September 25, 2015 at 9:24 am #8152
On the Loan Estimate under the Late Payment section our system vendor is not only putting the days late and percentage of the late fee they are including a dollar amount of that fee. On the Closing Disclosure they are only listing out the days late and the percentage of the late fee.
In addition on the LE they are indicating will be X% of the payment and the CD indicates it will be X% of the principal and interest over due.
Some in our company are viewing this as a major disconnect between the two disclosures and is not acceptable per TRID, while others are indicating these are saying basically the same thing and the use of a percentage and dollar value is more information and therefore more consumer friendly.
Do you have any thought on this?September 25, 2015 at 8:42 pm #8160
My thought is that it needs to be consistent between both LE and CD.
The piece of regulation that dictates how it should be detailed is 1026.37(m)(4) which states: (4) Late payment. A statement detailing any charge that may be imposed for a late payment, stated as a dollar amount or percentage charge of the late payment amount, and the number of days that a payment must be late to trigger the late payment fee, labeled “Late Payment.”
In the commentary to .37(m)(4) it states – 2. Applicability of State law. Many State laws authorize the calculation of late charges as either a percentage of the delinquent payment amount or a specified dollar amount, and permit the imposition of the lesser or greater of the two calculations. The language provided in the disclosure may reflect the requirements and alternatives allowed under State law.
So based on the regulation you can use dollar amount or percentage and number of days; however, there may be something in your state law dictating otherwise. You will need to check state law to ensure that is not the case.
I do think that regardless of the method utilized it should be consistent between the LE and CD to prevent confusion for the borrower.
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