CFPB Issues New Rule: A Light in the TRID Black Hole

5/9/2018 - By Janet Munns, CRCM

On April 26, 2018, the CFPB issued a final TILA RESPA rule that provides institutions more flexibility when changes occur between the time a closing disclosure is provided to borrowers and the consummation of the loan. The final rule will be effective June 1, 2018.

Background

As we know, TRID requires institutions, in good faith, to provide applicants with a loan estimate (LE) that discloses an estimate of costs associated with the loan being applied for.  TRID determines that an LE was made in good faith if the actual costs charged to the borrower do not exceed the amounts originally disclosed on the LE (subject to regulatory tolerances). Under specific circumstances, when a valid changed circumstance occurs, institutions must, within three business days of the changed circumstance, but no later than four business days before consummation, issue a revised LE to reset tolerances.  Herein lies the problem.  The current rule does not allow an institution to re-issue a revised LE after the closing disclosure (CD) has been delivered yet does not allow an institution to use a CD to reset tolerances if there are more than four business days before closing.

New Rule

The new rule removes the four-business day timing limitation and thus allows institutions the ability to reset tolerances with a CD when a valid changed circumstance occurs, regardless of the number of days between consummation and the date of the revised closing disclosure.  An institution must continue the practice of providing the revised CD at or before consummation, and within three business days of receiving information constituting the changed circumstance.  Furthermore, the initial CD must still be received by the borrower at least three business days prior to consummation.  A new three-day waiting period is still required when issuing a revised CD if the APR becomes inaccurate, a prepayment penalty is added, or the loan product changes from the previously disclosed product.

The commentary to the new rule also clarifies that only those costs affected by the valid changed circumstance may be considered for resetting tolerances.  Institutions may not change costs that are not associated with the changed circumstance on a revised LE, initial CD or revised CD. 

All in all, this is a welcome gift for the industry who has grappled with the issue of the Black Hole since the TRID Integrated Disclosures became mandatory in 2015. At last, let the light shine bright!  

About the Author | Janet Munns, CRCM
Janet is a consultant in the Financial Institutions Advisory Group at Saltmarsh, Cleaveland & Gund and has been serving the financial institutions industry since 1982, focusing on compliance, operations, policies and procedures. Janet is primarily involved in performing fair lending, loan internal audit, loan compliance, and other consulting services for our financial institution clients.

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