Conventional Loan Disclosures

Federal and state laws require lenders to disclose certain information to borrowers at various times during the loan process. This information is for the education and protection of the borrower. Some loans have more disclosure requirements than others. For instance, conventional loans have basic disclosures, which are outlined below. FHA and VA loans demand additional disclosures which are not covered here. Most of the disclosures listed must be presented to the borrower within three business days of the loan application, but many lenders provide them at the time of application.

• Equal Credit Opportunity Act (ECOA) Statement - Simply put, this disclosure statement mandates that the lender will not discriminate in any way.
• Good Faith Estimate of Closing Costs (GFE) - As its name implies, the GFE is an estimate of the itemized fees and costs which will be incurred for the loan. Because the lender cannot know the exacts amounts of all fees that must be paid (prorated interest charges will vary depending on the date that the loan closes, for example), the Good Faith Estimate should not be off by more than a few hundred dollars at most, assuming that the basic terms of the loan do not change. At closing, the borrower and seller will receive a detailed closing cost statement, usually the U.S. Department of Housing and Urban Development’s HUD-1 form, which lists the actual amounts that must be paid.
• Truth-in-Lending (T-I-L) Statement - This form discloses the terms and costs of the credit that’s being applied for, so that the borrower can knowledgeably compare loan packages. It lists the annual percentage rate (APR), the total of all interest and prepaid items over the life of the loan, the amount of the loan minus the prepaid items, and the total of all payments over the life of the loan. It also discloses any prepayment penalties that may be present, whether the loan is assumable, the payment schedule of the loan, and any late payment charges.
• HUD Handbook on Buying Your Home: Settlement Costs and Helpful Information - This booklet is issued by the U.S. Department of Housing and Urban Development and explains the closing costs listed on the GFE and provides additional helpful information to the borrower.
• Loan disclosure form - If the loan is an adjustable rate mortgage (ARM), the lender is required to provide written disclosure about how the loan works. Other types of loans, if they’re sufficiently complicated, must also be disclosed to the borrower.
• Consumer Handbook on Adjustable Rate Mortgages - If the loan being applied for has an adjustable rate, this booklet must be given along with a form to be signed by the borrower stating that it was received.
• Lock-in and Processing disclosures - Many states require the lender to give written disclosure concerning their rate lock-in terms and the loan’s estimated processing time.
• Certification of Authorization form - This form authorizes the lender to check the borrower’s credit, employment and assets in order to approve and prepare the loan for closing.
• Mortgage Transfer Disclosure Statement - This form reveals to the borrower the percentage of loans originated by the lender that are sold service-released. In other words, the lender sells the servicing (or payment-collecting) of the loan so that the borrower makes payment to a different lender. The originating lender may or may not sell the actual loan itself.