TRID Series – Good Faith Talk - YouTube

on page 18 we're going to introduce you to the  good faith tolerances and this is the first of  

three different portions or three different  sections in our three-part series that we're  

going to talk about good faith okay in depth  uh we're going to talk about producing the loan  

estimate and doing so in good faith when we talk  about change circumstances later on in the program  

we'll also bring good faith back to the table  and then in our third segment when we talk about  

revising the closing disclosure in addition to  actual completing the accurate information on the  

closing disclosure we'll also talk about this good  faith standard but we're going to go into it just  

a little more in depth here and kind of make sure  everybody's singing from the same sheet of music  

that should make us get through some of the  following sections in a little bit more of  

an expedited manner so here's what good faith  means page 18 very top of the page there's two  

paragraphs and there's some bold information okay  let me call out just a few things that are bold  

it means that it's based on the best information  reasonably available that's the second line in  

that first paragraph hey what's that mean well  it means there's this expectation that the the  

lender okay exercise due diligence in obtaining  information what's all that mean well we said  

when i talked plain english today means you've  done your homework means that you haven't just  

thrown darts at the wall or pulled numbers out  of the sky that you've reached out to insurance  

agents that you've reached out to realtors uh  title companies okay investors okay government  

aid government offices wherever the information  okay is coming from or should come from we've  

reached out we don't just guess okay and along  the way okay as you're putting this together to  

to build your loan estimate and what matters  is what you know or what did you know and when  

did you know it for example if you look down  towards the bottom of the page page number 18  

we've got these different tolerances and i'll come  back to the zero tolerance here in a minute but  

let's talk about the appraisal so we're talking  about this good faith standard making sure you've  

done your homework what did you know when did  you know it and so one of the items that comes up  

within the zero tolerance section is going to  be third-party services required by the lender  

where the lender picks the provider  now in my list of items in number six  

okay i list four things three of them are absolute  credit reports flood determinations and appraisals  

you're never going to let somebody shop  for those because there's independence  

and conflicts of interest risk that you're trying  to avoid and so let's talk about the appraisal  

you probably have an approved appraisers  list you've done some homework on that  

and there's other regulatory requirements by the  way within reg z that state that you should have  

done that homework so you likely already know that  for your approved appraisers list let's just say  

there's ten of them that the range in fees is  somewhere between four and five hundred dollars  

because they need to be relatively close for  the same work performed so since we've done that  

homework and that's the range for a typical one to  four family appraisal in our typical lending area  

that means some of the time it's going to be 500  and some as low as 400. can we put 500 on all of  

our loan estimates since we don't know which  appraiser is going to be utilizing connection  

with that transaction due to conflict of interest  and independence requirements can we put 500 on  

all of our loan estimates for a typical one to  four in our typical lending area and the answer  

is absolutely you can but you better hit 500  some of the time because good faith would not be  

saying okay 500 but let's just add another 100  just in case that's not good faith that's not  

the best information reasonably available at the  time the disclosure goes out so i'll go back to  

what did you know and when did you know it when  you're putting together the information for the  

estimate for the appraisal what do you know about  the property if you know very little 500 probably  

works but what let's say you you know that it's  also an 80 acre property instead of a quarter acre  

that needs to be accounted for it's a historic  home rather than a typical one to four then that  

should be accounted for those are all things that  likely your appraiser charges a little bit more  

for and that you should have taken into account  when you do the estimate for the appraisal so  

those details matter okay you've got to document  the story if you leave the details out what you're  

doing is leaving things to the imagination of the  auditor or the examiner when they pick up the file  

and start to look through it and try to figure out  what's going on if you have the information before  

the loan estimate goes out that information should  have been accounted for in putting together the  

estimate to meet the good faith standard if you  didn't get the information until after the loan  

estimate went out then we wouldn't wouldn't expect  that it would have been utilized in connection  

with coming up with the good faith estimate of  the dollar amount that's on your loan estimate  

so document when things come into your possession  for example the purchase agreement if you have  

it before the loan estimate goes out it should  have been reviewed in full to see if it impacted  

the loan estimate if it didn't come into your  possession until after the loan estimate went out  

it should be documented that it didn't come in  until after and so dates matter date stamp things  

when you when they come into your possession  again the story and those details matter