Right on the heels of the release of the 2017 TRID-RESPA Amendments final rule, the CFPB released a proposal today that also impacts TRID. The proposed amendment released in July 2016 contained comments related to utilizing a Closing Disclosure to determine if a closing cost was disclosed in good faith. The CFPB determined, based on comments received from the proposal, that many thought the amendment “would broaden creditors’ ability to compare charges paid by or imposed on the consumer to amounts disclosed on a Closing Disclosure to determine if an estimated closing cost was disclosed in good faith”, however, this wasn’t the original intent of the CFPB.
Under the current TRID rule, limitations are placed on the creditor as to when a revised Loan Estimate may be provided, specifically it must be provided at least 4 business days prior to consummation. This is due to the creditor providing a Closing Disclosure to the consumer 3 business days prior to consummation. A revised Loan Estimate and Closing Disclosure may not be provided on the same day. Comment 19(e)(4)(ii)-1 clarifies when creditors may reset tolerances with a Closing Disclosure instead of with a revised Loan Estimate. Specifically, the comment explains that if there are less than four business days between the time the revised version of the disclosure is required to be provided pursuant to § 1026.19(e)(4)(i) (i.e., within three business days of receiving information sufficient to establish a reason for revision) and consummation, creditors can reflect revised disclosures to reset tolerances on the Closing Disclosure.
As an example, let’s say you are scheduled to meet with your customer on Wednesday (3 business days prior to consummation) to hand deliver the Closing Disclosure; however, the APR becomes inaccurate on Tuesday (4 business days prior to consummation). You can hand-deliver a Loan Estimate on Tuesday and Closing Disclosure on Wednesday or you can make the revision to the Closing Disclosure provided on Wednesday. The customer is unable to come into the branch on Tuesday to hand-deliver a revised Loan Estimate and wants to avoid the closing being delayed so you decide to disclose the revised fee on the Closing Disclosure and provide it to the customer at your meeting on Wednesday. If the reason for the revision clearly fits into one of the five tolerance reset situations (i.e. change circumstance, customer request, etc.) you can reset the tolerance of the fee to avoid any tolerance violations. Currently, this is an acceptable practice under the TRID rules but has caused continued confusion since the release of the final 2015 TRID rule because many bankers didn’t think you could reset tolerance if you provided the closing disclosure less than 4 days prior to consummation. The CFPB attempted to correct the confusion in the proposed amendment released in July 2016 but only caused further confusion. This proposal is being released in an attempt to clear up the confusion and possibly simplify the requirement.
The proposal would amend § 1026.19(e)(4) and associated commentary to remove the four business day limit for providing Closing Disclosures for purposes of resetting tolerances and determining if an estimated closing cost was disclosed in good faith. Consistent with current comment 19(e)(4)(ii)-1, the proposal would allow creditors to reset tolerances by providing a Closing Disclosure (including any corrected disclosures provided under § 1026.19(f)(2)(i) or (ii)) within three business days of receiving information sufficient to establish that a reason for the revision applies. Unlike current comment 19(e)(4)(ii)-1, however, the proposal would not restrict the creditor’s ability to reset tolerances with a Closing Disclosure (either with the initial Closing Disclosure or any corrected Closing Disclosures provided pursuant to § 1026.19(f)(2)(i) or (ii)) to the period of less than four business days between the time the revised version of the disclosures is required to be provided pursuant to § 1026.19(e)(4)(i) and consummation.
The comment period for the proposal will be 60 days from the date it is placed in the Federal Register.