QUESTION
I hope this question is acceptable to ask, since it is probably going
to require a long answer. But here goes! I am a compliance manager in a small
mortgage lender in the Pacific Northwest. I just read that the CFPB issued a
new FAQ about TRID. I downloaded and read it, but it is filled with legalese. Could
you please assist me in understanding the CFPB’s new FAQs about TRID?
ANSWER
First and foremost, we welcome your question! Our commitment to
offering weekly answers to readers’ questions is to contribute in our own way
to the compliance needs of the mortgage community. So, please, keep asking
questions and thank you for asking the question about this recent issuance.
I will provide brief answers that may give you some relief from legalese.
The following is an outline, removing the questions, clarifying the answers –
and without the legalese.
The Consumer Financial Protection Bureau (CFPB) posted a new compliance
advisory on its website. It is dubbed TILA-RESPA Integrated Disclosure FAQs. These are the answers to frequently asked questions
(FAQs) about the TILA-RESPA Integrated Disclosure Rule (“TRID Rule”). These
FAQs were updated on January 25, 2019. The FAQs clarify a creditor’s obligation
to provide a new three-day waiting period along with a corrected Closing
Disclosure (CD) when a term previously disclosed has changed; how creditors may
use model forms that do not reflect the CFPB’s 2017 amendments to the Rule; and,
the impact of a recent TILA amendment to the requirement for corrected
disclosures. Since the FAQs were posted without advance notice or comment, our
view is that the CFPB may not initiate a long review for periodic clarifications
but use the FAQs as a means to provide such clarifications from time to time.
1. Only Three Types of Changes to Previously Disclosed Terms Require a
New Three-Day Waiting Period
TRID requires a creditor to provide a consumer with a CD at least three
business days before consummation. The FAQ explains that if a disclosed term
changes after the CD is provided, the creditor must provide a corrected CD. The
FAQ states that only three circumstances require the creditor to provide the
consumer with a corrected CD at least three business days before consummation:
(i) if the previously disclosed APR becomes inaccurate under Regulation Z; (ii)
if the loan product type changes; or (iii) if a prepayment penalty is added to
the loan. For any other changes, the creditor must provide a corrected CD at or
before consummation. [See 12 CFR § 1026.19(f)(1)(ii)(A); 12 CFR §
1026.19(f)(2)(i); 12 CFR § 1026.19(f)(2)(ii)]
2. A New Three-Day Waiting Period May Be Required If the APR Decreases
As I noted, TRID requires a corrected CD and a new three-day waiting
period if the previously disclosed APR becomes inaccurate under Regulation Z.
The FAQ states that an APR is accurate if the difference between the APR and
the actual APR is within an applicable tolerance. [See 12 CFR § 1026.22(a)] The
FAQ states that, for mortgage loans, Regulation Z provides that an APR that
decreases (viz., “overstated”) is considered accurate if the overstatement
results from an overstated finance charge. [12 CFR § 1026.22(a)(4)] If so, the
creditor must provide a corrected CD at or before consummation. However, if the
APR previously disclosed is overstated for a reason unrelated to the finance
charge, and no other tolerance is available under 12 CFR § 1026.22(a), the
creditor must provide a corrected CD at least three business days before
consummation. [See also 12 CFR § 1026.19(f)(2)(i); 12 CFR § 1026.19(f)(2)(ii);
CFR § 1026.22(a)(4)]
3. The Economic Growth, Regulatory Relief, and Consumer Protection Act
Does Not Change the TRID Rule’s Timing Requirements for Corrected Disclosures
The FAQs also clarify that the “No Wait for a Lower Rates” provision –
in Section 109(a) of the recent Economic
Growth, Regulatory Relief and Consumer
Protection Act – does not change TRID’s requirements for corrected disclosures.
[Public Law 115–174, 132 Stat. 1296 (2018)] The CFPB points out that Section
109(a) amended TILA’s requirement for special disclosures for certain high-cost
loans, and does not impact a creditor’s obligation to provide a corrected CD
and a new three-day waiting period.
4. The TRID Rule’s Model Forms Provide a Safe Harbor Even If They Do
Not Reflect the CFPB’s 2017 Amendments to the TRID Rule
In 2017 the CFPB made several amendments to the
TRID Rule, but it did not make corresponding changes to certain model forms.
The FAQ guidance states that if a creditor properly completes the appropriate
model form with accurate content, the creditor satisfies the safe harbor standard even if the model
form does not reflect the TRID Rule’s text and staff commentary as amended in
2017. For example, the 2017 amendments direct creditors to drop any trailing
zeros to the right of the decimal point when disclosing the rate for prepaid
interest. Model form H-24(C), however, shows the rate for prepaid interest with
trailing zeros. The CFPB clarifies that a creditor satisfies the safe harbor by
either including the trailing zeros or by dropping them. [See 82 Federal
Register 37,761-62; 15 U.S.C. § 1604(b); 12 CFR § 1026.37(g)(2)(iii) and
(o)(4)(ii)]
Jonathan Foxx
Managing Director
Lenders Compliance Group
