With respect to the question regarding the need for re-disclosure if the APR is LOWER than the ETIL or the latest CTIL, I was very frustrated with how the Fed did not DIRECTLY ANSWER that question, instead they came up with an answer that is as clear as mud:
Commenters requested guidance on whether corrected disclosures are required if the APR initially disclosed under § 226.19(a)(1)(i) overstates the actual APR. Comment 19(a)(2)(ii)–1 provides that corrected disclosures are not required when the APR previously disclosed is considered accurate under the tolerances in § 226.22.
So that makes us take the merry trip down the regulatory breadcrumb trail ***sigh*** Wouldn't it be nice if we could just get a straight "Yes" or "No"?
Okay - so we start at 226.22
§ 226.22 Determination of annual percentage rate. (4) Mortgage loans. If the annual percentage rate disclosed in a transaction secured by real property or a dwelling varies from the actual rate determined in accordance with paragraph (a)(1) of this section, in addition to the tolerance applicable under paragraphs (a)(2) and (3) of this section, the disclosed annual percentage rate shall also be considered accurate if:
(i) The rate results from the disclosed finance charge; and
(ii)(A) The disclosed finance charge would be considered accurate under § 226.18(d)(1)
(B) For purposes of rescission, if the disclosed finance charge would be considered accurate under § 226.23(g) or (h), whichever applies.
(5) Additional tolerance for mortgage loans. In a transaction secured by real property or a dwelling, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, if the disclosed finance charge is calculated incorrectly but is considered accurate under § 226.18(d)(1) or § 226.23(g) or (h), the disclosed annual percentage rate shall be considered accurate:
(i) If the disclosed finance charge is understated, and the disclosed annual percentage rate is also understated but it is closer to the actual annual percentage rate than the rate that would be considered accurate under paragraph (a)(4) of this section;
(ii) If the disclosed finance charge is overstated, and the disclosed annual percentage rate is also overstated but it is closer to the actual annual percentage rate than the rate that would be considered accurate under paragraph (a)(4) of this section.
So this means we also get to take a peak at 226.18 § 226.18 Content of disclosures.
(d) Finance charge. The finance charge, using that term, and a brief description such as "the dollar amount the credit will cost you."
(1) Mortgage loans. In a transaction secured by real property or a dwelling, the disclosed finance charge and other disclosures affected by the disclosed finance charge
(including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge:
(i) is understated by no more than $100; or
(ii) is greater than the amount required to be disclosed. And let's not forget 226.23 (which deals with Right of Rescission) § 226.23 Right of rescission. (g) Tolerances for accuracy.--(1) One-half of 1 percent tolerance. Except as provided in paragraphs (g)(2) and (h)(2) of this section,
the finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge: (i) is understated by no more than 1/2 of 1 percent of the face amount of the note or $100, whichever is greater; or
(ii) is greater than the amount required to be disclosed. (2) One percent tolerance. In a refinancing of a residential mortgage transaction with a new creditor (other than a transaction covered by § 226.32), if there is no new advance and no consolidation of existing loans, the finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:
(i) is understated by no more than 1 percent of the face amount of the note or $100, whichever is greater; or
(ii) is greater than the amount required to be disclosed.
(h) Special rules for foreclosures.--(1) Right to rescind. After the initiation of foreclosure on the consumer's principal dwelling that secures the credit obligation, the consumer shall have the right to rescind the transaction if:
(i) A mortgage broker fee that should have been included in the finance charge was not included; or
(ii) The creditor did not provide the properly completed appropriate model form in appendix H of this part, or a substantially similar notice of rescission.
(2) Tolerance for disclosures. After the initiation of foreclosure on the consumer's principal dwelling that secures the credit obligation, the finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:
(i) is understated by no more than $35; or
(ii) is greater than the amount required to be disclosed.
BUT - When you go to the COMMENTARY for 226.22. you find THIS gem: 22(a)(4) Mortgage loans. 1. Example. If a creditor improperly omits a $75 fee from the finance charge on a regular transaction, the understated finance charge is considered accurate under § 226.18(d)(1), and the annual percentage rate corresponding to that understated finance charge also is considered accurate even if it falls outside the tolerance of 1/8 of 1 percentage point provided under § 226.22(a)(2). Because a $75 error was made, an annual percentage rate corresponding to a $100 understatement of the finance charge would not be considered accurate.
22(a)(5) Additional tolerance for mortgage loans.
1. Example. This paragraph contains an additional tolerance for a disclosed annual percentage rate that is incorrect but is closer to the actual annual percentage rate than the rate that would be considered accurate under the tolerance in § 226.22(a)(4). To illustrate: in an irregular transaction subject to a 1/4 of 1 percentage point tolerance, if the actual annual percentage rate is 9.00 percent and a $75 omission from the finance charge corresponds to a rate of 8.50 percent that is considered accurate under § 226.22(a)(4), a disclosed APR of 8.65 percent is within the tolerance in § 226.22(a)(5).
In this example of an understated finance charge, a disclosed annual percentage rate below 8.50 or above 9.25 percent will not be considered accurate. What NONE of this really addresses is -
WHAT HAPPENS IF THE RATES DROP BETWEEN THE TIME YOU SENT THE FRIGGIN' EARLY DISCLOSURE AND WHEN THE APPLICANT WANTS TO CLOSE THEIR LOAN? If the interest rate drops, the APR also drops and none of that seems to be addressed by 226.22 and its resultant bread crumb trail.
And an even MORE loaded question - what happens if the rate increases while the applicant is forced to wait the effective 6 days (3 to mail, 3 to wait)?
My guess is that EVERYONE will have to purchase a rate lock at some point, and as soon as that rate lock is purchased, send out a CTIL.
I just wish the Fed would have recognized that forcing out more disclosures and more waiting time when the rates DROP isn't going to do ANYONE any bit of good.
I recommend that everyone prepare front line staff for when their customers or members get angry that its taking so darn long to close a loan and that they miss rate drop opportunities and give them a standard response "These mandatory waiting times are the result of the law passed by Congress. We cannot change the law, so you should write to your Congressional representatives and tell them you want the law changed."