Compliance Blog

Written by Elizabeth M. Young LaBerge, Senior Regulatory Compliance Counsel

On Monday, this blog post highlighted some of the proposed revisions to the TRID rules, including:

• clarification that creditors can reset tolerances using a revised Closing Disclosure when a Closing Disclosure had already been issued; and
   
• clarification regarding post-consummation inspection fees and completing the Loan Estimate for multiple-advance construction loans.

Your NAFCU Regulatory Compliance Team is continuing to pick apart the proposal, but here are a couple other changes to highlight.

Modifying Disclosures for Sharing with Sellers and Third Parties

Whereas Regulation X required providing sellers and the parties agents with the HUD-1, it has not been clear how the Closing Disclosure can be shared. Section 1026.38(t)(5)(v) and (vi) state that the Closing Disclosure can be modified to create separate disclosures for buyers, sellers and third parties by removing certain information. The CFPB has provided additional guidance in the commentary on how to achieve this:

Paragraph 38(t)(5)(v).

1. Permissible form modifications to separate consumer and seller information. The modifications to the form permitted by 1026.38(t)(5)(v) may be made by the creditor in any one of the following ways:

i. Leave the applicable disclosure blank concerning the seller or consumer on the form provided to the other party;

ii. Omit the table or label, as applicable, for the disclosure concerning the seller or consumer on the form provided to the other party; or

iii. Provide to the seller, or assist the settlement agent in providing to the seller, a modified version of the form under  1026.38(t)(5)(vi), as illustrated by form H-25(I) of appendix H to this part. (Emphasis added). See, pg. 284.

Another roadblock to sharing this information has been privacy concerns under the Gramm-Leach-Bliley Act (GLBA) and Regulation P. The CFPB also addressed privacy concerns surrounding sharing the disclosures in the preamble:

Regulation P generally provides that a financial institution (such as a creditor or settlement agent) may not disclose its customers nonpublic personal information to a nonaffiliated third party without providing notice to the customer of such information sharing and an opportunity to opt-out of such sharing.

There are several exceptions to these notice and opt-out requirements, however. For example, GLBA section 502(e)(8) provides an exception that applies if a financial institution shares its customer's non-public personal information to comply with Federal, State, or local laws, rules and other applicable legal requirements. GLBA sections 502(e)(1) and 509(7)(A) provide another exception that applies if a financial institution's sharing of its customers nonpublic personal information is required, or is a usual, appropriate, or acceptable method, to provide the customer or the customers agent or broker with a confirmation, statement, or other record of the transaction, or information on the status or value of the financial service or financial product.

See, pg. 147.

Requirements for Disclosing the Ability to Shop and the Written List of Providers

The amendments also add some language to comments 2 and 4 to section 1026.19(e)(1)(vi) that require the creditor to specifically identify services that are payable by the consumer and can be shopped for by the consumer. Comment 4 is being amended to specifically require that a creditor specifically identify those services payable by the consumer and for which the consumer is permitted to shop on the written list of providers. There is clarification in the commentary regarding packaged services. Below is the new language added to comment 1026.19(e)(1)(vi)-4:

If the charge for a particular service for which the consumer is permitted to shop is payable by the consumer, the creditor must specifically identify that service and an available provider of that service on the written list of providers unless, based on the best information reasonably available to the creditor at the time the disclosure is provided, the creditor knows that the service is provided as part of a package (or combination of settlement services) offered by a single service provider. Specific identification of each service in such a package is not required provided they all are services for which the consumer is permitted to shop. (Emphasis added.) See, pg. 223.

Comment 3 to section 1026.19(e)(1)(vi) is being amended to clarify that use of model form H-27 is deemed compliant, but is not required. Use of the model form was discussed in detail in the preamble to the proposed amendments:

Unlike the model forms for the Loan Estimate and the Closing Disclosure, which, under 1026.37(o)(3) and 1026.38(t)(3), respectively, are mandatory forms for a transaction that is a federally related mortgage loan (as defined in Regulation X), form H-27(A) is not a mandatory form. Moreover, TILA section 105(b) permits creditors to delete non-required information or rearrange the format of a model form without losing the safe harbor protection afforded by use of the model form if, in making such deletion or rearranging the format, the creditor does not affect the substance, clarity, or meaningful sequence of the disclosure. Accordingly, the proposed revision to comment 19(e)(1)(vi)-3 would clarify that, although use of the model form H-27(A) of appendix H to this part is not required, creditors using it properly will be deemed to be in compliance with 1026.19(e)(1)(vi)(C). (Emphasis added.) See, pg. 48.

If these provisions will affect your operations, positively or negatively, please reach out to NAFCU and let us know so that we can incorporate your feedback in NAFCU's advocacy efforts regarding these amendments.

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