In the May 2, 2018, issue of the Federal Register (83 FR 19159, click here) the CFPB published a final rule (2018 TRID Final Rule) to remove what is informally termed the “black hole” that prohibits resetting closing cost tolerances on a Closing Disclosure four or more days prior to closing. To accomplish this the 2018 TRID Final Rule amends §1026.19(e) of the TRID Rule and its Official Interpretations by revising paragraphs (e)(4)(i) and (ii) and  comments 19(e)(4)(i)-1 and 19(e)(4)(ii)-1, making conforming revisions to comment 19(e)(1)(ii)-1, and removing existing comment 19(e)(4)(i)-2. The text of these revisions is attached to this memorandum for reference.


Currently, §1026.19(e)(4) contains the following rules for providing and receiving revised estimates to reset tolerances for closing cost increases: (1) paragraph (e)(4)(i) provides that, subject to the requirements of paragraph (e)(4)(ii), if a creditor uses a revised Loan Estimate pursuant to paragraph (e)(3)(iv) (i.e., changed circumstance) to reset the tolerances under paragraphs (e)(3)(i) and (ii), the creditor must provide the revised Loan Estimate within three business days of receiving information sufficient to establish that there is a permissible reason under paragraph (e)(3)(iv) for revised estimates to reset tolerances; and, (2) paragraph (e)(4)(ii)  prohibits the creditor from providing a revised Loan Estimate on or after the date on which the creditor provides a Closing Disclosure and requires that the consumer must receive a revised Loan Estimate not later than four business days prior to consummation.  Current comment 19(e)(4)(ii)-1 explains that if there are less than four business days between the time a revised Loan Estimate is required to be provided pursuant to paragraph (e)(4)(i) and consummation, creditors may disclose the revision to reset tolerances on the Closing Disclosure. This intersection of timing rules for providing revised estimates to reset tolerances has caused situations where creditors cannot provide either a revised Loan Estimate or Closing Disclosure to reset tolerances even if a reason for revision under paragraph (e)(3)(iv) would otherwise permit the creditor to reset tolerances. This is because there is no similar provision in the current TRID Rule that explicitly provides that creditors may use a Closing Disclosure to reset tolerances if there are four or more business days between the time the revised version of the disclosures is required to be provided pursuant to paragraph (e)(4)(i) and consummation. The 2018 TRID Final Rule removes this four-business day limit and permits creditors, after the Loan Estimate is provided, to reset tolerances with either an initial or corrected Closing Disclosure regardless of when the Closing Disclosure is provided prior to consummation


Full Memorandum