We do not have a formal rate lock program, but on Fannie Mae loans we have been issuing a revised loan estimate (LE) when we lock the rate with Fannie Mae (I'm going to attempt to stop this practice). Since we do not have a formal rate lock program, this would not be considered a changed circumstance under Reg Z, and we would not be required to issue a revised LE.

The initial LE listed the appraisal fee as $600, the revised LE listed the appraisal fee as $435, and the closing disclosure (CD) listed the appraisal fee as $560. The revised LE was also not received by the borrower at least 4 business days prior to loan closing.

Since the revised LE that was sent because the rate was locked with Fannie Mae is not required to be sent under Reg Z, did we still violate Reg Z since the revised LE was not received by the borrower at least 4 business days prior to closing? Also, would there be a cure for the appraisal fee since the fee increased by $125 from the revised LE to the CD?

Thank you!

You have several things going on here.

No- locking the interest rate with the investor does not trigger a revised LE. Only a written rate lock with the borrower triggers a required revised LE.

You have a good faith error on the appraisal fee. Technically, that does not reset your tolerance established with your initial LE, but if these are investors loan, I would not be surprised if they do not make you cure it anyway.

I don't understand, what do you mean the revised LE was not received at least 4 days prior to closing. You mean they received it after you delivered a CD?

Below is what I was referring to regarding the revised LE not being received by the borrower at least 4 business days prior to closing. The revised LE was sent on 5/24/24 and closing was 5/31/24, so with allowing the 3 day delivery time, the borrower would have received the revised LE 2 days prior to closing. The CD was received electronically 5/28/24. Since the revised LE was not required, I was unsure if the 4 business day timing requirement still applied, although I suspect that it does.

§ 1026.19(e)(4)(ii)

(ii) Relationship between revised Loan Estimates and Closing Disclosures. The creditor shall not provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section on or after the date on which the creditor provides the disclosures required under paragraph (f)(1)(i) of this section. The consumer must receive any revised version of the disclosures required under paragraph (e)(1)(i) of this section not later than four business days prior to consummation. If the revised version of the disclosures required under paragraph (e)(1)(i) of this section is not provided to the consumer in person, the consumer is considered to have received such version three business days after the creditor delivers or places such version in the mail.

Yes, you have a problem. It includes "any revised version" whether triggered by a changed circumstance or not.

"The consumer must receive any revised version of the disclosures required under paragraph (e)(1)(i) of this section not later than four business days prior to consummation."

I suspected so. At least I now have a very strong argument for doing away with this practice. Thank you, sir!

Something else to consider: you cannot mark an LE as locked if you do not have a written rate lock agreement with the borrower. If that's why the revised LE is being done, it's wrong.