Compliance Blog

Home-Secured Lending Jul 31, 2015

TRID: Issuing Revised Loan Estimates While Within the Tolerances; July NCUA Report Available

Written by Brandy Bruyere, Senior Regulatory Compliance Counsel

Several weeks ago, I volunteered as tribute and watched the CFPB’s “fifth and final” TILA/RESPA webinar. While the implementation date for the rule is delayed until October 3rd, compliance efforts continue and several of our members have asked if the rule permits credit unions to provide a revised Loan Estimates solely for “informational purposes” when settlement costs increase, but are still within the applicable tolerance limits. Here is an informal transcript of the CFPB’s webcast guidance on this issue:

“Question: In a scenario where the creditor’s estimate of closing costs changes, but the prior estimate remains “in good faith” for purposes of Section 1026.19(e)(3), is the creditor prohibited from providing the consumer with a revised disclosure?

Answer: No. As stated in comment 19(e)(3)(iv)(A)-1.ii, the rule does not prohibit the creditor from  issuing revised disclosures for informational purposes. When estimates change, section 1026.19(e)(3)(i-iii) determines whether the charges the changes are in good faith. TO be clear throughout this answer the phrase in good faith will refer to this section [of the rule]. Bear in mind that the Loan Estimate is a disclosure to the consumer. The Loan Estimate alone will not indicate whether estimates are in good faith. To determine estimates are in good faith, the creditor must perform the analysis under section 1026.19(e)(3)(i-iii). If the creditor performs that analysis and determines that changed estimates are not in good faith, the in certain circumstances [the rule] may allow the creditor to reset the estimates in order to be in good faith. When resetting the estimates under those circumstances the rule requires the creditor to provide the consumer with a revised Loan Estimate or in certain instances explained in comment 1 to section 1026.19(e)(4)(ii), a Closing Disclosure. But even if the creditor determines that changed estimates remain in good faith the rule does not prohibit the creditor from issuing an updated disclosure reflecting the changed estimates and the creditor has the option of doing so. However keep in mind that in that case, the updated disclosure would not impact the good faith analysis under section 1026.19(e)(3)(i-iii), and that the creditor must have a mechanism for tracking which disclosure controls for the purposes of determining good faith.

Let’s consider an example.  The scenario in comment 19(e)(3)(iv)(A)-1.ii assumes that a creditor previously provided a $400 estimate of title fees. For the purposes of determining good faith, title fees are generally included in the category of fees that in aggregate may not increase by more than 10%. This scenario further assumes that a changed circumstance increases title fees from $400 to $500 and that the sum of all costs subject to the 10% tolerance category has not increased by more than 10%. Under section 1026.19(e)(3)(ii) the prior estimate remains in good faith therefore the rule does not permit the creditor to reset the estimate since the total charges in the 10% tolerance category are still in good faith. However the creditor has the option of providing the consumer with an updated disclosure reflecting the increase in title fees, and when the creditor performs the good faith analysis the actual title fees of $500 may not be compared to the revised estimate of $500. Instead they must be compared to the originally estimated title fees of $400 because the changed circumstances did not cause the sum of all costs in the 10% tolerance category to increase by more than 10%.”

(emphasis added)

For those who also want to know if a webcast will be helpful without having to watch the entire session, there’s good news! The bureau does keep an index of these webcasts, updated in July to reflect the fifth webcast. The index lists the questions were covered by date of webcast along with the approximate timestamp on the webcast that the question was discussed.

***

July NCUA Report Available. The July issue of The NCUA Report is available here, covered topics include the proposed changes to the Member Business Loan rule, extension of the interest rate ceiling through March 2017, and NCUA’s approval of voluntary diversity assessment standards.

***

Palate Cleanser.

Nolan is not quite crawling, but he certainly rolls quite a bit to get where he wants to go. I suppose child proofing needs to be a priority—and poor Lemmy, he has to share a lot more space lately!

Nolan & Lemmy

  • tags

  • TRID