Questions and Answers about Federal Truth in Lending Disclosures
Closing Disclosures FAQs
Q: Does an owner of the property who is not a borrower need to sign the CD. They are on the deed, but not a borrower.
The TRID rule does not mandate the signature of any consumer in the transaction. Such signatures are at the discretion of the creditor. See 12 CFR 1026.38(s). That being said, you should ascertain whether or not non-borrower signatures are required by a specific loan program or investor for purposes of insuring the loan or purchasing the loan.
Finally, remember that if the transaction is subject to the right of rescission, the non-borrower with an ownership interest in the property must receive the notice of the right to rescind and the Reg Z material disclosures which would be contained in the Closing Disclosure. See 12 CFR 1026.23. Some lenders require the non-borrower owners to sign the Closing Disclosure because they use that signature to demonstrate that the Closing Disclosure was provided to that party for right to rescind compliance.
Q: If I provide a corrected CD after the loan has been closed, what do I date the CD? Do I use the date I am providing the CD to the customer and leave the Closing Date and Disbursement Date the same as they were at closing?
A: The regulation does not specifically answer your question, but it would make sense to use the date you are issuing the revised CD (either the date you place it in the mail or the date it is given to the consumer). From an audit perspective, this date will “show” that it is a revised Closing Disclosure. Note that you can also track revisions by using a revision number suffix appended to the end of the loan number. The Closing and Disbursement dates would stay the same as these dates haven’t changed.
Q: According to the new TRID guidelines a corrective Closing Disclosure can be provided to the borrower within 30 days of closing. What if it exceeds the 30 days? Can anything else be done to remedy the issue?
A: First, we need to clarify that the CFPB response to the Mortgage Bankers Association regarding investor concerns over liability for minor errors on the TRID disclosures does not rise to the level of formal guidance. However, it certainly provides a solid gauge as to the CFPB’s (as well as other regulators’) TRID enforcement intentions in the next few months.
With respect to corrections, the TRID rule does contain provisions for providing updated disclosures due to changes in settlement. Under the law, lenders must provide a corrected Closing Disclosure if an event in connection with the settlement occurs during the 30-calendar-day period after consummation that causes the Closing Disclosure to become inaccurate and results in a change to an amount paid by the consumer from what was previously disclosed. 12 CFR 1026.19(f)(2)(iii); Comment 19(f)(2)(iii)-1. When a post-consummation event requires a corrected Closing Disclosure, the creditor must deliver or place in the mail a corrected Closing Disclosure not later than 30 calendar days after receiving information sufficient to establish that such an event has occurred. Note that the corrected disclosure is not required within 30 days of closing but rather within 30 days of receiving information that establishes an inaccuracy.
Example: Assume the loan is consummated on day 1, a recording fee increases 20 days after consummation and you are made aware of the increase 35 days after consummation. The “event” occurred within 30 calendar days after consummation so you are obligated to provide a corrected disclosure. You are made aware of the increase 45 days after consummation, so you would have 30 days starting at day 45 to provide the updated Closing Disclosure.
If you fail to respond within the time-frame described above, you can still avoid liability for the underlying error and provide a corrected Closing Disclosure pursuant to existing TILA/Regulation Z. According to 15 USC 1640(b), a lender can avoid compliance liability if finds the error before the borrower does and makes the appropriate adjustments and provides notice of this adjustment to the borrower within 60 days of discovering the error. As always with compliance violations, you may want to consider consulting with your legal counsel.
Q: On loans that are secured by rental property and land only, are we required to disclose the escrow information even though we are not escrowing?
A: Assuming you are referring to the escrow disclosures on the Loan Estimate and the Closing Disclosure, there would be no requirement to disclose escrow information if you are not establishing an escrow account. The law does require disclosure of the sum of taxes, insurance and other assessments pursuant to 12 CFR 1026.37(c)(4) even if no escrow account for the payment of some or any of such charges will be established. The Closing Disclosure also requires disclosure of why an escrow account was not established under 12 CFR 1026.38((l)(7)(i)(B).
Q: Is the closing date the same as the disbursement date?
A: Not necessarily. For purposes of the TRID rule, the closing date that is disclosed on the Closing Disclosure is the date of consummation. 1026.38(a)(3)(ii). Consummation means the time that a consumer becomes contractually obligated to you the creditor on the transaction and that point in time is defined according to your state law. 1026.2(a)(13) and Commentary. The disbursement date is the date funds are expected to be paid to the consumer and seller in a purchase transaction or the consumer or other third party in a non-purchase transaction. 1026.38(a)(3)(iii).
Often the closing date and the disbursement date are the same, but you will want to verify what “consummation” means in the state you are doing business. Consummation is often the closing date, but in some states, this point in time can occur earlier.
Q: Do adjustments and other credits include money that the consumer gets from the proceeds of subordinate financing, local or State housing assistance grants or other similar sources?
A: Yes. Comment 5 to section 1026.37(h)(1)(vii) specifically addresses your question and states: Adjustments and Other Credits includes funds provided to the consumer from the proceeds of subordinate financing, local or State housing assistance grants, or other similar sources.
Q: What is the length of time to make a refund after closing? Length of time to make correction?
A: Creditors must refund excess charges to the consumer no later than 60 days after consummation. The creditor must also deliver or place in the mail corrected disclosures that reflect such refund no later than 60 days after consummation. 12 CFR 1026.19(f)(2)(v).
If during the 30-day period following consummation, an event in connection with the settlement of the transaction occurs that causes the disclosures to become inaccurate, and such inaccuracy results in a change to an amount actually paid by the consumer from that amount disclosed, 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. If the error is clerical in nature, the corrected disclosure must be provided not later than 60 days after consummation. 12 CFR 1026.19(f)(2)(iii) and (iv)
Q: Are signatures required on the Closing Disclosure?
A: No. According to the regulation, signatures are optional. However, FNMA is requiring signatures on the Closing Disclosure. If the lender is planning on selling to the secondary market, it should carefully review their requirements in addition to the regulations.
Q: We believe that an HVE or AVM should be disclosed as an “Estimated Property Value,” not an “Appraised Property Value,” as an HVE or AVM are not full appraisals. Is this correct?
A: Yes, That is correct. An HVE or an AVM are valuations of a property’s value, not a full appraisal. If an AVM or HVE is used to determine approval, then it should be disclosed as “Estimated Prop. Value.” The Interpretation says, “To comply with this requirement, the creditor discloses the value determined by the appraisal or valuation used to determine approval of the credit transaction. If the creditor has not obtained an appraisal, the creditor may disclose the estimated value of the property. Where an estimate is disclosed, rather than an appraisal, the label for the disclosure is changed to “Estimated Prop. Value.”§1026.38(a)(4)-1.
Q: How should state grants be disclosed on the Closing Disclosure?
A: On the Closing Disclosure, a state grant for a mortgage loan is disclosed on page 3 in the Summaries of Transactions Table, in section L. Paid Already by or on Behalf of Borrower at Closing in the subsection ‘Other Credits’. 1026.38(j)(2)(vi). This ‘other credits’ section acts as a catch-all for credits paid on behalf of the borrower that were not otherwise disclosed on page 2 or section K on page 3. 1026.38(j)(2)(vi).
Q: For an escrow state such as California, the term consummation means when the borrower signs the note. The note does not have a date field. Can we assume the date the note is signed will be used to determine if the 3-day waiting period expired?
A: Yes, that is probably a safe assumption. If consummation occurs when the borrower signs the note, then the date to determine compliance with the 3-day rule will likely be the date next to the borrower’s signature. You may want to consider updating your policies and procedures and documenting that for purposes of determining the 3-day waiting period, you consider the date the borrower signs the note to be the date of consummation.
Q: We do business in states like California where we fund the loan one day and close/record the transaction the next day. Is the requirement to provide the Closing Disclosure 3 days before consummation based on the funding date or the recording date (i.e. closing)?
A: The general rule is that the consumer must receive the Closing Disclosure no later than three business days before consummation. (§1026.19(f)(1)(ii).
Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan. The point in time when a consumer becomes contractually obligated to the creditor on the loan depends on applicable state law. (§ 1026.2(a)(13) and Comment 2(a)(13)-1).
In California, provided the loan documents identify the lender, consummation occurs when the borrower signs the loan documents which generally happens at closing. So the Closing Disclosure would need to be provided 3 days prior to the closing.