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[Music] so let's bring back to where we are at in this course at this time we've had our borrower we've qualified our borrower and that pre-qualification process and we've given them a pre-qualification form and then or to the real estate agent they go out and shop for a house and they get make an offer on the house they get an accepted offer and then they have a contract the real estate contract and it will be executed so executed means it's going to be signed and fully executed means it's signed by all parties so then once you have the purchase contract it gives you the property address so now we have to pause and realize now that you have this property address you have one of the six key pieces of information that trigger an initial disclosure so we're going to cover that here shortly what are those six key pieces of information but continuing on here we have the purchase contract typically the real estate agent would then send the contract to the title company the borrower would give some earnest money putting down on the transaction and that also would be forwarded on to the title company and the title company would hold that then in escrow for the transaction and then at the completion of the transaction that earnest money would be then credited towards the transaction whether it be for the down payment or the closing costs now you as a loan officer you would be given the purchase contract from the real estate agent as well another copy of it and either you or your loan processor would reach out to the title company and request title fees later when we discuss the loan estimate itself having accurate title fees is important in that process so now let's talk about trid trid is the truth in lending respa which is real estate settlements procedures act integrated disclosure rule so let me say that again the tilla respa integrated disclosure rule or otherwise known as trid so trid was developed to create an industry standard for various loan processes and milestones to be met in other words there are different agencies rules and laws that have different definitions of and here's the example of what is the definition of a complete loan application being that we had all these different definitions trid set an industry standard which are those six key elements that i just mentioned now once you have these six key elements you are required to disclose to the borrower the mechanism to disclose to the borrower through trid is a loan estimate and the closing disclosure so the loan estimate is given initially and the cd is given later on in the process near the end of the loan process to accurately disclose to the borrower their closing costs the main key components of the trid the purpose of trid and the loan estimate and cd portion of it is to accurately disclose the fees and apr so what happened is there used to be a truth in lending document a good faith estimate and a hud-1 settlement statement and some other disclosures such as an armed disclosure for adjustable rate mortgages an escrow disclosure a servicing disclosure and even an appraisal disclosure what trid has done with the mechanism of the loan estimate and the cd was being able to combine these documents into the forms of loan estimate and cd now when we break out the loan estimate further in this chapter and the cd in another chapter later on we're going to discuss those specific disclosures and those elements contained therein right now we're discussing trid and the main key components of trid so before i continue let's go back the definition of a loan application the 1003 as we call it that's number one number two is once you have this loan application the six elements that we're going to talk about here momentarily there's a trigger to disclose accurately via the loan estimate and then like i said later on the cd and then there's a certain timing so when once you have that trigger you have to deliver this initial loan estimate within a specific time frame and that is three business days after taking a loan application three business days after taking a loan application so after you've given the loan estimate and you followed the timing then there are tolerances which mean we know that after you've disclosed to the borrower the certain fees may change well trid sets tolerance categories which will be also be discussed later in this chapter so those are the four main key components that trid establish the definition for the 1003 or a complete loan application now once you have it the mechanism for disclosing that trigger okay once it's been triggered the loan estimate and the cd okay and then ultimately within a certain time so timing and then established tolerances in case certain fees did change ultimately the purpose of trid is to protect consumers from harmful acts disclosing accurately and making sure things are done timely so let's dive further into this first component of trid where the six key pieces of information that make up a loan application all right this does not require you completing the entire uniform residential loan application or the urla as it's sometimes referred to or also the 1003 it just requires you collecting six key pieces of information and then of course as i had mentioned once you obtain these six key pieces of information you're now required to deliver a loan estimate within three business days after receipt of that information so we have the property address we also have the estimated value remember we always take the lower of the purchase price or the appraised value so in the case of a purchase it would be the purchase price at least at the beginning or the onset of the loan process number three would be the name of the borrower and then you need the social security number to run the credit report which then would give you the credit score which then would enable you to price or give an interest rate to the borrower if the borrower does not give you their social security number you are not required to give them a loan estimate and then the fifth component would be the borrower's income and the loan amount would be the last item on the list once you have those you must disclose so let's circle back to that real estate contract we just got all right what does that contract give you the purchase price that sale price so we're going to use that as the value it's also going to give you the property address information that you did not have before so now you have an address you have the value now of course it's going to give you the borrower's name but let's just say you already had the borrower you pre-qualified them well what type of information would you already have on the borrower in that case well yes you'd have their name absolutely you would probably have their credit score so you would have had their social security number and if you qualified them you would probably have their income as well now with receipt of the contract you now have the remaining information you're able to develop an actual loan amount based on that sale price and finishing that qualification process now once you have those six elements you will have to disclose now again we're going to disclose later in this process but let's continue on there's an important reminder if you have a refinance a borrower is refinancing you're already going to have the property address whereas if you're purchasing the real estate contract is going to give you that address and another reminder is it does not require you taking a complete loan application which we're going to review in just a moment however it is very common in your mortgage practice for the borrower to complete this and give you this information whether they do it online a lot of times or even if it's over the phone the borrower has already contacted you you're going to sit down and take this information so chances are you'll have for a majority of your loans yes a completed application but just know that it does not require you getting a complete application it just that most times in your business practice you're going to have a complete application so our next step is to let's examine this document called the 1003. the 1003 or the uniform residential loan application was created by the federal housing finance agency the fhfa and the fannie mae number is the 1003 and it's listed at the bottom here as well as form 65 1003 for fannie mae and 65 for freddie mac for our purposes we're going to refer to it as the 1003. now as we cover this section we're going to highlight those key elements we may not address every single line filling out the name or specifically the street address and so on we're going to identify the laws as they interact with taking the loan application and it is your responsibility to become familiar with this 1003 so that you're able to know what items are collected in each section possibly the pages and the various forms contained within the entirety of the 1003 now again the 1003 was designed for an online version it is a fully executable pdf so the borrower can simply fill in the information click the next button or the tab and go to the next segment space in the pdf there are two main pieces the borrower information section and then there's a lender section which we're going to talk about later the two main sections consist of nine pages total the borrowers pages are seven and the lenders pages are two together they equal a complete 1003. so again for trid just to make this clarity what is a complete application definition is the six elements okay and a complete application are the two components the borrower and the lender in loan information all right so let's go through the borrower information we have in section one borrower's name and that personal information section two would be the assets and liabilities section three the real estate any real estate they own number four would be the loan property information so the loan they're applying for number five would be declarations number six would be the acknowledgements and agreements that everything is true and correct number seven military service number eight is demographic information and section nine is for the loan officer information now we're going to break these down and go through these page by page here momentarily but that is a review of all nine sections of the borrower information portion of the 1003 so let's take a look at page one section one so we have section one that's where the borrower puts their name social security number and other personal information well to highlight a couple of key points though is are they applying for an individual loan credit or are they doing applying for joint credit now that'll come into play later on for title purposes and what have you as we'll show you in the lender portion but that's initially so we know what other borrowers are going to be in this loan and dependence we have to capture that now capturing that is more for purposes of the what is the definition of a dependent we'll see that varies based on your loan program if fha va usda and conventional loans may have different definitions and therefore capturing that information based on the loan program is what's necessary and then of course you'll get the cell phone and email address information as well and if you are doing a joint credit then an additional borrower will have their own four pages their section to complete and we'll review this additional borrower application later in this section for now let's continue on with some of these key components in section one so we're going to have to ask the borrower their marital status which we'll cover here in just a minute and their birth date now asking that information right off the bat might be a little disturbing icoa so let's bring in the law to how it applies to that specific question ecoa regulation b the equal credit opportunity act prohibits discrimination based on race color religion sex national origin marital status age public assistance and exercising your rights under the consumer credit protection act but now you're just going to say well we have to ask that information but we're prohibited well ecoa does allow and requires a loan officer to only ask about marital status if the application is for joint credit okay that makes sense or is the credit transaction secured like a mortgage and if the applicant resides in a community property state we'll cover that a little later in the in this section explaining why and how that affects but at this point you can only ask married unmarried or separated you are allowed to ask for age why you have to know if the individual is of legal age to enter into a legal contract so the next law is the fair housing act of 1968. now there's some small differences with ecoa okay it adds disability but it excludes age and so how do you determine well you've got ecoa and you've got faj so look at it this way ecoa are for the creditor is for the creditors okay you've got eco equal credit opportunityxo is only for the creditors loaning the money that would be you fha well that still includes you fair housing act you're loaning on a house property real estate but it's also for the other parties involved in the transaction such as the title company the realtors the appraisers inspection companies even landlords so again includes lenders but all the other players in the transaction and that's what fha now let's review those classifications for fha we have race color religion sex disability familial status and national origin or ancestry so any health issues disease they would fall under the disability you should know and be aware of which classifications fall into which of these two laws now let's move on with our 1003 section one we've already covered date of birth marital status we're also going to ask as part of that marital status if they are unmarried they do have to complete an unmarried addendum which we are going to review a little bit later in this section but note that we do have another form that each borrower will have to fill out on their own and then ultimately we're going to do uh collect their address and we always look for a two-year history on everything as much as possible we typically look for two year history now moving on to section one b we're going to capture their employment information so here's two points though that i want to make on this one it allows the borrower to self-identify if they're employed by a family member or a property seller or someone involved within the transaction okay and then we allow the borrower to identify if they are self-employed now what constitutes self-employment in the mortgage industry is 25 or more ownership in a company so 25 or more in the ownership of a company very important and then on to the right of this section 1b you'll see where you could put the income in there and military entitlements are gathered so look at that section and understand what those military entitlements are there's additional information within your textbook for that so just a quick reminder even employment just as residences we look for a two year history now there may be exceptions for certain loan programs training recent graduates and so on but it's two-year history on residences two-year histories on employment and again self-employed is greater than or equal to 25 percent now let's move on to section one e now this is where we capture other sources of income now because it's another source of income and it's not maybe a base salary or an hourly wage and we'll be discussing that in a later chapter as well but since we're here on the 1003 we're discussing these other types but if certain sections of the 1003 if you've noticed there's a does not apply absolutely certain sections of the 1003 might not apply to someone so you'll see that on every section that the borrower has that opportunity to do to choose does not apply but specifically here in one e we're going to capture this additional income and different sources that they have of income but i need to make a very important note or comment about revealing alimony child support or separate maintenance you cannot ask if they are receiving alimony child support or separate maintenance unless they wish to disclose so you have to ask them do you have any other sources of income that you would like to include in the qualification process for your loan but you cannot ask if they receive child support alimony or separate maintenance now as a side caveat to that you must always ask if they are paying because that would be a liability and we would need to include that into debt income ratio purposes let's look at this a little further here and bring up the equal credit opportunity act again ecoa actually prohibits asking if the borrower receives child support alimony or separate maintenance so again a loan officer can only ask if you have any other sources of income that they would like to include additionally with ecoa ecoa prohibits refusing an application to someone on public assistance or refusing to use such income ecoa also prohibits denying an application based on information such as child bearing or child rearing information and it's important to note that ecoa prohibits refusing an application to someone receiving part-time income in other words you cannot discourage someone from applying for a loan or deny someone or cause harm to anyone based on any prohibited basis lender guidelines might end up that the borrower doesn't qualify and that's understandable not everybody does qualify for a loan but the key component is that you at least have to consider these types of incomes and always always allow a borrower to apply for a loan now in section two this is where we're going to capture the assets now we're going to refer to liquid assets being captured here and the assets are going to be used for cash to close how much money the borrower has to bring in at closing or reserves how much money is needed to be left in the bank account after closing for the reserve requirements for the loan so these are checking accounts savings accounts money markets and so on and they're going to be listed in section 2a so again we're going to collect their asset information now if a gift or a grant has already been received and it's been deposited into the bank account then you would list that here if it is not then you would list that over in section 4d which we'll cover in just a minute but all gifts whether deposited or not are going to be listed elsewhere on the loan application so be sure not to list a gift as an asset here they are listed elsewhere on the 1003 and another key component about assets most assets need to be sourced where are they coming from and seasoned sitting in a bank account for at least 60 days okay 60 days now there are exceptions to that gifts and certain other types which we'll cover in another chapter but for now assets typically need to be sourced and seasoned for 60 days now just as like we had with income in 2b we have other types of assets and then even credits and again if something doesn't apply you can always the borrower can check that section this is assets maybe a borrower is selling a house to receive proceeds in order to put down on another house if they've already sold the house then they would have already received the money we'll put that in the bank account up there in 2a but and 2b is well they're waiting for the sale to happen and they're going to be selling one property within just a couple days of or the same day as they're going to be closing on their new home well then we would list it here because they haven't yet received those funds okay so this is for other types of assets okay but here's a key component when listing where the assets even if it's a gift list the current location of those funds if it's already in the bank account it's section 2a if it hasn't been received yet and it's another type of asset it's in 2b if it is a gift and it hasn't been received yet then we'll list that another section in the 1003 which we'll get to here shortly now there's another key component here unsecured borrowed funds well we're going to capture whether the borrower has borrowed money and from an unsecured source for their down payment however we cannot use those funds so you'd have to instruct your borrower that we were on we would be unable to use those however if a borrower let's say is completing this application they might not know that so you would have to inform them but just remember we do not use and cannot use unsecured borrowed funds in a mortgage transaction now one last piece in 2b are the credits so remember the earnest money that we had talked about this is where you would list that now if for some reason at the time of the application the earnest money had not yet been given and it was still in the bank account then we would list it in section 2a but if it's already been given we would account for that then here in 2 b we want to be sure we're not duplicating our assets listing in one place and then listing them in a second place and then that makes for inaccuracies when actually qualifying the borrower now let's go to section 2c this is the liability section now what we do is we'll run a credit report and we'll have our loan application and we'll be working in a loan origination software our los and what happens is the credit report is run pulled into the the data is pulled into our los and it's auto populated so at least you don't have to type out all of the liabilities for those that have pages of maybe student loans car payments credit cards and a lot of debts that would be a lot of data entry so at least that portion of it will be auto populated for you now sometimes a borrower might actually have a debt or liability that doesn't show on their credit report or as i mentioned before the borrower might have to pay alimony child support or separate maintenance this is where we capture that information in 2d okay so this is sections 2c they're auto populated that's on the credit report and section 2d are the items that might not be listed then on the credit report because we need to capture all the liabilities in order to qualify the borrower accurately and come up with an accurate debt to income ratio now when discussing liabilities important to remember we do not include general household expenses cell phone bills utilities personal insurances or voluntary payroll deductions now we are going to discuss this later in another chapter but just understand those personal household expenses are not included in our debt to income ratio now i do want to make a note on va loans we do use certain household expenses for residual income tests but not for debt to income ratio but again that's specific to va loans or anytime a lender would be doing a residual income test now let's move on to section three this is where we're going to capture the real estate owned if the borrower owns any real estate of course if they don't they select the box at the top that says i don't own any other real estate now if it is a refinance transaction they do need to list that property first and that property would be called the subject property now below that then would be any other property that they would own and it's important to understand that even if there's no loan no lien on the property we still need to have the borrower list every single property they own because we need to capture the property tax the homeowner's insurance and if there's a homeowner's association a borrower may be receiving rental income and again we're going to discuss that in a later chapter right now we're taking the 1003 but it's very important to understand you have to capture all properties owned whether there's a loan on it or not in order to have an accurate debt to income ratio later on when we calculate that now section four section four is for the loan information the the borrower gets to identify are they applying for a purchase or a refinance and they can put the address there and how many units is the property going to be and i'll address that in just a minute and if what type of occupancy is it owner occupied or is it a investment property or non-owner occupied property and or is it a manufactured home all of these are very important components that affect underwriting loan to value even the loan program you are qualifying for the interest rate maybe even the months of reserves that are required for the loan and even the credit score requirements so important to note though under respa the real estate settlements procedures act of 1974 regulation x again respa defines a residential property as a one to four family single family dwelling what does that mean is up to four units but each unit is for a single family anything more than four units would be a commercial loan now in section 4b we're going to capture if there's any other loans being taken out simultaneously with this mortgage to have part of the down payment so we talked about earlier loan to value and cltv and hcl tv if there's a heloc involved this is where we would capture that information for subordinate financing and now we talked about gifts and grants whether deposited or not deposited go in for d but you would identify if it has or has not moving on to section five section five is the declarations now if the borrower for some reason doesn't fill this section out and you end up going back to the borrower to fill this out please please do not assume you need to have accuracy is this going to be the primary home of the borrower and do they have a relationship with somebody involved in the transaction are they borrowing money for this transaction and is there do they have debts that aren't listed on the credit report very important and if the borrower fails to disclose accurately that's fraud additionally in section 5 specifically 5b the declarations are continued to ask additional questions please don't assume if the borrower does not fill this out it is fraud if it is not filled out truthfully so loan officers you should be aware of all of the questions in section five now let's move on to section six this is where they acknowledge and they sign acknowledging everything they've provided is true and correct and again if they are committing fraud mortgage fraud is a one million dollar fine and or 30 years in prison as we move on to section seven we'll capture any military service and that'll be helpful for your va loans if you are doing those and section eight then is the demographic information now let's take a look at this a little further this demographic information in section 8. ecoa once again prohibits collection of information about race color religion national origin or sex except when necessary to comply with humda or the home mortgage disclosure act regulation c so let's talk about that a little bit is humda requires the reporting of data annually and then is used to identify discriminatory lending practices now this information is voluntary so a borrower has the option of providing this information or not but if you're taking a face-to-face loan application it is required for you as a loan originator to guess to make a best guess so let's take a look at this specifically if you notice and i'll read this to you was the ethnicity of the borrower collected on the basis of and here's the keywords visual observation or surname and you select yes or no very important and this is only for face to face now only for face to face video conferencing is also considered face to face anything other than face to face is optional and you're not required to guess on that there is a section where it the borrower can select i do not wish to provide since we're speaking of humda the home mortgage disclosure act that was enacted in 1975 humda for short regulation c let's take a look at some of these key components of humda well the data is collected to see whether or not the lenders are serving the housing needs of their areas and identify those potential discriminatory lending practices the data is used to determine if they're violating ecoa or fha now the cfpb dictates the guidance that lenders follow on how to report this information what institutions are covered now there's more information in your textbook so please look at that take the time to read that so you have a better understanding we're going to cover some key highlights though here like the types of institutions that are required to report the types of transactions that must be reported what information is collected and how is it reported and here's just a few key points like loan volume thresholds so the volume of at least 25 closed-end mortgage loans or at least 500 open-end lines of credit both in the preceding two calendar years and then of course meeting all the other coverage requirements again there's more information in your textbook please read up on that so you're familiar with these aspects of humda now as far as those data points that are collected by humda there are 49 data points let's take a look at some of these from loan program to loan type purpose occupancy the property type number of units we just discussed that all of this is being collected from your 1003 loan to value cltv any lien status like subordinate financing your rate the pricing on the loan the rate spread how much your company's making any points or fees lender origination fees total costs on the loan and then if a consumer comes into your office and asks for your hum to report you have to give it to them within three business days so there's more information again in your textbook i would go ahead and make sure you read that and understand those key components of hamda but i want to end this humda section with three key elements so the main primary purposes of hamda are to determine whether that financial institution is serving the community's needs those community housing needs and number two is to help and assist public officials in distributing public investment and number three and the one we've been talking about is to identify potential discriminatory lending patterns now as we continue coming back to the 1003 so that was section 8 of your 1003 was the demographic addendum required to collect that information based on humda now we move on to section nine which is the originator information it's where you would sign put your nmls number and so on so remember your nmls number is being captured on all loan documents now we talked about additional borrowers at the very beginning of the loan application page one section one it's going to ask for if you're applying for a joint credit or are you doing this as an individual i mentioned as an additional borrower there would be four additional pages let's take a look at that section for additional borrowers here in for just a moment so as i mentioned there's a four-page addendum just for additional borrowers now in section one it's the same information being captured as the borrower completed on their application so we don't need to re-review that but important to note for assets and liabilities in section 2 and section 3 the real estate and section 4 for any loan and property information that it actually contains a statement and as you can see on your screen my information for now sections two three and four is listed on the uniform residential loan application and then with the borrower's name so as you can see those are a little different but then when we go back to section 5 the declarations it's asking the same questions as we did before but now for each individual borrower and then section 6 also has that same statement for that acknowledgement is my signature for section six is on the uniform residential loan application with and then naming the borrower section seven for military service again same questions section eight the demographic information same question section nine loan officer same questions okay so that is the four page addendum for the additional borrower now let's move on to the lender and loan information so that is two additional pages for a total of nine now it's important to note that both pieces the borrower section and the lender and loan section make up a complete 1003 okay the complete loan application so let's take a look at this in a little more detail we have section one with the property and loan information section two for the title information section 3 the mortgage loan information and section 4 for the qualifying the borrower so here we have l 1 now the l stands for lender so you can identify which forms that you're on but l1 you're going to list is it a community property state remember we talked about community property state information at the beginning you're going to need to capture that because community property states affect the borrower's liabilities the debt to income ratio and even the property ownership requirements we also capture if it is a refinance whether it's cash out or no cash out refinance and so on as we move on to l2 this is where we're going to capture title information so who's going to be on the title who's going to own the property now it's important to note that somebody could own the property and not necessarily be on the loan so you're going to need to ask and capture that information and we're also going to determine how which you may not know this information yet and we're going to discuss that in a later chapter but we will eventually be capturing how title will be taken and it's important to understand is the property fee simple or leasehold now just a quick note on that so fee simple is when you own the house or the property and you own the land whereas a leasehold as in certain states like maybe hawaii and maybe there's a 99-year lease or maybe you're in a uh resort area and the home is on a golf course you might own the home but you don't own the land so you have a lease it's called leasehold property eventually the lease is going to expire so there'll be an expiration date that you'll capture but here's the component for financing so if you have a 99 year lease you're fine because we only do 30-year mortgages at most but what if you only have 20 years left on your lease you would not be able to do a 30-year loan in other words it's going to be equal to or less than that's the the amortization term has to be equal to or less than the remaining time of the lease now in section l3 we're going to capture that loan information where we have is it a conventional is it usda is it fha va and so on also the terms of the loan meaning what's the note rate as well as the actual term now it's important to note that we do in months everything is in months so 30 year would be 360 360 months and where it would be a 180 months for a 15 year and so on we use months and you need to capture that correctly some additional information amortization type and any loan features just take a look at that and get familiar with your loan application then in section l4 we're going to capture the financial details so we got the sale price we're going to list any closing costs and any uh um loans that would be being paid off it was if it was a refinance and what are those closing costs so this is section l4 now section l4 kind of breaks down into four different sections so this is first what's due from the borrower so we add all this up and we got to come up with this amount of money which also includes the payoff if it's a refinance or if it's a the sale price we still have to come up with that money now then when we go to the next section we're going to come up with that money via the loan amount so we're going to list that and any other secondary mortgages or secondary financing that's going to come into play and then say the third element of that is going to be any credits maybe the seller is going to offer a credit paying the borrower's closing cost that happens quite often and any earnest money we talked about that at the very beginning this is where we would actually have that listed as well and then continuing on to the very last section that fourth section is when we take all those numbers and we come together adding them and subtracting them and we're going to come up with the cash to close how much money does the borrower need to bring in at closing or in the case of a refinance how much money might the borrower be getting back now as we wrap up the 1003 sections we're going to have some additional forms and addendums that may be used may be required for the loan so to start with a continuation sheet well we realize maybe the borrower has more liabilities on their credit report than there are enough line spaces on the application or maybe they have a lot of assets or maybe they own a lot of real estate and there's not enough space on the initial application for that so we would have a continuation sheet and there's a continuation sheet for every single section and then there's the additional borrower section which we just reviewed those four pages and the third addendum that would be required or needed would be the unmarried addendum now if you remember at the beginning on page one of the 1003 we captured the information do you remember the questions we can ask and only ask it's married unmarried or separated so if they're unmarried then we have to have them fill out this document here so whether or not they're in a civil union a domestic partnership a registered reciprocal beneficiary relationship so folks have your borrowers fill this out if they are unmarried so now let's review the 1003. we talked about the seven pages for the borrower with nine sections and then the four page addendum if you have an additional borrower and then that one page additional unmarried addendum one for each borrower and then two pages for the lender information and then of course if there's any additional continuation pages and the instructions are 13 pages in themselves but they may not always be applicable on your transaction but for the most part we're looking at anywhere from a 15 to a 20 page loan application now let me give you some tips on taking that 1003 you really need to know your 1003 you may not be in the office you may be on the phone not having a document in front of you in again not in your office and at a another function and you're having a conversation with somebody the key components the information that's needed in order to qualify a borrower is located in the 1003. so knowing the questions understanding the 1003 it's key in being a successful loan officer and having a complete application that's probably the biggest item to remember is a complete loan application before you move the loan file further in the journey so the tip i want to give you is take your own loan application know the sections know what information is captured fill it out as if you're your own loan officer at least for practicing purposes you really need to become familiar with this loan application since you'll be doing this every day the rest of your life now as we've been mentioning when you take the loan application ecoa the equal credit opportunity act regulation b 1974 is designed to prevent discrimination based on a protected class well since we're taking the loan application we've also discussed ecoa there are some additional disclosures within ecoa that need to be addressed so a notice of adverse action or notice of action as well as an appraisal notice are all part of ecoa as well let's discuss this adverse action what does that mean you've taken this loan application right and the borrower doesn't qualify you have to tell the borrower whether favorably or adverse that they don't qualify or they do qualify so within 30 days so in a nutshell an easy way to think of it is you have 30 days to decision this file you get that loan application you hit the stopwatch and it's 30 days to decision a loan file now if it's favorable you're going to give what's called a notice of action here's your loan here's your terms here's what you qualify for but if it's denied you're going to provide an adverse action now it's important to note on an adverse action with ikoa adverse action is for all reasons of denial including credit the reason i make this distinction is later on in the course there is another adverse action but it's designed specifically for credit only ecoadverse action is for all reasons of denial including credit very important distinction and there are two exceptions though to this 30-day timing let's say you give a counter offer and meaning the borrower applies for the loan and you're still within the 30 days but they don't qualify but then you give them a counter offer for a different program now you have 90 days before you have to send the adverse action because obviously they didn't qualify for the first program but rather than denying the loan then you gave a counter offer and then if the loan application was incomplete you just give them a notice of incomplete letting the borrower know hey i'm still needing this additional pay stub some tax returns and whatever other items are needed that extends the notice of action deadline 30 days now as part of the adverse action you're going to give the creditor's name the creditor's address and it's important to note the nature of the action taken the specific reasons why you denied the loan what were those reasons and that the borrower has the right in this will be in the notice to request those reasons they were denied within 60 days of receiving the adverse action now the other notice is appraisal and i'm going to come back to a key component here in just a minute but i want to do the disclosures first okay and then explain why they're a part of ikoa so talking about the appraisal notice the borrower has the right to receive a copy of the appraisal now if you remember when we talked about trid in the beginning here the first reason purpose of trid was to identify what is a complete application that definition and if you remember then the second component was the mechanism once you've triggered that complete application is to disclose the accurate fees and apr the mechanism is the loan estimate initially and the cd prior to closing well we're going to discuss the cd in a later chapter as well as the loan estimate in the next section but that initial disclosure to the borrower of their right to receive a copy of the appraisal within three business days prior to consummation is the word the closing but it's the consummation date okay which we'll also discuss later when we talk about this the loan estimate here but focusing on three business days delivering that appraisal why is this a part of ikoa why was the notice of action a part of ecoa well let's look at it this way if i give a copy of the appraisal to this borrower but then i choose not to give a copy of the appraisal to that borrower maybe i deny that borrower give him a notice of that information and this borrower over here i don't even call that borrower back am i treating the borrowers equally well of course not of course you're not well that's what ecoa is about treating everyone equally you give a copy of the appraisal to this person you give a copy of the appraisal to that person you deny this person you tell them you deny that person you tell them and so on and you approve somebody you inform them so you're treating everyone equal regulation b and possibly an easy way to remember that was because you're being equal you want to be equal but now let me finish with this ecoa right to receive a copy of the appraisal so the lender may not charge the borrower for delivering the appraisal you're going to print it off and you're going to give it to the borrower you're going to email it you can't charge for that and if you're going to do an appraisal waiver maybe the loan doesn't require an appraisal you're getting a property inspection waiver well then you have to inform the borrower that they're not going to be getting a copy of the appraisal because there is no appraisal and maybe the loan doesn't close well you still need to provide a copy of the appraisal no later than 30 days after determining that the transaction is not going to close and the mechanism for doing this again is initially in the loan estimate and then at closing or three days before closing which again will cover later with the cd is the loan estimate in the cd disclose these rights or the borrower's rights to receive a copy of the appraisal three business days before consummation well folks that wraps up the 1003 portion of the trid that we've been talking about and now to go into the loan estimate and delivering that loan estimate within three business days so timely and then eventually tolerances of when fees can change [Music] you