CFPB Explanations

The Consumer Financial Protection Bureau’s (CFPB’s) TILA-RESPA Integrated Disclosure (TRID) Rule is quite specific regarding fees and forms, while in other areas it is a bit vague.

For example, endorsement charges are not addressed. The disclosure of  the policy premium is discussed but there is no specific guidance as to how to disclose endorsements.

CFPB’s TRID Rule was enacted to help consumers better understand their obligations in a real estate transaction along with the fees and premiums incurred. In that spirit, it is best to disclose any endorsement fees separately on the disclosure forms. When listing endorsement fees on the new forms, the Loan Estimate (LE) or the Closing Disclosure (CD), the listing must begin with the word “Title – “ followed by the description of the endorsement. The placement of the fees will be in Sections B or C (LE and CD) if the endorsement appends the Loan Title Insurance Policy and in Section H (LE or CD) if the endorsement appends the Owner’s Title Insurance Policy.

Listing the endorsement fees separately from premium disclosures will better ensure that the consumer fully understands the closing transaction.

Call your Old Republic Title agent or office to discuss the endorsements available for your transaction.

Some of the terms we have used in the title insurance industry have changed and new terminology has been added for closings on most mortgage applications. Lenders are referred to as creditors, borrowers are called consumers, tolerances are variances and settlement is called consummation. It is important to understand the definition of consummation in accordance with the Consumer Financial Protection Bureau’s (CFPB’s) TILA-RESPA Integrated Disclosure (TRID) Rule because that moment in time is the moment against which many disclosure requirements are measured.

The Rule defines “consummation” as “the time that a consumer becomes contractually obligated on a credit transaction.” See § 1026.2(a)(13). Although terminology varies in different parts of the country, with terms such as closing, settlement, loan document signing and escrow, the clock starts ticking either forward or backward from consummation.

The Closing Disclosure (CD) must be in the hands of the consumer three business days prior to consummation. A revised Loan Estimate (LE) must be in the hands of the consumer no later than four days prior to consummation and variances must be cured within certain time frames after consummation. If changes occur within 30 days after consummation the CD may need to be revised.

While consummation and the events of closing, settlement or escrow may occur at the same time, they are separate and distinct legal events. It may not be as simple as saying consummation occurs when the consumer signs the Note because some state laws define “obligated” differently. It is advisable for the creditor and title/escrow professionals to understand and verify applicable state laws.

The Consumer Financial Protection Bureau’s (CFPB’s) TILA-RESPA Integrated Disclosure (TRID) Rule includes three day rules which apply to both the Loan Estimate (LE) and to the Closing Disclosure (CD). This means that the consumer is entitled to receive the LE within three business days of placing a loan application and the consumer is entitled to receive the CD to review no later than three business days prior to the time when he/she is required to sign the loan documents.

The LE discloses the loan amount, interest rate and the estimated monthly payment along with the balance of the terms of the loan. It breaks down the charges for fees and services required to secure the loan and gives the consumer an estimate of the amount of funds needed to complete the transaction.

Determining when that countdown begins depends on how the documents are delivered. See section §1026.19(f)(1)(ii) of the CFPB’s TRID Rule.

The LE may arrive by US Mail, overnight delivery or via email if the consumer gave prior authorization to receive disclosure for electronic delivery. The lender (called the creditor) must place the LE in one of the modes of delivery within three days after the consumer has supplied them with six pieces of information. When the consumer tells a potential lender their name, address of the property they are interested in buying/financing, social security number(s), income, loan amount sought and estimated property value, they will have triggered the need for the creditor to prepare and deliver the LE within three “business days.”

“Business day” in this provision is defined under § 1026.2(a)(6), as the “day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions.”

A “business day” for delivery of the LE is not the same as a “business day” for the delivery of the CD. The definition of a “business day” when it comes to the delivery of the CD is as follows: “For purposes of § 1026.19(f)(1)(ii), the term “business day” means all calendar days except Sundays and legal public holidays,” referred to in § 1026.2(a)(6).

This means that the consumer will receive the CD containing fees and loan terms three business days prior to the signing of the documents giving them time to review the numbers.

Old Republic Title agents and offices stand ready to help answer consumer questions once they have received the CD or at any other point in the transaction.

Can a borrower waive their right to waiting three days after receiving the Closing Disclosure (CD) in order to close the deal sooner? Yes, but only under very limited circumstances.

There is a provision in Consumer Financial Protection Bureau’s (CFPB’s) TILA-RESPA Integrated Disclosure (TRID) Rule that allows the borrower to waive the three day review period after receiving the disclosure ONLY if the borrower has a Bona Fide Personal Financial Emergency. The phrase is undefined but the CFPB has noted the bar is set very high for what would constitute a financial emergency. However, the entity that will determine whether or not a waiver may be used is the creditor on the new loan. The CFPB “recognizes that the limited guidance on what constitutes a bona fide personal financial emergency may limit the use of the waiver, but the Bureau believes the waiver should be reserved for limited use: when a consumer faces a true financial emergency, as distinct from an inconvenience.” Page 472

The definition of a Bona Fide Personal Financial Emergency was left intentionally narrow in the Rule and “while they noted that consumers may be inconvenienced by closing delays, they stated that a waiver should not be available for mere inconveniences, and that a narrow waiver provision would provide industry an incentive to avoid such inconveniences without risking the potential that a flexible waiver provision could be abused.” Page 467