Written by Brandy Bruyere, Regulatory Compliance Counsel
As credit unions work towards complying with the TILA/RESPA Integrated Disclosures Rule by the August 1, 2015 deadline, we frequently receive questions relating to changes in timing and delivery requirements. Generally, the current TILA provision contains a waiting period, requiring credit unions to deliver early disclosures at least seven days before the loan is consummated. If the credit union must correct an early Truth in Lending disclosure because the APR changes, a correction must be provided three days before consummation. See, 12 C.F.R. 1026.19(a)(2).
Meanwhile, RESPA requires the Good Faith Estimate (GFE) to be provided no later than three days after the credit union receives the member’s application. RESPA also allows credit unions to provide a revised GFE in certain “changed circumstances” or borrower-requested changes, and requires a revised GFE when the interest rate locks. Generally, revised GFEs must also be provided within three days of the event that triggered the revision. So how does TILA/RESPA address these kinds of situations?
Timing & Delivery of Revised Loan Estimates
Much like the current GFE, the Loan Estimate can only be redisclosed under particular circumstances. [We blogged about the particulars of using revised Loan Estimates in this post.] Under the TILA/RESPA rule, a revised Loan Estimate can serve the purpose of providing estimates in good faith. In other words, the revised Loan Estimate figures would apply when calculating the tolerance limits of particular costs. However, the credit union must provide the revised disclosure within three business days of “receiving information sufficient to establish” that a revised Loan Estimate is permitted. See, revised 12 C.F.R. § 1026.19(e)(4)(i). [Side note—under TILA/RESPA, a “business day” means all calendar days except Sundays and federal holidays]
Additionally, if the credit union issues a revised Loan Estimate, the member must receive the revised Loan Estimate four business days before the loan can be consummated. Further complicating this, if the credit union does not provide the revised Loan Estimate in person, the disclosure is not considered received until three business days after the date the credit union placed the revised Loan Estimate in the mail. Here is the excerpt from the rule:
“The consumer must receive a revised version of the [Loan Estimate] not later than four business days prior to consummation. If the revised version of the [Loan Estimate] is not provided to the consumer in person, the consumer is considered to have received such version three business days after the creditor delivers or places such version in the mail.”
See, revised 12 C.F.R. § 1026.19(e)(4)(ii). In other words, a revised Loan Estimate that is delivered by mail must be placed in the mail at least seven business days prior to consummation. The commentary clarifies how this same timing rule applies when the revised disclosure is sent electronically:
“2. Electronic delivery. The three-business-day period…applies to methods of electronic delivery, such as email. For example, if a creditor sends the [Loan Estimate] via email on Monday…the consumer is considered to have received the disclosures on Thursday, three business days later. The creditor may, alternatively, rely on evidence that the consumer received the emailed disclosures earlier. For example, if the creditor emails the disclosures at 1 p.m. on Tuesday, the consumer emails the creditor with an acknowledgement of receipt of the disclosures at 5 p.m. on the same day, the creditor could demonstrate that the disclosures were received on the same day…”
The commentary goes on to clarify that in order to provide the Loan Estimate electronically, the credit union must comply with the E-SIGN Act.
Using the Closing Disclosure in lieu of a Revised Loan Estimate
If this was not complex enough, a revised Loan Estimate cannot be provided after the credit union has provided the Closing Disclosure. If a “changed circumstance” occurs less than four business days before consummation, the credit union can utilize the Closing Disclosure instead to reflect the changes. If the “changed circumstance” occurs after the credit union already provided a Closing Disclosure, the credit union may use the Closing Disclosure provided at consummation to reflect the changes. For more details on how this section of the rule works, check out revised section 1026.19(e)(4)(ii), comment 19(e)(4)(ii), and page 50 of the CFPB’s TILA/RESPA Integrated Disclosure Small Entity Compliance Guide. For information on the particular timing and delivery requirements for using revised Closing Disclosures, check out this blog.
2015 NAFCU Compliance GPS. The 2015 edition of our popular Credit Union Compliance GPS electronic manual is now available. It includes over 30 new pages dedicated to the TILA/RESPA Integrated Mortgage Disclosure rule as well as updates on major regulatory changes over the past year. Plus, one purchase allows you to share it with your entire credit union. Learn more.
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