Title’s TRIDBITS – Game On Volume 23
How do I handle the situation if the consumer states that they never received the Closing Disclosure (CD)?
We answered this question in our FAQs some time ago but an interesting trend is starting to develop across the lending community. Our original FAQ answer to the above question is in italics below:
Simply call the lender and tell them the consumer states that they did not receive the CD in advance and then inquire if the lender would like you to proceed. Remember, if the lender used the “mail-box method” of delivery (either mailing or emailing the CD seven days in advance); there is a presumption in the Rule that the consumer received the CD without requiring proof of receipt. Therefore, it is entirely possible that the lender met its obligation but the CD got lost in the mail/email.
Remember, it is not up to the settlement industry to police the delivery if made by the lender.
Since this FAQ was written, industry has heard that in order to make certain the three-day rule is met, some lenders may be issuing a CD soon after issuing the Loan Estimate (LE) at the onset of the mortgage process. In some cases the initial CD is being delivered to the consumer 45 days in advance of settlement. We find nothing in the written words of the Rule that prohibits this procedure though some may wonder how the inevitable changes and updates are handled.
If the initial CD becomes inaccurate, the lender does not violate the Rule as long as the lender provides an accurate CD at the time of consummation. See §1026.19 (f)(1)(i)-1 on page 1718.If the APR becomes inaccurate (or a prepayment penalty is added or the loan product changes); however, the lender is required to meet the 3-day review requirement again. All other changes are permitted close to or at the time of consummation without triggering a new review period.
What about tolerances? Once the CD is issued, the lender may not revise the LE even with a changed circumstance; however, the lender, under certain circumstances, may avoid a tolerance violation by simply revising the CD.
Therefore, if the lender determines that there is a need for a change after the initial CD is delivered, the lender may send a revised CD reflecting the new fees and charges before or at consummation as long as the initial CD was delivered at least 3 business days in advance. How does the lender know what fees will be charged at consummation so far in advance? Estimates are permitted as long as the lender has performed its due diligence to obtain the fees. See 1026.19(f)(1)(i)-2(i)(B)(ii) on page 1720 where the Rule describes due diligence as “using the best information reasonably available even though the creditor knows that more precise information will be available at or before consummation.”
Specifically addressing the need to revise the CD after the initial was delivered without triggering a new three-day review period (except in the three circumstances mentioned above) is Section 1026.19(f)(2), page 1728 which states, “[I]f the disclosures provided under § 1026.19(f)(1)(i) become inaccurate before consummation….. the creditor shall provide corrected disclosures reflecting any changed terms to the consumer so that the consumer receives the corrected disclosures at or before consummation.”
Therefore when a consumer tells you they don’t recall receiving the CD, it is very possible they received it but it was so long ago they don’t remember. When confronted with this circumstance consider the FAQ recommendation (excerpted in italics in the second paragraph) before challenging the practices of the lender in front of the consumer.
Questions? Contact us at email@example.com