Compliance Blog

Written by JiJi Bahhur, Director of Regulatory Compliance

In last week’s TILA-RESPA blog post, the general requirements for the new Closing Disclosure were highlighted.  Today, I’d like to highlight the general timing and delivery requirements applicable to the Closing Disclosure. 

General Timing and Delivery Requirements

The creditor is responsible for ensuring that the Closing Disclosure is received by the consumer no later than three business days before consummation of the loan. To ensure the consumer receives the Closing Disclosure on time, Regulation Z’s new section 1026.19(f)(1)(ii) provides ways in which the creditor must arrange delivery. If the creditor delivers the Closing Disclosure to the consumer in person, it is considered received by the consumer on the day that it is provided. If the creditor mails or delivers the Closing Disclosure electronically, and in compliance with the Electronic Signatures in Global and National Commerce Act, it is considered received by the consumer three business days after it is delivered or placed in the mail.

In instances where a settlement agent is used to provide the Closing Disclosure to the consumer on the creditor’s behalf, the creditor is still responsible for satisfaction of the delivery requirements and remains legally responsible for any errors or defects. This is true even where the settlement agent assumes responsibility for completing some or all of the Closing Disclosure.

More Than One Consumer

When a transaction applicable to the TILA-RESPA rule involves more than one consumer, who must receive the Closing Disclosure is dependent on whether the transaction is rescindable or not. In transactions that are not rescindable, the Closing Disclosure may be provided to any consumer with primary liability on the obligation. In rescindable transactions, however, the Closing Disclosure must be given to each consumer who has the right to rescind, although the disclosures required for adjustable rate mortgages need only be provided to the consumer who expresses an interest in a variable-rate loan program. 

Consumer’s Waiver of Waiting Period

After receiving the Closing Disclosure, the consumer has the ability to waive or modify the three-business day waiting period if he or she determines that the extension of credit is needed to meet a bona fide personal financial emergency.  Whether a bona fide personal financial emergency exists is determined by the facts surrounding individual situations. The Commentary to section 1026.19(f)(1)(iv) provides that the “imminent sale of the consumer's home at foreclosure, where the foreclosure sale will proceed unless loan proceeds are made available to the consumer during the waiting period,” as an example of a bona fide personal financial emergency.

To modify or waive the waiting period, the consumer must also give the creditor a dated, written statement that describes the emergency, specifically modifies or waives the waiting period and bears the signature of all consumers who are primarily liable on the legal obligation. A pre-printed waiver form provided by the creditor is prohibited.   

Applicable Definitions

Business Day.  It is important to note that the term “business day” is defined differently for purposes of providing the Closing Disclosure than it is for purposes of providing the Loan Estimate (which we addressed here in this blog). Business day, for purposes of providing the Closing Disclosure no later than three business days before consummation, is defined to include all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year’s Day, Martin Luther King, Jr.’s Birthday, Washington’s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.

Consummation.  Even though consummation commonly occurs at the same time as closing or settlement, it is a legally distinct event. Consummation refers to when the consumer becomes contractually obligated to the creditor on the credit transaction, not when the consumer becomes contractually obligated to the seller on a real estate transaction.

Determining when consummation occurs, i.e., when a consumer becomes contractually obligated to the creditor, is a matter of state law. To ensure delivery of the Closing Disclosure at least three business days before consummation, creditors and settlement agents should consult with local counsel to determine when consummation occurs in the applicable state.

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Happy Friday, all! I’ve been slacking on my picture-taking of the kiddos lately but their 2-year birthday is coming up in two weeks so I’m certain I’ll  have something cute to share soon!