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Wednesday, November 27, 2019

TRID Rule Concerns

QUESTION
Our compliance and sales heads met as a group and put together a few questions for you. We are a non-bank lender in all states. We met to discuss TRID and draft replies to questions we have been getting from our loan officers. We plan to publish the answers soon and will gladly give you attribution. Here are our questions. 
Does Section 109(a) of the EGRRCPA affect the timing for consummating a transaction if we are required to provide a corrected Closing Disclosure under the TRID Rule? 
If there is a change to the disclosed terms after we provide the initial Closing Disclosure, are we required to ensure that the consumer receives a corrected Closing Disclosure at least three business days before consummation? 
Are we required to ensure that a consumer receives a corrected Closing Disclosure at least three business days before consummation if the APR decreases (i.e., the previously disclosed APR is overstated)? 
Should we use a model form for a safe harbor if the model form does not reflect the TRID Rule change that was finalized in 2017?
ANSWER
Thank you for your questions. Bringing compliance and sales staff together to discuss regulatory issues is a good idea. There was a time, years ago, when compliance and sales had a tense relationship. These days, though, compliance and sales are cemented together. Most loan officers want to do what is legally required to originate loans, while also ensuring that they have the support of management to earn strong and vibrant income.

Your questions are reminiscent of the CFPB’s FAQs issued earlier this year. Here’s a brief response to your questions from the creditor’s perspective.

Question:
Does Section 109(a) of the EGRRCPA affect the timing for consummating a transaction if we are required to provide a corrected Closing Disclosure under the TRID Rule?

Answer:
The short answer is, No. The Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) Section 109(a) of the EGRRCPA did not change the timing for consummating transactions if you, as the creditor, are required to provide a corrected Closing Disclosure under the TRID Rule. Section 109(a), entitled No Wait for Lower Mortgage Rates, amends section 129(b) of TILA. TILA section 129(b) governs when certain disclosures must be provided for high-cost mortgages as well as the waiting periods for consummating a transaction after you have provided those high-cost mortgage disclosures. However, according to the CFPB, the disclosure and waiting period requirements for mortgage loans are stated in section 128 of TILA and, therefore, since the EGRRCPA did not amend section 128, the exception does not apply to all mortgage but only high-cost loans.

Question:
If there is a change to the disclosed terms after we provide the initial Closing Disclosure, are we required to ensure that the consumer receives a corrected Closing Disclosure at least three business days before consummation?

Answer:
You do not need 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. 

Question:
Are we required to ensure that a consumer receives a corrected Closing Disclosure at least three business days before consummation if the APR decreases (i.e., the previously disclosed APR is overstated)?

Answer:
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 the consumer receives a corrected Closing Disclosure at least three business days before the loan’s consummation.

Question:
Should we use a model form for a safe harbor if the model form does not reflect the TRID Rule change that was finalized in 2017?

Answer:
To the extent that the appropriate model form is properly completed with accurate content, the safe harbor is met. The safe harbor applies even if the model form does not reflect the changes to the regulatory text and commentary that were finalized in 2017. Please note, the CFPB did not update the model forms to reflect the 2017 amendments, so it is allowing for a safe harbor as long as the form is completed accurately.

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group