For the first time ever, the CFPB recently published four FAQs addressing the TILA-RESPA Integrated Disclosure rule or “TRID.” [1] These FAQs are welcomed by a mortgage industry that has urged the CFPB to issue written informal guidance for years. The FAQs bear resemblance to the FAQs that the Department of Housing and Urban Development previously issued to provide guidance on the 2010 Good Faith Estimate rule. This written informal guidance is perhaps a positive sign of the new leadership direction of the CFPB away from guidance in the form of webinars and oral statements. In any event, the FAQs provide useful information to dispel some confusion regarding the TRID rule.

Three of the four FAQs cover a source of frequent confusion for mortgage lenders: corrected Closing Disclosures and the three business-day waiting period before consummation. The first FAQ discusses the three types of changes that require a corrected Closing Disclosure to be received by a consumer at least three days before consummation. Specifically, a creditor must provide the consumer with a corrected Closing Disclosure at least 3 business days before consummation if any of the following occur after the initial Closing Disclosure is provided:

For other types of changes, the creditor may consummate the loan without waiting three business days after the consumer receives the corrected Closing Disclosure.

The second FAQ addresses whether a new 3-day waiting period is required when the APR decreases from the amount on the Initial Closing Disclosure. The FAQ states that the answer depends on whether the APR is considered accurate under Regulation Z (i.e., the difference between the disclosed APR and the actual APR for the loan is within an applicable tolerance in Regulation Z). [2]   If accurate, the creditor must provide a corrected Closing Disclosure at or before consummation but a new three-business day waiting period is not required. An inaccurate APR, on the other hand, will trigger a new three-business day waiting period.

The FAQ also discusses a tolerance that might apply where there is an APR overstatement tied to an overstated finance charge, resulting in no additional 3-day waiting period. However, loan investors may not permit correspondent lenders to rely on this tolerance. Accordingly, prudent lenders should check with investors regarding their policy on this issue.

The third FAQ clarifies that Section 109(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA” or “Act”) does not affect the timing requirements for providing a revised Closing Disclosure. Section 109(a) of the Act attempted to eliminate the need for another three-business day waiting period in cases where an APR becomes inaccurate due to a decrease in the APR after the initial Closing Disclosure is issued. However, the FAQ correctly notes that Section 109(a) did not create an exception to the TRID rule waiting period because Section 109(a) amends TILA Section 129(b), which only applies to high cost mortgage disclosures. The FAQ adds that TILA Section 128 sets forth a waiting period requirement for other credit transactions, and that such section was not amended by the Act.

It appears that Congress intended to modify the waiting period under the TRID rule, but made a technical error. Hopefully, the CFPB will act soon and propose a rule to reflect the intent of Congress by the Act. Such a rule should eliminate the need for a second three-business day waiting period when the APR becomes inaccurate because of a new offer of credit with a lower APR.

The last FAQ states that a creditor’s use of a model form will provide a safe harbor even if the model form does not reflect the changes to the regulatory text and commentary that were finalized in 2017. An appropriate model form must be properly completed with accurate content in order to meet the safe harbor for TRID Rule compliance.

[1] The TRID FAQs can be found here: https://www.consumerfinance.gov/policy-compliance/guidance/tila-respa-disclosure-rule/tila-respa-integrated-disclosure-faqs/ (last visited Mar. 6, 2019).

[2] In general, Section 226.22(a)(2) of Regulation Z states that if a disclosed APR for a regular loan transaction does not exceed the actual APR by more than 0.125 percentage point above or below, then the disclosed APR is considered accurate. For irregular transactions, such as loans with multiple advances, irregular payment periods, or irregular payment amounts, the disclosed APR is considered accurate under §226.22(a)(3) if it does not exceed the actual APR by more than 0.25 percentage point above or below. In addition to these tolerances, there are also tolerances in the rule for changes in APR due to over and under stated finance charges. For more information on the accuracy of APRs under Regulation Z, see https://www.consumercomplianceoutlook.org/2011/first-quarter/mortgage-disclosure-improvement-act/#footnotes (last visited March 6, 2019).

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