During a May 12 speech at the National Association of Realtors conference in Washington, D.C. CFPB Director Richard Cordray took the time to dismiss some misconceptions regarding the TRID Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosures and he created a few misconceptions in the process.
Director Cordray said the requirement to provide the new Closing Disclosure three business days before closing “should not interfere with a successful closing, as some have claimed. In fact, there has been some serious misunderstanding about what kinds of major changes would cause a delay of the closing date, so I want to take a moment to clear that up right now.”
He explained, “The timing of the closing date is not going to change based on any problems you discover with the home on the final walk-through, even matters that may change some of the sales terms or require seller’s credits. On the contrary, we listened carefully to your concerns and limited the reasons for closing delays to only three narrow sets of circumstances:
- Any increases to the APR by more than 1/8 of a percent for fixed-rate loans or more than 1/4 of a percent for variable-rate loans;
- The addition of a prepayment penalty; or
- A change in the basic loan product, such as moving from a fixed-rate loan to a variable-rate loan. That is it.”
If only the APR tolerance rules were that simple. The tolerance rules are contained in Section 1026.22 of Regulation Z, as amended effective August 1, 2015. Click here to view the regulations. You will see that Section.22 contains a lot of words but nowhere does the regulation state, “by more than 1/8 of a percent for fixed-rate loans or more than 1/4 of a percent for variable-rate loans.” So how do we explain this discrepancy:
- It could be that Mr. Cordray’s speechwriter is not familiar with the regulation and that Mr. Cordray’s knowledge is not deep enough to catch the mistake; or
- The CFPB has simplified the tolerance rules but have not shared that information with the rest of us yet.
I would be nice if the CFPB would simplify the tolerance rules per Mr. Cordray’s speech. And if they are changing the tolerance rules it would be nice if they would clarify, once and for all, whether a new three-day waiting period is required on a mortgage loan as a result of an APR increase, decrease, or both.