The Consumer Home Lenders Association (“CHLA”) has notified the Consumer Financial Protection Bureau (“CFPB”) of a potential “black hole” that could impact lenders when the TILA-RESPA Integrated Disclosure (“TRID”) rule goes into effect on October 3, 2015.
The CHLA sent a letter to the CFPB regarding a potential conflict from the Loan Estimate and Closing Disclosure timelines if a borrower requests a change in the loan or an extension for closing.
TRID rules require a lender to deliver the Loan Estimate to a borrower within three days after receiving a loan application and at least seven days prior to when the loan documents are signed. The CHLA warned that if the borrower wants to make a change after the Loan Estimate is delivered — such as extending the closing date — lenders would not be able to effectively comply with the current timelines.
“Specifically, when a borrower makes a request to delay the closing after the Closing Disclosure has been made, but more than seven business days before the new closing date, that there is no apparent legal way for the lender to disclose an increase in costs, for example in conjunction with a loan lock extension fee,” the CHLA said. “The timing of the requirements could create a Black Hole.”
Once the Closing Disclosure document has been provided to the borrower, the Loan Estimate cannot be revised. Any changes must be reflected in a revised Closing Disclosure.
“However, if the change in circumstances occurs more than seven business days before consummation, there are concerns that a lender cannot effectively comply with both the requirement to provide the revised Closing Disclosure (in lieu of a revised Loan Estimate) within 3 business days of the change AND provide it within 4 business days of consummation,” the CHLA said.
In that case, the CHLA said a lender’s only option could be to absorb the increased cost and while that may have not been the CFPB’s intention, in the absence of clarification from the Bureau, this would likely be the result.
The CFPB said it has received the CHLA letter and is reviewing it.
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