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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)
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.
I haven’t seen this setup. My concern would be to avoid any potential deceptive or abusive criticism for waiving/covering closing costs, but requiring the borrower to maintain a specific balance which may cost them more than the closing costs would have. The balance requirements need to be explained very clearly in promotional materials and disclosures.
If it is a no closing cost product you wouldn’t need to insert a range of third party fees, correct? If you anticipate some fees being charged then you couldn’t disclose it as “no closing costs”. (Requiring property insurance in connection with a no closing cost loan isn’t a problem as long as you disclose that the property insurance is required.) You could say something such as “We waive closing costs up to $1500” or “low fees”. Consider that some of these may be triggering terms which require certain disclosures in advertisements (see 1026.16 and its commentary).
There are prohibitions against requiring certain affiliates as settlement service providers in Regulation X (see 1024.15).
In regards to your specific example, the title insurance company is an affiliate and you may not require them as a settlement service provider. In addition, if you are referring consumers to use the affiliated title insurance company you should be providing the affiliated business arrangement disclosures required by 1024.15 of Regulation X/RESPA.
Commentary to Reg Z 1026.19(e)(1)(vi)says: Section 1026.19 does not prohibit creditors from including affiliates on the written list required under § 1026.19(e)(1)(vi)(C). However, a creditor that includes affiliates on the written list must also comply with 12 CFR 1024.15. Furthermore, the written list is a “referral” under 12 CFR 1024.14(f).
Also, 1024.16 prohibits sellers from requiring a particular title insurance company, so if your bank is owns and is selling a piece of property keep in mind that, as the seller, the bank can not require the use of a specific title insurance company in connection with a federally related mortgage loan.
You must look at the circumstances of each situation to determine if there is a bona fide personal financial emergency. I believe this situation could possibly qualify as such. You would need to consider the situation the consumer is in and what the effect will be if the waiver isn’t used (e.g. they have sold their home and are counting on the new purchase to be their immediate residence and will be out of a home if the waiver isn’t used, etc.). If it is determined to be bona fide personal financial emergency be sure to thoroughly document your file as to how you came to that conclusion.
Response by Jholzknecht:
I understand some examiners are criticizing banks for “requiring” consumers to waive. Examiners are performing a penetration analysis and when the percentage is very high the banker is deemed to have required the waiver.Answer: We covered the ECOA appraisal/valuation delivery rules in May of 2013.
There isn’t anything that would prohibit a financial institution from providing a waiver form. However, financial institutions should consider that the rule was put in place to allow applicants to generally receive copies of appraisals/valuations promptly upon completion or 3 business days before consummation, whichever is earlier. The key is whether customers are making the decision to waive the timing requirement or is the bank requiring the waiver to be signed – it should be applicant’s choice to waive the timing requirements.
Perhaps the financial institution is doing something similar to what Jack has suggested in the past which is, early in the application process the lender could have a conversation with the applicant letting him/her/them know that the bank will be required to wait three business days after delivering the appraisal to close the loan and explaining the waiver that can be used if the customer is under a time constraint and would prefer not to wait the three business days to close. Since the customer must waive the timing requirement no later than three business days prior to consummation it makes sense to address it early in the relationship.
And just as reminder, there is no waiver for delivery timeframes under the HPML appraisal rules.
Check out this prior post on the same topic. https://mycomplianceresource.com/forums/topic/mdia-redisclosurewaiting-period/
Appendix A as well as a RESPA Roundup from July 2010 address services that were disclosed on the GFE but not charged/purchased, but other non-service charges such as daily interest aren’t really addressed, so in my opinion it is a bit of grey area. One could side with consistency and not disclose any amount on the comparison chart if it isn’t charged. On the other hand, if you look at the intent behind services that are not purchased not being disclosed on the comparison chart, it is to avoid padding the tolerance (padding would would give creditors more room for error/overcharging/underdisclosing). This isn’t a concern for the “Charges that Can Change” so, I believe the charge in block 10 of the GFE may be carried over to the HUD comparison chart even if that charge is not assessed.
I don’t believe anyone could construe that by asking the question you propose you are asking for monitoring information. For one thing, the answers provided will not automatically equate to someone being a specific race or ethnicity. Also, Regulation B, section 1002.5(e) allows you to ask about permanent residency or immigration status in connection with a transaction.
Other bankers I talk to say they ask similar question as part of identifying their customers.
I would be concerned about passing this along to the consumer (see Reg X below). I believe most institutions feel it saves them money from printing and mailing paper copies.
§ 1024.12 No fee.
No fee shall be imposed or charge made upon any other person, as a part of settlement costs or otherwise, by a lender in connection with a federally related mortgage loan made by it (or a loan for the purchase of a manufactured home), or by a servicer (as that term is defined under 12 U.S.C. 2605(i)(2)) for or on account of the preparation and distribution of the HUD–1 or HUD–1A settlement statement, escrow account statements required pursuant to section 10 of RESPA (12 U.S.C. 2609), or statements required by the Truth in Lending Act (15 U.S.C. 1601 et seq. ).
For first lien dwelling secured loans, you would need to provide a copy of all appraisals (including the second) three business days before consummation or promptly upon completion, whichever is earlier. Reg B does allow for a waiver on on these timing requirements and permits the appraisal/valuation to be delivered at or before consummation (the waiver must be obtained at least three business days before consummation).
If the transaction is an HPML the appraisal (including the second/flip appraisal) must be provided 3 business days before consummation and there is no waiver option. Depending on your situation you may have to delay closing.
My opinion would be to renew the policy and honor the protections until the bill either dies or is passed and make a call at that time. I don’t believe a bank would be criticized for continuing to provide increased protections even if the statute originally behind it has expired. On the other hand, if you choose to dismantle this process and don’t mind reinstating it if the bill becomes law, then that would be fine as well too. I guess it ultimately depends on what your institution prefers.
