CFPB FINAL RULE CLARIFIES REGULATORY BLACK HOLE

On April 28, 2018 the Consumer Financial Protection Bureau (CFPB) finalized an amendment to its Truth in Lending/Real Estate Settlement Procedures Act Integrated Disclosures (TRID) that addresses when a creditor may compare charges paid by or imposed on the consumer to amounts disclosed on a Closing Disclosure, instead of a Loan Estimate, to determine if an estimated closing cost was disclosed in good faith.

Under the current rule, circumstances may arise in which a cost increases but the creditor is unable to use an otherwise permissible revised estimate on either a Loan Estimate or a Closing Disclosure for purposes of determining whether an estimated closing cost was disclosed in good faith. This situation, which may arise when the creditor has already provided a Closing Disclosure to the consumer when it learns about the cost increase, occurs because of the intersection of timing rules regarding the provision of revised estimates. This has been referred to in industry as a “gap” or “black hole” in the TILA-RESPA Rule.

In response, in July 2017 the Bureau proposed an amendment removing that particular timing restriction. The final rule specifically allows creditors to use Closing Disclosures to reflect changes in costs for purposes of determining if an estimated closing cost was disclosed in good faith, regardless of when the Closing Disclosure is provided relative to consummation.

The final rule will take effect 30 days after publication in the Federal Register.

A copy of the 65-page final rule is available at:  https://files.consumerfinance.gov/f/documents/cfpb_tila-respa_final-rule_amendments-to-federal-mortgage-disclosure-requirements.pdf

A copy of a CFPB Executive Summary is available at:  https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/cfpb_2018-TILA-RESPA-rule_executive-summary.pdf

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