Mortgage responsibilities

What Are My Closing Disclosure Responsibilities?

The Consumer Financial Protection Bureau (CFPB) Director Richard Cordray spoke at the Senate Banking Committee, stating “creditors cannot unilaterally shift their liability to third parties and, under the Truth in Lending Act, alone remain liable for errors on the Know Before You Owe mortgage disclosures.”

Cordray echoes the view of Ben Olson, former Deputy Assistant Director for the Office of Regulations at the CFPB, who answered a question from an ATS Secured webinar:

What Is My (Lender’s) Responsibility With Respect To the New Closing Disclosure (“CD”)?

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Ben Olson’s answer:

TRID Liability Shifts To You

Under the TRID rule, responsibility for the information currently disclosed on the HUD-1 or HUD-1A shifts from the settlement agent to you.[1] You must disclose the costs associated with the transaction that are actually charged to the borrower on the CD, and you must provide this disclosure sooner than previously required—it must be received by the borrower at least three business days prior to closing.[2] You may delegate completion of the form to a settlement agent, but you ultimately retain the liability if the settlement agent gets it wrong.[3]

TRID Liability Has Expanded

Notably, liability for these disclosures has also expanded. The Dodd-Frank Act expanded TILA to require that, for residential mortgage loans, you disclose “the aggregate amount of settlement charges for all settlement services provided in connection with the loan, the amount of charges that are included in the loan and the amount of such charges the borrower must pay at closing, . . . and the aggregate amount of other fees or required payments in connection with the loan.”[4] Because there is no accuracy tolerance for the aggregate settlement charge, you must accurately disclose each individual settlement charge to avoid liability under TILA for stating an inaccurate total. If you inaccurately disclose the charges, then borrowers may bring a private right of action against you for violating TILA.

Most lenders will continue to rely heavily on settlement agents in preparing the CD, and the TRID rule expressly condones this practice.[5] However, careful coordination and communication are required to ensure the disclosure is accurately and timely made.

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[1] Cmt. 19(f)(1)(v)-3.

[2] 12 C.F.R. § 1026.19(f)(1).

[3] 12 C.F.R. § 1026.19(f)(1)(v); cmt. 19(f)(1)(v)-3.

[4] 15 U.S.C. § 1638(a)(17).

[5] See comment 19(f)(1)(i)-2.i.B (“Assume that . . . the creditor obtained information about the terms of the consumer’s transaction from the settlement agent regarding the amounts disclosed under § 1026.38(j) and (k). The creditor has exercised due diligence in obtaining the information about the costs under § 1026.38(j) and (k) for purposes of the “reasonably available” standard in connection with such disclosures under § 1026.38(j) and (k).”); 78 Fed. Reg. at 79868 (“The final rule clarifies that, with respect to the Closing Disclosure provided three business days before consummation, creditors may provide disclosures based on the best information reasonably available and may rely on information provided by settlement agents.”).

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