The person that prepared the CD neglected to mark the flood insurance premium POC. As a result the amount of the premium was collected by the title company at closing. Realizing the error, we are preparing a new CD that the title company will send to the borrower along with a refund of the premium collected. Should we date the new CD the day of closing or the current date?

Date issued should be current date.

Thank you very much.

I'm wondering if I have the following description of required post closing corrections right.

1. If the amount charged to the borrower changes within 30 days following closing and we pass that increased cost on to the borrower (or we overcharged the borrower for a settlement fee in error), we must notify the borrower about the error and provide a corrected CD. In the case of an overcharge(e.g., actual appraisal cost was $400 and we charged $450 on the CD) we must also refund the amount of the overage. This correction / refund is required; it is not optional.
2. If there are other non-numerical clerical errors (general errors that do not affect the numbers or the delivery of the CD) IF we provide a corrected CD to the borrower in a timely manner, we can cure the violation of 1026.19(f)(i). This correction can be used to cure a violation, but it is not required. So the bank would be left with a violation due to the original error, but does not gain a violation if it does not make a correction to a non-numerical clerical error. Do you agree?
3. If the fee tolerances are exceeded, we may make the tolerance cure after closing to cure the original violation. Like #2, this correction can cure a violation, but it is not required by the rule. That is we don't gain an additional violation by failing to identify the need for a tolerance cure and corrected CD post closing. Do you agree?

I don't dispute that reviews and corrections under #'s 2-3 above should be performed (and will be expected by examiners), but do you think the reviews/corrections above are required?

1. Good luck in try to collect additional fee after closing. Otherwise it is correct.

2.Not correcting a known problem with a CD is a violation.

3. No - I do not agree.

Thank you Randy. We would not try to collect a fee after closing, I was just trying to follow the language in the rule. Will you help me to understand your position on #2 and #3?

As for #2 - 1026.19(f)(2)(iv) says "a creditor does not violate (f)(1)(i) if...." I don't see where correction of the non numerical clerical error is otherwise a requirement. It looks like we can correct a violation, but I don't see where we must.
#3 - 1026.19(f)(2)(v) says "the creditor complies with (e)(1)(i ) and (f)(1)(i) if..." So, I was using the same logic. We can cure a violation, but I don't see where we must.

Always glad to be schooled

I just looked at the CFPB exam procedures. They basically say:
1. Amounts paid by the borrower were incorrect - Must correct
2. Non-numerical clerical errors - Must correct
3. Good faith analysis tolerance cures - May correct

19(f)(2)(v) Refunds related to the good faith analysis.
1. Requirements. Section 1026.19(f)(2)(v) provides that, if amounts paid at closing exceed the amounts specified under § 1026.19(e)(3)(i) or (ii), the creditor does not violate § 1026.19(e)(1)(i) if the creditor refunds the excess to the consumer no later than 60 days after consummation, and the creditor does not violate § 1026.19(f)(1)(i) if the creditor delivers or places in the mail disclosures corrected to reflect the refund of such excess no later than 60 days after consummation.

Hi ahou,
Thanks for your posting. I am familiar with the citation you provided. Are you understanding it to REQUIRE a post closing tolerance cure?

Let me ask you this. If you have a tolerance violation that requires a cure, why would you think you didn't have to correct it just because the loan has closed? If that was the case, why cure any of them?

The citation is an IF/THEN set-up.
IF you collect too much and
IF you refund it no later than 60 days after closing and
IF you send corrected disclosures
THEN the creditor does not violate § 1026.19(e)(1)(i).

Granted it's a cart before the horse way of writing it but that's what it says.
It doesn't give you the option not to correct it.

Why would I think we didn't have to correct it? Because I'm not seeing the language in the rule that mandates it. Am I missing it? For the sake of doing the right thing and to cure the violation, we most certainly would want to perform the review and make the tolerance cure. So, I am not debating what is the right thing to do, I am trying to get a fundamental understanding of what is technically required and what actions are merely available to us for the sake of curing a prior violation.

ahou above gave you the citation at 19(f)(2)(v)

Hi Truffle, thanks for your thoughts. I am wondering however, if despite all of the if's in the citation you provide above, you believe the rule actual requires a post closing tolerance cure such that if we don't perform all of the steps we violate both 1026.19(e)(1)(i) and 1026.19(f)(2)(v)? As mentioned above, I read the section to provide a way to avoid the violation under 1026.19(e)(1)(i) by refunding and providing a corrected disclosure in a timely manner. I don't see how the failure to do so creates another violation under 1026.19(f)(2)(v).

Ok Randy -- thank you.

All I can say is that if you have a violation of 1026.19(e)(1)(i) and you do not correct it, the regulators will make you do it - long past the 60 days frame and that they may also require a look back on your entire portfolio. It also closes the window on an civil liability. So, are you actually required to correct - I guess the answer is no. However one would not only at the peril of the bank.

This is no different and it is modeled after the Joint Statement of Policy on Administrative Enforcement of The Truth in Lending Act that has been around since 1998.

Exemption from Restitution Orders

A creditor will not be subject to an order to make an adjustment if within 60 days after discovering a disclosure error, whether pursuant to a final written examination report or through the creditor's own procedures, the creditor notifies the person concerned of the error and adjusts the account to ensure that such person will not be required to pay a finance charge in excess of that actually disclosed or the dollar equivalent of the APR disclosed, whichever is lower. This 60-day period for correction of disclosure errors is unrelated to the provisions of the civil liability section of the Act.

And in other words...if you exceed the 60 days on the correction....they can cite you for it.

Oh...oops...many posts happened while I was otherwise occupied but still in the reply screen !

That is very helpful. Thank you everyone. I know this was a painful thread.

Just making sure that I am understanding this correctly. We would need to send out a revised closing disclosure after consummation if we collected too much at closing. We disclosed and collected for a $450.00 appraisal fee but the borrower ended up paying for it before closing. We need to give this 450.00 back (obviously), but we also need to provide a revised closing disclosure within 30 days of finding the error.

With the old HUD, in a case like this we only refunded and gave a letter explaining what the refund was for, but didn't provide a revised HUD since the fees were not out of tolerance. I thought the new LE & CLoD were the same, but when I read the reg I am now thinking that we would need to redisclose along with giving them the check. Is this correct?

Yes, you must refund and send a corrected disclosure.

19(f)(2)(iii) Changes due to events occurring after consummation. If during the 30-day period following consummation, an event in connection with the settlement of the transaction occurs that causes the disclosures required under paragraph (f)(1)(i) of this section to become inaccurate, and such inaccuracy results in a change to an amount actually paid by the consumer from that amount disclosed under paragraph (f)(1)(i) of this section, the creditor shall deliver or place in the mail corrected disclosures not later than 30 days after receiving information sufficient to establish that such event has occurred.

Question-If Closing Costs Financed was disclosed incorrectly on the CD, is this a clerical error or a numerical error? I wasn't sure since it does not affect the amount a consumer has to pay, however, it is numerical in nature Thanks!