You wouldn't think after all this time that we still question how to disclose increased fees due to a customer request, but here we are!

When a loan amount increase is requested by the borrower, which will in turn increase the transfer tax, if we are going to want to reset that baseline fee, should it be done with a redisclosed LE within 3 business days, or is it perfectly fine to just increase it on the CD within 3 business days (sent out about 10 days prior to closing date) using a Change in circumstance?

I'm struggling to know where that line is of when an LE should be used because we do have time and when a CD is ok to be used.

I understand if a CD has already been issued, the change would be disclosed with a new CD or if it is within 4 days of closing when the CD would have to be delivered. It is that time in between where we really could us a Loan Estimate, but a Closing disclosure is just easier.

Thoughts?

If you go way back to the Outlook Live Webinar on August 24th, 2014, you will find that the answer is no. The explanation goes on for another full two pages and if you want them, I can post them later. It takes some time to clean them up for posting on BOL .

Ayoubi: Great. [Bullet 3] May a Closing Disclosure be provided early and a revised Closing Disclosure be used in place of revised Loan Estimate for redisclosing estimates that changed due to changed circumstances?

Arculin: Ok. This question actually touches on numerous procedural components of the redisclosure regime and I’ll spend a good deal of time walking through them. Generally though, while § 1026.19(f)(1)(ii), the provision that controls timing for the delivery of the Closing Disclosure, allows creditors to provide Closing Disclosures earlier than required, in other words, it only requires that the consumer receives the Closing Disclosure no later than three business days prior to consummation, the short answer to this question as to whether or not the Closing Disclosure could be provided early and then used to redisclose is going to be no.

The redisclosure rules set forth in §§ 1026.19(e)(3)(iv) and 1026.9(e)(4) provide a very precise timing mechanism which is designed to allow creditors to redisclose charges increased due to changed circumstances or other triggering events by providing Loan Estimates, revised Loan Estimates up until the point in time where they will no longer be able to do so because they have provided a Closing Disclosure. Then these provisions allow creditors some flexibility to use the Closing Disclosure to redisclose charges.

But as I will explain, the timing rules that relate to using a Closing Disclosure to redisclose charges within this window are keyed off of consummation and they do not account for early delivery of the Closing Disclosure. So while creditors may provide a Closing Disclosure earlier than required, the Rule does not provide a mechanism for redisclosure using revised Closing Disclosures in place of revised Loan Estimates in the event the Closing Disclosure is provided earlier than required, and the timing for redisclosure does not fit neatly within this mechanism.

Thank you for your response! This was how I understood it.... the push back is that TRID 2.0 in 2018 gave allowance for it. I have struggled to find clear guidance on it.

Interesting. Would the people pushing back care to provide a citation supporting this? There was a proposed comment that may have suggested it, but it was scratched in the final amendments.

The Final Rule

As noted above and described in the proposal, proposed comment 19(e)(4)(ii)-2 was intended to clarify that the reference to Closing Disclosures required by § 1026.19(f)(1) in existing comment 19(e)(4)(ii)-1 refers to both the initial Closing Disclosure required by § 1026.19(f)(1) and to any corrected Closing Disclosures provided pursuant to § 1026.19(f)(2). Although the Bureau recognizes that the text of proposed comment 19(e)(4)(ii)-2 could plausibly be interpreted as also removing the existing four-business day limit for providing corrected Closing Disclosures to reset tolerances, the preamble to the proposal does not describe that the Bureau intended such a change.

At the same time, the Bureau has considered the concerns expressed by industry through comments about the implementation challenges caused by the current provisions regarding the use of Closing Disclosures to reset tolerances, and the potential negative effects of those provisions on consumers and creditors. In particular, the Bureau recognizes that the current rules may lead to circumstances under which creditors might be unable to provide revised estimates for purposes of resetting tolerances where the Closing Disclosure has already been provided and there are four or more days between consummation and the time the revised version of the disclosures is required to be provided pursuant to § 1026.19(e)(4)(i). The Bureau believes, however, that before finalizing a rule that addresses this issue it is advisable to propose more explicit language and to seek comment so that stakeholders who understood the proposal in accordance with the Bureau’s intent will have the opportunity to provide their perspectives on this issue. For this reason, the Bureau is issuing a new proposal, concurrent with this final rule, that would address this issue. Accordingly, the Bureau declines to finalize proposed comment

This was addressed in 2.0. Executive summary can be found here:

https://files.consumerfinance.gov/f/documents/cfpb_2018-TILA-RESPA-rule_executive-summary.pdf

Relevant text:

2018 TILA-RESPA Rule and the Use of Closing Disclosures to Reset Tolerances:
Currently, 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 2018 TILA-RESPA Rule removes this four business day limit on a creditor’s ability to reset tolerances with a Closing Disclosure. Thus, if a changed circumstance or another triggering event has occurred, the 2018 TILA-RESPA 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.

Also, per Arculin's response, the reason he stated this was not permissible back in 2014 was due to the timing requirements for the Closing Disclosure that were keyed off the consumation date:


This inconsistency in the regulations resulted in a massive implementation headache that many in the industry dubbed the "black hole". It was clearly an oversight by the regulators when they drafted the text of the CD timing requirements, and it was a god-send for the industry when 2.0 killed the black hole.

That seems to fly in the face of the actual preamble to TRID 2.0.

Although the Bureau recognizes that the text of proposed comment 19(e)(4)(ii)-2 could plausibly be interpreted as also removing the existing four-business day limit for providing corrected Closing Disclosures to reset tolerances, the preamble to the proposal does not describe that the Bureau intended such a change.

At the same time, the Bureau has considered the concerns expressed by industry through comments about the implementation challenges caused by the current provisions regarding the use of Closing Disclosures to reset tolerances, and the potential negative effects of those provisions on consumers and creditors. In particular, the Bureau recognizes that the current rules may lead to circumstances under which creditors might be unable to provide revised estimates for purposes of resetting tolerances where the Closing Disclosure has already been provided and there are four or more days between consummation and the time the revised version of the disclosures is required to be provided pursuant to § 1026.19(e)(4)(i). The Bureau believes, however, that before finalizing a rule that addresses this issue it is advisable to propose more explicit language and to seek comment so that stakeholders who understood the proposal in accordance with the Bureau’s intent will have the opportunity to provide their perspectives on this issue.

The black hole fix was actually proposed at the same time the final TRID 2.0 rule was published and was finalized separately, so it's technically not part of TRID 2.0. Right after the language you quoted, the preamble to the final TRID 2.0 states "For this reason, the Bureau is issuing a new proposal, concurrent with this final rule, that would address this issue."

That proposal resulted in a final rule to fix the black hole, which was published at 83 FR 19159 and became effective on June 1, 2018.