) (ii)). The starting point for determining when the three-day period starts is the day the consumer becomes contractually obligated on the loan (i.e., the day they sign the note).

When should a consumer receive a loan estimate?

The Loan Estimate must be provided to consumers no later than three business days after they submit a loan application. The Closing Disclosure form is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction.

When is a revised Loan Estimate considered received?

According to the TILA-RESPA Integrated Disclosure rule, when a revised Loan Estimate is provided in person, it is considered received by the consumer on the day it is provided. (Discussed in section 11.2 regarding the Closing Disclosure)

When should a consumer receive a corrected loan estimate?

The consumer must receive the corrected Loan Estimate no later than 4 (four) business days before consummation. Note: There must be at least 1 (one) business day between the disclosure of the most recent Loan Estimate and the issuance of the Closing Disclosure (§1026.19 (e)(4)(ii)-1).