February 17, 2016 at 9:28 am #8786
If a revised closing disclosure is needed, I see the guidelines on the “Revised Loan Estimate Flowchart” regarding the waiting period, however my question is regarding in what circumstances a revised closing disclosure would be allowed?
For example, if we had provided a closing disclosure, and then became aware that the customer wanted to increase the loan amount, which would affect several fees, would we then be able to use a changed circumstance to revise the closing disclosure? And if so would that “reset our tolerance”
Normally this happens much earlier in the process but in this case it did not, so here we are with a closing disclosure on one loan amount, with fees based on that amount, and the customer now wants a higher loan amount. Are we correct to consider it a changed circumstance of the customer wanting more money, provide a revised closing disclosure, and wait 3 days if hand delivered, 6 if USPS mailed?
Any help is appreciated. Thank you.February 18, 2016 at 2:43 pm #8805
1026.19(f)(2) gives two categories of changes and re-delivery timeframes for closing disclosures. 1026.19(f)(2)(i) says that if any of the information on the CD becomes inaccurate then a revised CD should be provided at or before consummation. 1026.19(f)(2)(ii) says if the APR changes and exceeds the permitted tolerance, the loan program changes or a prepayment penalty is added then corrected disclosures should be provided no later than 3 business days before consummation.
Regarding revised loan estimates and resetting tolerances those rules are found in 1026.19(e)(3)(iv). If a reason for a revised loan estimate exists you may provide a corrected LE within in accordance with the requirements, but no later than the fourth business day prior to consummation. The commentary to 1026.19(e)(4)(ii) says if there are fewer than four business days between the time the revised LE disclosure is to be provided and consummation the correction charges may be reflected on the closing disclosure.
From guidance in the CFPB’s Small Entity Compliance Guide, p. 50 it appears you are able to issue revised estimates on subsequent closing disclosures:
If the event occurs after the first Closing Disclosure has been provided to the consumer (i.e., within the three-business-day waiting period before consummation), the creditor may use revised charges on the Closing Disclosure provided to the consumer at consummation, and compare those amounts to the
amounts charged for purposes of determining good faith and tolerance. (Comment 19(e)(4)(ii)-1).
Based on this, it seems if you have a changed circumstance after you have issued the initial CD you can re-disclose revised estimates on a subsequent CD.
If you do decide to go this route with re-disclosing changed circumstances, there may be some risk involved. The regulation nor the commentary take the idea of redisclosing estimates as far as what the SECG does. Although the commentary does say revised estimates can be reflected on the closing disclosure it doesn’t say if is permitted beyond the initial CD, but it also doesn’t say it is prohibited either. Based on the SECG it seems possible, but the regulation doesn’t provide specific support of that comment.
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