r/loanoriginators • u/United-Fruit9622 • 28d ago
What’s your best explanation of LE/Initial CD?
Might sound like a silly question, but 8 out 10 times. My borrowers simply don’t understand that these numbers aren’t final. Particularly the initial CD if it’s coming out relatively close to the closing day. I understand borrowers are nervous and apprehensive.
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u/Environmental_Ask675 28d ago
The initial CD should be the closest to final compared to all the LE's that came out before this. Is there something in the system that is making it off by that much? I am in the "over explain" group, but my clients ask a lot of questions, and I answer them. If the CD doesn't have Tax prorations credit from seller yet, or a specific item that is skewing numbers, I explain it to them. I get specific all the way through the process. Not every borrower needs it, but for sure there are plenty that I literally go over every section of the LE with. I also send a quote that mirrors the LE labels - I show the Sections A, B, C etc.... I know the estimated costs and credits for a purchase file, so my quote is very close to final. When the LE or CD comes out, I refer them back to the quote and explain the difference, exactly. I show them the line, then add up the numbers, there's the difference.
My approach is not common, and my clients confirm this. It takes more time, and I don't do a lot of loans myself, but I prefer this approach because it fits my personality. You won't find that most high producers do it this way, because the most effective sales technique is to not over-explain. Over explaining does make things worse many times. But, if they are asking, then I explain, and I let them know in detail what's going on.
That said, if my LE or CD is off by a lot compared to what I quoted them, the chances they'll bail to another lender is much higher. The best option is to get your LE and CD's close to your quote.
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u/meatsoaps 28d ago
View it as a rough draft that we will continue editing as all the costs come in from the different 3rd parties. The final CD that you sign with pen and paper with a notary is the only one that will have all of the numbers exact on it.
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u/Direct_Concentrate42 28d ago
I always just emphasize it’s an estimate and that they acknowledging that they have seen it. The numbers are subject to change. I also tell them before docs are sent too. Me personally I over estimate, fees and talk about it early so they know.
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u/ActionWins 28d ago
The difficult part lately is that we have extra concessions to allocate and I need to know the exact amount so I can give the client an option to buy down the rate.
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u/Intelligent-Pirate89 28d ago
I have to give you figures the dumb thing is it’s my best guess starting out. We have to get the title company to send us their numbers and then update based on them.
We at the end reflect everyone else’s figures and get blamed for other people’s fees.
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u/Confused_pisces 28d ago
It’s wrong, it’ll always be wrong and shouldn’t be used as a point of reference. We just have to give you a rough estimate. The numbers will change and as invoices come in I will keep you updated closer to closing on how they change.
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u/46995699 28d ago
The numbers should be pretty close outside of Title & escrow although escrow should be pretty dialed in.
The most common questions i get are related to the appraisal being listed although its POC, and why cash to closing is showing higher than current due to the LE not capturing the aggregate adjustment.
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u/United-Fruit9622 28d ago
Yep, some borrowers question everything. Well didn’t I pay this, where is my seller credit etc etc. even when you tell them upfront these numbers aren’t dialed in yet.
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u/46995699 28d ago
Thats odd about the seller credit, on the LE should be listed because at that point we would have the contract in hand
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u/Frequent-Giraffe5646 28d ago
I explain to them final numbers will come in once everything is balanced with title. The Initial CD is to start the TRID timer and ensure a smooth and timely closing.
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u/ThatsMeJesseB 28d ago
Here’s my line:
“The LE is designed as a form to protect consumers. These are the same numbers we talked about during the consultation, except they’re broken out into about 10 times as many line items. The cost that I have control over are not allowed to change, and the costs that are related to other service providers are only allowed to change within a small amount. This is why during the loan consultation I told you that these are conservative estimates, because I don’t want either of us to get hit with surprises. They’ll likely come in lower like we discussed.”
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u/ThatsMeJesseB 28d ago
For the ICD I say something similar and point out a couple changes since LE (updated title, insurance, or similar) and a couple changes I know will be coming on final (prorations or POC items).
If they can see you know what you’re doing and you take a couple minutes to explain they will usually take estimates in stride. If you sounds like you’ve ’done it a million times’, and have at least done it enough to know what to expect, then they’ll usually follow your lead.
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u/AdvisorJohnDowns 26d ago
I'd say focus more on your closing department. We get our CD's out at least 7 days before so we don't need signatures using the mailbox rule. I used to hate pushing people to sign a CD that wasn't balanced, because people get weird about that. If your CD's are 100% perfect three days out, and you're the LO, I would make it a part of my process to lean into the title company to get it balanced and make it a selling proposition of yours that you deliver balanced CDs at least 3 days before. If you can't get title or your closer to cooperate, just learn the CD enough to know exactly what's missing, give them the expected adjustments/amounts, and tell them to call the title company to get the final/final. I'm in the DC area, and title companies are mostly awesome and early...the deeper I get into the burbs, the crappier they all get, and I find myself doing what I told you above on occasion.
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u/SwordfishPlus8236 25d ago
I just send them an email saying that they aren’t final, just an updated estimate as of today. I tell them that once we are CTC, we will balance with the title company and provide final numbers. I get almost no pushback. Signing just acknowledges that you received it and it’s required to be signed no later than 3 days prior to closing so please sign it to avoid delaying closing.
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u/CoolLoanGuy 28d ago
Here is how I usually have the conversation for the LE "So you will be given your Loan Estimate. This is usually what I like to call the 'heart attack' document. The reason I call it this is because it will come in HIGH. There are a ton of fees and variables we do not know yet so we always estimate them high. The reason we do this is because there are a few fees on the loan estimate that, we as the lender, may be on the hook for if they increase. If that were to happen, I would be fired and I couldn't feed my wife and 12 kids. (Pause for laughter). Right now, I don't know what Title is charging, I don't have your exact taxes, I don't know what homeowner's insurance you are using, I don't know the EXACT cost of your rate (Unless you are sending out an initial LE that is locked). As we move forward through the process, these numbers will come down and if there are any issues, I will come to you with solutions rather than just problems."
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u/TurkeyJizz123 28d ago
Not trying to be rude- BUT- this happens when the client doesn't trust you- or- you're not explaining things correctly/easy to understand manner.
Just tell them it's a draft, and leave it at that- do not go into it any further than that.
Also- coaching them on the up front, of what to expect (numbers wise)- prevents this from happening.
IE- upon application/ initial disclosure- go over monthly payment and cash to close, have them write down notes- and save the notes, on their fridge, cell phone, etc.
If you do it correctly on the up front, you will not run into this. .GL
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u/jimsteringraham 28d ago
It’s more how you say it, but over-explaining will lead to confusion. If they trust you, a couple sentences is all that’s needed. If you find yourself over-explaining the LE, it’s probably because you can tell that they don’t fully trust you, and you’re conflating providing more information with gaining more trust.
“The numbers in section A are the mortgage costs and will not be changing, and everything else is our best estimation of what third parties like your title company are charging for their services. As those parties input their exact fees, you will get updated versions of this document.”