QUESTION
We are a lender and long-time subscriber. In
fact, we meet each week as a group to discuss compliance,
sales, and underwriting, and your weekly FAQs are part of our discussion. So,
thank you for publishing these FAQs! A few weeks ago, you published the article New TRID FAQs. There were four new TRID updates from the CFPB. Although you did cut through the legalese and mumbo-jumbo, we still are a little confused by two
of them. So, for the sake of clarity, please clarify these two new FAQs from the CFPB.
(1) If there’s a change to disclosed terms after we provide the initial Closing Disclosure, are we required to ensure that the consumer receives a corrected CD at least three business days before consummation?
(2) Are we required to make sure that a consumer receives a corrected CD at least three business days before consummation if the APR decreases?
ANSWER
Thank you for the kind words about
our FAQs. Also, thank you for subscribing to the weekly FAQs. We offer them as
a “labor of love,” because we feel strongly that knowledge should be shared! You
do not have to be a client of ours as a precondition of receiving our articles,
newsletters, FAQs, and website posts.
The article that you reference
received a very high level of reader interest. There has been a flurry of
activity regarding the new TRID clarifications issued by the Consumer Financial
Protection Bureau’s posting of frequently asked questions. I am not surprised
that you asked these two questions, as they often snag a lender in contortions
of confusion.
Let’s dig in!
(1) If there’s a change to disclosed
terms after we provide the initial Closing Disclosure, are we required to
ensure that the consumer receives a corrected CD at least three business days
before consummation?
You do not need to
provide a new disclosure and a new waiting period for most changes in terms.
However, if the change results in one of the three situations listed below,
then you must issue corrected disclosures and provide another waiting period:
- The change in terms results in the annual percentage rate (APR) becoming inaccurate;
- The loan product information required to be disclosed under the TRID Rule has become inaccurate; or
- A prepayment penalty previously undisclosed was added to the loan contract.
(2) Are we required to
make sure that a consumer receives a corrected CD at least three business days
before consummation if the APR decreases?
If the overstated APR
is accurate under Regulation Z, you must provide a corrected Closing
Disclosure, but you are permitted to provide it at or before consummation
without a new three-business-day waiting period. If the overstated APR is
inaccurate under Regulation Z, you must ensure that a consumer receives a
corrected Closing Disclosure at least three business days before the loan’s
consummation.
For instance, the
following is an example of an overstated APR in a real estate transaction that
is still considered accurate:
If the APR and finance charge are overstated because
the interest rate has decreased, the APR is considered accurate. So, you may
provide the corrected Closing Disclosure to the consumer at consummation and you
are not required to ensure that the consumer receives the corrected Closing
Disclosure at least three business days before consummation.
In any event, I suggest you re-read the original FAQ we published to better understand the nuances (and there are nuances!) involved
in such re-disclosure and also review the citations.
Jonathan Foxx
Managing Director
Lenders Compliance Group
