I have read and re-read many of the various posts on this topic and just want to see if there has been a consensus on whether the re-disclosed initial TIL on is required if the APR exceeds the the tolerance? Any over disclosure of the APR would not require the "new" re-disclosed TIL?

There's no doubt in my mind. The reg says if the APR is outside of tolerance. It doesn't say only if it is understated.

I agree, David. "Out of tolerance" runs from 1 basis point over or under the allowable tolerance all the way to infinity. Although the consumer may not be overcharged, s/he is deprived of the accurate information required for Reg. Z to achieve its primary purpose--informed credit shopping. Imagine if lenders could say "APR does not exceed 1,000%." That's a true statement and would not result in an overcharge, but would be useless as a comparison shopping tool.

But in reviewing the revised regulation and related Commentary, 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:


§ 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.


§ 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.


I think what everyone is gnashing their teeth over is when a customer elects to float the rate in hopes that rates drop. If that happens, and then you have to send out a revised disclosure, you are going to have one ANGRY customer if they lose the lower rate because they didn't lock and are unable to close due to the extended delay.

I foresee some real outrage as it is in a rising interest rate environment if someone is constantly chasing a rate and is unable to close because of the enforced waiting periods for the amended TIL. Can you imagine the outrage if the frustrated consumer finally locks a rate so that in 6 days (3 to mail, 3 to wait) they can close only to read that interest rates just dropped?

Thanks for posting this Bonnie.

This is what I was going by as well. What do the experts think, please?

Although, I was thinking the overstatement had to be the result of an overstated fee. That way if you had stated the fee at the correct price, your APR would have been correct or if you misquoted a payoff amount (customer payment passed in the mail on a refi to another lender).

I believe any change of terms is going to trigger a re-disclosure

I agree §226.22 doesn't require redisclosure, but §226.19(a)(2)(ii) does:

If the annual percentage rate disclosed under paragraph (a)(1)(i) of this section becomes inaccurate, as defined in § 226.22, the creditor shall provide corrected disclosures with all changed terms. The consumer must receive the corrected disclosures no later than three business days before consummation. If the corrected disclosures are mailed to the consumer or delivered to the consumer by means other than delivery in person, the consumer is deemed to have received the corrected disclosures three business days after they are mailed or delivered.

This section doesn't say, if the APR is under-disclosed. It also doesn't say "look to §226.22 to determine if you need to redisclose". It tells you to redisclose (period) if it is out of tolerance. It refers you to §226.22 to determine what "out of tolerance" means - .125/.25%.

It's really that simple.

David,

I'm probably just being dunce ::puts on cone hat:: but what does 226.22(a)(4) add to all of the mix? It references the above sections that Bonnie alluded to.

I'm teaching this rule in sections-APR tolerances being the last part because there's been so much discussion.

Any help would be greatly appreciated!

My point is that the MDIA rules [§226.19(a)] set a new standard. It states "if you are out of tolerance". It doesn't say "if you under disclose". It points you to §226.22 to determine what "out of tolerance" means.

That's my understanding. Hopefully, we'll get more guidance. That's the problem with issuing a regulation in mid-May and requiring it to be implemented by 7/30.

Thank you David. I appreciate your knowledge as always!

I have a call in to our examiner (Fed) and will let you know if I get any clarification. The following is a quote from an article written by Richard J. Andreano, Partner, Weiner Brodsky Sidman Kider PC (I think I found it on a mortgage compliance website):
This seems more in line with Bonnie's interpretation.

David - it's more of a "follow-the-regulatory-bread-crumb-trail" since 226.19 refers you to 226.22 which refers you to 226.18 which says the APR (for mortgage transactions) is still accurate if the F/C (and resulting APR) is over-disclosed.

I believe the amendments to to 226.22 and 226.18 came about to prevent unethical consumers and attorneys from forcing recision just because a lender disclosed a fee or F/C higher than what was actually charged.

So I'll just advise all of our clients to disclose 100% APR on the P-TIL. (that's sarcasm).

So what's the bottom line here? Is everyone going to redisclose for anything out of the .125/.25 tolerance whether it's up or down? Are we going to turn blue holding our breath waiting for more guidance?

Great discussion, I've been rehashing this in my office as well.

I tend to view this as Bonnie does; overstated APRs on the PTIL which is given in good faith, and based on the disclosed finance charge would be considered accurate in a mortgage transaction.


Purposefully providing an overstated APR (to avoid any potential re-disclosure later) would not be in good faith...as such, it should not be considered accurate under 226.19, IMO.

That's exactly how I am approaching this. The issue that has been driving everyone nuts is the issue of rate or point drops and it seems counter-productive to delay or prevent a consumer from taking advantage of a better deal.