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1. If we have issued a Closing Disclosure, but consummation has not occurred, and we learn of a changed circumstance which would result in a tolerance violation from what was quoted on the Loan Estimate, must we issue a revised Closing Disclosure at consummation providing a lender credit to rebate them for the amount outside tolerance?
2. What changes could the consumer request to be made which would not require revised disclosures?
3. We have items which are payable to third parties but the Bank collects the fee at closing and remits payment to them via a deposit account agreement. There is no upcharge on these fees. An example is our Flood Certification company, Evans, Simpson & Associates. For our settlement agent to be able to issue the check to us at closing, we list on the HUD as Flood Certification payable to Bank For Benefit Of Evans Simpson. Would it be permissible to handle these the same way on the new disclosures?
1) Effective 8/1/15 section 1026.19(e)(4)(ii) prohibits a creditor from providing a revised Loan Estimate on or after the date on which the creditor provides the closing disclosure. Section 1026.19(e)(4)(ii) also requires that the consumer must receive a revised version of the Loan Estimate no later than four business days prior to consummation, and provides that if the revised version of the Loan Estimate is not provided in person, the consumer is considered to have received the revised Loan Estimate three business days after the creditor delivers or places in the mail the revised version of the disclosures. So providing a revised Loan Estimate is not an option in your scenario.
Reg Z, 1026(e)(4)(ii) does say if there are less than four business days between the time the revised Loan Estimate is required to be provided (per the changed circumstance rules) and consummation (i.e. you’ve already provided the Closing Disclosure), you as a creditor comply with the delivery requirements for a revised Loan Estimate if the revised disclosures are reflected in the Closing Disclosure. The commentary provides these examples:
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Example 1:
If the creditor is scheduled to meet with the consumer and provide the disclosures required by § 1026.19(f)(1)(i) on Wednesday, and the APR becomes inaccurate on Tuesday, the creditor complies with the requirements of § 1026.19(e)(4) by providing the disclosures required under § 1026.19(f)(1)(i) reflecting the revised APR on Wednesday. However, the creditor does not comply with the requirements of § 1026.19(e)(4) if it provided both a revised version of the disclosures required under § 1026.19(e)(1)(i) reflecting the revised APR on Wednesday, and also provides the disclosures required under § 1026.19(f)(1)(i) on Wednesday.
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Example 2:
If the creditor is scheduled to email the disclosures required under § 1026.19(f)(1)(i) to the consumer on Wednesday, and the consumer requests a change to the loan that would result in revised disclosures pursuant to § 1026.19(e)(3)(iv)(C) on Tuesday, the creditor complies with the requirements of § 1026.19(e)(4) by providing the disclosures required under § 1026.19(f)(1)(i) reflecting the consumer-requested changes on Wednesday. However, the creditor does not comply if it provides both the revised version of the disclosures required under § 1026.19(e)(1)(i) reflecting consumer requested changes, and also the disclosures required under § 1026.19(f)(1)(i) on Wednesday.
2)In regards to the Closing Disclosure, Reg Z says if the APR becomes inaccurate, there is a change in the loan product causing disclosed information to become inaccurate or a prepayment penalty is added, the creditor must ensure that the consumer receives a corrected Closing Disclosure containing all changed terms no later than the third business day before consummation. For all other disclosures provided on the Closing Disclosure that become inaccurate before consummation, the creditor must provide corrected disclosures reflecting any changed terms so that the consumer receives the corrected disclosures at or before consummation.
In regards to the Loan Estimate and a changed circumstance based on revisions/changes requested by the consumer, if consumer requests a change to the credit terms or settlement that would result in an increased charge over what was disclosed the creditor can use that as a basis for a changed circumstance and provide a revised Loan Estimate. If you prefer not utilize the changed circumstance option of re-disclosure and provide a revised Loan Estimate you can honor the original estimates and cure any tolerance violation that occurs as a result of the change.3) I haven’t seen anything that would specifically prohibit this. I’ll ask Jack to offer his opinion.
3) This method of payment is not addressed in the final rule – nothing endorses or prohibits the practice.
Why do you handle the payment this way? What advantage is gained over having the settlement agent cut the check to the vendor, then depositing the check in the vendor’s account at your bank?
Robin, if we do have a changed circumstance affecting tolerances and we re-disclose on the Closing Disclosure prior to consummation, do we not have to provide any rebates for tolerance cures? Further, how would the revised charges be displayed on the Cash to Close comparison chart? Would we show the revised charges under both the Loan Estimate & Closing Disclosure columns or only under the Closing Disclosure column?
Jack, the deposit account where we remit funds to the vendor is held in the Bank’s name and therefore why the payee is Bank for benefit of Vendor.
Thank you! The CMG sessions on TRID over the past year have been a great help.
If there is a changed circumstance that occurs less than four business days prior to consummation you would document the change circumstance in the file and those charges affected by the change would be revised and reflected on the Closing Disclosure. See the comments below from the CFPB’s Small Entity Compliance Guide, page 48:
Creditors may provide consumers with a Closing Disclosure reflecting any revised charges resulting from the changed circumstance and rely on those figures (rather than the amounts disclosed on the Loan Estimate) for purposes of determining good faith and the applicable tolerance.
If the changed circumstance or other triggering event occurs between the fourth and third business days from consummation, the creditor may reflect the revised charges on the Closing Disclosure provided to the consumer three business days before consummation.
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)
Robin, just when I think I understand I find other opinions that lead me to feel otherwise. Below is a link to a BOL thread discussing changed circumstances and tolerances after the initial Closing Disclosure has been issued.
https://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=2010582&gonew=1#UNREAD
The only thing that is clear is that there are conflicting opinions on this topic. I can see both sides of this argument. Because of that and knowing that examiners may have similar interpretations, I think it may be best to take the conservative approach, which is to not revise charges due to changed circumstances after the closing disclosure is issued and to reimburse any tolerance violations.
I’ll ask Jack to offer his thoughts. He might have a different opinion.
Question: If we do have a changed circumstance affecting tolerances and we re-disclose on the Closing Disclosure prior to consummation, do we not have to provide any rebates for tolerance cures? Further, how would the revised charges be displayed on the Cash to Close comparison chart? Would we show the revised charges under both the Loan Estimate & Closing Disclosure columns or only under the Closing Disclosure column?
Answer: The CFPB has not clarified this issue yet. Hopefully they will do so before August 1st. Until then the consensus seems to be no cure would be needed the final number on the closing disclosure would appear in both the Loan Estimate and Closing Disclosure columns.Question: The deposit account where we remit funds to the vendor is held in the Bank’s name and therefore why the payee is Bank for benefit of Vendor.
Answer: By having the account in the bank’s name you are creating an issue that is eliminated if the account is in the vendor’s name.New to this forum…
If an error regarding a disclosed APR is discovered subsequent to loan closing, in addition to restitution, is a corrected CD also required?
1026.19(f) Mortgage loans—final disclosures—(1) Provision of disclosures—(i) Scope. In a transaction subject to paragraph (e)(1)(i) of this section, the creditor shall provide the consumer with the disclosures required under §1026.38 reflecting the actual terms of the transaction….
(2) Subsequent changes.
(i) Changes before consummation not requiring a new waiting period. Except as provided in paragraph (f)(2)(ii), if the disclosures provided under paragraph (f)(1)(i) of this section become inaccurate before consummation, the creditor shall provide corrected disclosures reflecting any changed terms to the consumer so that the consumer receives the corrected disclosures at or before consummation. Notwithstanding the requirement to provide corrected disclosures at or before consummation, the creditor shall permit the consumer to inspect the disclosures provided under this paragraph, completed to set forth those items that are known to the creditor at the time of inspection, during the business day immediately preceding consummation, but the creditor may omit from inspection items related only to the seller’s transaction.(ii) Changes before consummation requiring a new waiting period. If one of the following disclosures provided under paragraph (f)(1)(i) of this section becomes inaccurate in the following manner before consummation, the creditor shall ensure that the consumer receives corrected disclosures containing all changed terms in accordance with the requirements of paragraph (f)(1)(ii)(A) of this section:
(A) The annual percentage rate disclosed under § 1026.38(o)(4) becomes inaccurate, as defined in § 1026.22.
(B) The loan product is changed, causing the information disclosed under § 1026.38(a)(5)(iii) to become inaccurate.
(C) A prepayment penalty is added, causing the statement regarding a prepayment penalty required under § 1026.38(b) to become inaccurate.Also see 1026.19 (f)(2)(iii) for information on required corrected disclosures due to events occurring after consummation.
Hope this help!
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