Compliance Blog

Written by Brandy Bruyere, Director of Regulatory Compliance

On Friday, as promised, the CFPB released proposed revisions to the TRID rules that aim to provide improved clarity and incorporate informal guidance provided in unwieldy forms like webcasts into the rule text or official staff commentary. The proposal is nearly 300 pages long, so we will not bog everyone down too much on a Monday morning, but here are a few highlights.

Change in Circumstances After the Closing Disclosure is Issued

One common question that has caused problems since the implementation of TRID relates to changes that would permit credit unions to issue a revised Loan Estimate (LE), except a Closing Disclosure (CD) was already provided so a revised LE is not an option. This posed barriers to resetting tolerances. Here's a description of the problem from the preamble to the proposed rule:

Section 1026.19(e)(4)(ii) imposes certain timing restrictions on the issuance of revised Loan Estimates relative to consummation and the issuance of a Closing Disclosure to ensure that the consumer does not receive disclosures containing estimates and disclosures containing actual costs at the same time. Existing comment 19(e)(4)(ii)-1 explains that, where the rule prohibits issuance of a revised Loan Disclosure, the creditor can instead use the Closing Disclosure to reflect changes in costs that would otherwise justify issuing a revised [LE] and that that Closing Disclosure may be used for the purpose of determining good faith under  1026.19(e)(3). The Bureau proposes to add comment 19(e)(4)(ii)-2 to clarify that creditors may use corrected Closing Disclosures provided under  1026.19(f)(2)(i) or (ii) to reflect further changes in costs that will be used for purposes of determining good faith under  1026.19(e)(3).

.. a creditor may use a corrected Closing Disclosure to reset applicable good faith tolerances when there are fewer than four business days remaining before consummation or when the Closing Disclosure has already been issued, provided that the creditor also complies with the other requirements of  1026.19(e)(4). The Bureau is proposing comment 19(e)(4)(ii)-2 to clarify this point. (Emphasis added.)

Here is the comment language itself:

2. Corrected disclosures provided under 1026.19(f)(2)(i) or (2)(ii). If there are fewer than four business days between the time the revised version of the [LE] and consummation or the Closing Disclosure has already been provided to the consumer, creditors comply with the requirements of  1026.19(e)(4) (to provide a revised [LE] for the purpose of determining good faith under  1026.19(e)(3)(i) and (ii)) if the revised disclosures are reflected in the corrected [CD], subject to the other requirements of  1026.19(e)(4)(i) [addresses revised LE].

Clarification for Construction Loans

Construction loans have been a challenge under TRID. The CFPB proposal, on page 286, includes significant additions to current Appendix D, giving some TRID-specific guidance for multiple advance construction loans. There is also proposed commentary to section 1026.19(e)(1)(iii) that would provide examples for providing the LE for multiple-advance construction loans. Here's one of these examples:

1. Assume a creditor receives a consumer's application for construction financing only on Monday, June 1. Assume further that the creditor generally makes both construction and permanent financing available to qualifying consumers and that the consumer does not expressly state that the consumer will not obtain permanent financing from the creditor. In these circumstances, the construction loan that the consumer applied for is a loan to finance construction of a dwelling that may be permanently financed by the same creditor under comment 17(c)(6)-6. The creditor therefore must deliver or place in the mail the [LE] for both the construction financing and the permanent financing, either disclosed as one or more than one transaction, not later than Thursday, June 4, the third business day after the creditor received the consumer's application, and not later than the seventh business day before consummation of the transaction, even though the application is for construction financing only.

There are other sections that may add some clarity for construction loans. For example, comment 38(g)(4)-1 would clarify that (disclosed) inspection fees are for pre-consummation inspection fees, not post-consummation inspection fees. Instead, post-consummation inspection fees would be disclosed on an addendum attached as an additional page of the CD. This revised comment would also clarify that if some funds for construction are disbursed after closing, these amounts are still placed in the At Closing column on the CD.

There are a few big issues that the CFPB intentionally did not address, like the formula for simultaneously issued title insurance and issues with cure provisions. I'm also sure we'll find other problematic items as we continue working through the proposal. In the meantime, if you spot any disconcerting items in this proposal, let us know (well, let my colleague Alex know) our members input drives our advocacy efforts as we work on comments.

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