The final rule requires that disclosures be provided before consummation of the transaction. How is this defined and what all must be included in this disclosure?

The requirement is that the borrower receives the Closing Disclosure 3 business days prior to consummation, which can be different than closing. Consummation is the date the borrower becomes legally obligated to the transaction and that is usually going to be the date they sign the note; however, in escrow closing states, you may have circumstances where the borrower is not actually legally obligated until funding occurs. In those circumstances, you may, depending on how many days are between the date the consumer signs and the actual funding date, the consumer could be receiving the final Closing Disclosure on the date they sit down with you to sign the note. That could be the first Closing Disclosure they see. You have to look to your state law on that particular point.

In terms of what you’re giving them, you’re giving them a Closing Disclosure that provides all of the information that we walked through – all five pages — based on the best information reasonably available to the creditor through the exercise of due diligence. The rule makes clear that the due diligence obligation means getting information from the settlement agent, realtor, and service provider. You do have an obligation to seek this information out. You can delegate that. The settlement agent can perform the same functions it does today when collecting this information, but do so on behalf of the creditor, pursuant to an agreement between the creditor and settlement agent.

That will be the new normal under this rule. The question is, of course, do those three days mean essentially you’ll close before you close? Will it add 3 days on to the end of the process? Or is this something that can be accomplished within the existing timeline? I think the general assumption seems to be that it will make closings take longer than they do today, but we simply don’t know yet.

Note: This transcript has been edited from the February 2015 TRID webinar for clarity and completeness.

Answered By: Ben Olson