On April 26, 2018, the CFPB (Consumer Financial Protection Bureau) issued a final rule to provide clarification on when a revised Closing Disclosure can be used to reset TRID applicable tolerances when a changed circumstance or other triggering event has occurred. Similar to the proposed rule issued in July 2017, the final rule attempts to correct the “black hole” issue by addressing when mortgage lenders with a valid justification may pass on increased closing costs to consumers and disclose them on a Closing Disclosure. In addition to addressing this issue, the final rule also includes some additional technical clarifications. The final rule is effective on June 1, 2018.
Under the existing rule, a creditor may only use a Closing Disclosure to reset tolerances if there are fewer than four business days between the time the creditor is required to provide the Closing Disclosure reflecting the revised estimate and consummation. The final rule removes the four-business day limit on a creditor’s ability to reset tolerances with a Closing Disclosure. Therefore, if a changed circumstance or another triggering event has occurred, the 2018 final rule permits a creditor to reset tolerances with either an initial or corrected Closing Disclosure regardless of the number of days between consummation and the date the Closing Disclosure reflecting the revised estimate is required to be provided to the consumer. In any case, the creditor must provide the consumer with the Closing Disclosure reflecting the revised estimate at or before consummation and within three business days of receiving information sufficient to establish that the changed circumstance or other triggering event has occurred. Additionally, the consumer must still receive an initial Closing Disclosure at least three business days prior to consummation. Consistent with the existing rules, a new three-day waiting period is only required for a corrected Closing Disclosure if the APR becomes inaccurate, a prepayment penalty is added, or the loan product changes from the loan product previously disclosed.
To view the rule in its entirety, please click on the following link:
To view the executive summary of the rule and other implementation resources, please click on the following link: