Per its normal procedures, the Consumer Financial Protection Bureau (“CFPB”) requested comments on its proposed amendments to Regulation Z, commonly referred to as the “TRID Amendments.” In response, we provided a comment letter regarding these amendments, not only since they will impact our clients and ourselves once implemented, but also to share our expertise – cultivated through 25 years of providing vendor services – with the CFPB.
After posting a blog about our comments, we’ve received requests for more specifics as to their content. To oblige these requests, we are posting excerpts from our letter.
The following excerpt is our comment on the issue involving re-disclosure of Loan Costs and Other Costs, when these costs have changed – some due to a valid “change of circumstance” under 12 CFR § 1026.19(e)(3), and some which have changed due to any other reason (e.g. clerical errors).
Comments - Background
A fairly contentious question surrounding the implementation of the new TILA-RESPA Integrated Disclosure is what lenders should use as a base to disclose fees on a revised Loan Estimate or Closing Disclosure. Many lenders seemed to believe that the amounts disclosed on the Loan Estimate column of the Calculating Cash to Close table on the Closing Disclosure should be the figures that are used for tolerance, rather than using the most currently available figures for amounts that are not being reset due to tolerance events.
Section 1026.19(e)(3)(iv) makes it clear that “[f]or the purpose of determining good faith under paragraph (e)(3)(i) and (ii) of this section, a creditor may use a revised estimate of a charge instead of the estimate of the charge originally disclosed under paragraph (e)(1)(i) of this section if the revision is due to any of the following reasons:” The reasons listed in (iv)(A) through (iv)(F) are valid change of circumstances.
This instruction did not make it clear, however, whether a lender should use updated amounts on the revised disclosures for items that were not being reset for tolerance problems. To further compound the problem, using the example of a redisclosure for a rate lock extension fee, Comment 19(e)(3)(iv)-2 says that “other charges unrelated to the rate lock extension may not change.”
This led many to believe that in the process of doing a redisclosure, if a fee changed due to something other than a valid change of circumstance, the amount disclosed for that fee could not reflect the new information. Under the new Proposed Amendments, the Comment is slightly modified to read as follows:
“Actual increase. A creditor may determine good faith under § 1026.19(e)(3)(i) and (ii) based on the increased charges reflected on revised disclosures only to the extent that the reason for revision, as identified in § 1026.19(e)(3)(iv)(A) through (F), actually increased the particular charge. For example, if a consumer requests a rate lock extension, then the revised disclosures on which a creditor relies for purposes of determining good faith under § 1026.19(e)(3)(i) may reflect a new rate lock extension fee, but the fee may be no more than the rate lock extension fee charged by the creditor in its usual course of business, and the creditor may not rely on changes to other charges unrelated to the rate lock extension for purposes of determining good faith under § 1026.19(e)(3)(i) and (ii).”
Comments - Endorsement
This version of the comment makes it less likely to be used as evidence for the position that redisclosed fees cannot change without a valid change of circumstance, but it doesn’t really clarify the issue. Fortunately, the new proposed amendments also add Comment 19(e)(3)(iv)-4 & 5:
“4. Revised disclosures for general informational purposes. Section 1026.19(e)(3)(iv) does not prohibit the creditor from issuing revised disclosures for informational purposes, e.g., to keep the consumer apprised of updated information, even if the revised disclosures may not be used for purposes of determining good faith under § 1026.19(e)(3)(i) and (ii). See Comment 19(e)(3)(iv)(A)-1.ii for an example in which the creditor issues revised disclosures even though the sum of all costs subject to the 10 percent tolerance category has not increased by more than 10 percent.
5. Best information reasonably available. Regardless of whether a creditor may use particular disclosures for purposes of determining good faith under
§ 1026.19(e)(3)(i) and (ii), except as otherwise provided in § 1026.19(e), any disclosures must be based on the best information reasonably available to the creditor at the time they are provided to the consumer. See § 1026.17(c)(2)(i) and Comment 17(c)(2)(i)–1. For example, if the creditor issues revised disclosures reflecting a new rate lock extension fee for purposes of determining good faith under § 1026.19(e)(3)(i), other charges unrelated to the rate lock extension should be reflected on the revised disclosures based on the best information reasonably available to the creditor at the time the revised disclosures are provided. Nonetheless, any increases in those other charges unrelated to the lock extension may not be used for the purposes of determining good faith under
This change makes it much clearer that the information disclosed should always be based on the “best information reasonably available” when the disclosures are made. As a result, lenders should use updated amounts on the revised disclosures. This was a much-needed change and clarifies a long-standing question.
There’s never a dull moment in the mortgage industry. Some of our members lament it - I love it. It keeps me on my toes. And helps to separate the forward thinking lenders from the ones that go through the motions.
We’ve been an industry of constant change, really since mortgage originations exploded sixteen years ago at the onset of the 2001-2004 refinance boom. That boom was followed by the loosening of credit, a few years of massive originations, the ’07’-’08 “Mortgage Meltdown”, and then the seven year period of rampant regulatory reform that seems to now be coming to a close.
I think we’ll look back at ’17-’19 as “The Technology Era” of the mortgage lending industry. Steady, if unspectacular, from a total originations standpoint. But years where we’ll see the manufacturing and customer delivery components of mortgage lending completely revamped.
Technology aside, boy is this going to be an interesting year for our industry. The new administration has only been in office for 13 days, and all this stuff has already happened:
Ben Carson’s nomination for HUD Secretary was confirmed by committee and sent to the Senate for a full vote
The Trump admin suspended the FHA MIP reduction
Ted Tozer stepped down at Ginnie Mae
Senate Republicans unveiled a bill to replace the CFPB Director with a commission
The CFPB fined Prospect Mortgage $3.5M for RESPA violations
President Trump signed an executive order to decrease regulation
MBA released a proposal to reform Fannie/Freddie
On top of all this, we’re still waiting to hear who the next FHA Commissioner and President of Ginnie Mae will be, two positions expected to have huge influence on soon to be Secretary Carson. And who knows what will happen with the confirmation of Trump’s Treasury Secretary pick - Steve Mnuchin.
TMC - Chief Operating Officer