If we have issued a CD and after issuing the CD we have a valid change-in-circumstance, I know a new LE cannot be issued. According to the TRID regulations and guidance, a new CD can be issued to reflect the change-in-circumstance. Assuming the change doesn’t trigger one of the 3 things that require a new 3 business day waiting period (APR, Prepayment Penalty, Change in program), could the new CD be issued even on same day as closing to reflect the change-in-circumstance? As we understand it, under current RESPA rules, a change in circumstance is reflected in a revised GFE (and Early TIL, if needed) and must be done at least one business day prior to close. Since there is no ability to issue a new LE after the CD is issued, it would seem that a new CD reflecting the change in circumstance could be issued on the day of closing, but the reg and guidance is not clear on this point.

As a follow up, if a new CD is issued to reflect the change-in-circumstance, are we now bound by that new CD for any tolerance calculations as reflected in the settlement, or are we still bound to the tolerance levels of the last LE issued?

According to the TRID regulations and guidance, a new CD can be issued to reflect the change-in-circumstance.

I have not been able to locate such a statement. If you have a CofC and you are within four business days of closing, you cannot issue a LE, but you issue the initial CD with the changes and that resets your tolerance categories. Once the initial CD is issued, I see no provisions to reset your tolerances.

1026.19(f)(2) seems to allow for a new CD to be issued, but is silent on whether that resets tolerance or does not reset tolerance. However, all of the examples provided in the commentary would seem to lead one to believe tolerances have been reset with the new CD resulting from the CiC. That's what I'm trying to find out about.

We feel this reference in the Small Entity Guide indicates you can reset tolerances with a revised CloD:

"If the event occurs after the first Closing Disclosure has been provided to the consumer (i.e., within the three-business-day waiting period before consummation), the creditor may use revised charges on the Closing Disclosure provided to the consumer at consummation, and compare those amounts to the amounts charged for purposes of determining good faith and tolerance. (Comment 19(e)(4)(ii)-1)"

You might find this thread helpful: http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=2009024&page=1

Diane, I agree with you. One of our concerns, though, is this is very specific to the change occurring within the 3 business day waiting period. If we send a CD to the consumer 6 business days before closing (so we can get presumption of their receipt 3 business days before), then have a CiC that occurs 5 business days prior to closing. Is the "i.e." language in the SEG prohibitive to using a revised CD since it didn't occur within the 3 business days prior to closing? I don't think it was intended to be prohibitive to that, but I could see an overzealous examiners saying "See! Says right here that you can only do that if the change occurs within 3 business days." That would create a potential black hole where no changes could occur between the date the CD is issued and 3 business days prior to closing, then at the 3 business day mark, you would once again be open for changes - that just seems contrary to the regulatory intent.

similar thread that touches on your situation

You need to elaborate on this opinion a little more as the citation you are quoting is in reference to issuing a CloD in lieu of an LE an not issuing a revised CloD after issuing an initial CloD.

I feel the reference from the Small Entity Guide does address providing a revised CloD after an initial CloD has been provided. Is there something I'm missing?

I agree that we don't really have any guidance if a changed circumstance occurs after you've mailed the CloD but more than three business days before closing. Likewise, I agree that it seems like the intent would be to cover the period from the time you're required to mail the CloD (the six business days prior to closing). However, I don't feel we have anything concrete to defend that stance to an examiner (besides it seems to make sense:).

Once you transition to 19(f) there is no going back to 19(e). There is also no reference to 19(e) in 19(f)(2).

I would agree that the ability to support this from a citation standpoint is difficult. Do you disagree with the ability to reissue the CloD or reset tolerances with a revised CloD or just feel that the regulatory support is weak, at best? Thanks!

Based on the regulatory structure I do not think that it is possible.

OK, I had a little time this morning and I thought I would put forth my reasoning and position in a little more of a narrative manner.

First refer to 19(e)(4)(ii): Relationship to disclosures required under § 1026.19(f)(1)(i). The creditor shall not provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section on or after the date on which the creditor provides the disclosures required under paragraph (f)(1)(i) of this section.

As you know the disclosures required under (e)(1)(i) are your good faith estimate and disclosure that sets or resets under 19(e)(4) your allowed tolerances.

While further in the paragraph it cover the fact that if the CofC happens with four days of consummation, you must issue the closing disclosure (19(f)(1)) in lieu of issuing a revised LE under 19(e)(4).

However, that still means that you have now issued a closing disclosure under 19(f)(1). That being true, you no longer have the ability to issue revised disclosures under 19(e)(4) to reset your tolerances since you have already issued your closing disclosure.

There is absolutely nothing in 19(f)(2), which addresses the circumstances under which reissue of the closing disclosure is required and allowed, that indicates any circumstances under which the revised closing disclosure would impact your estimates made under 19(e)(1) to reset your tolerance allowance.

As far as the statement in the Small Entity guide, I think it is saying the same thing. If the event occurs after the first closing statement is issued, you compare the revised figures that you will disclose on the closing disclosure provided at consummation (as charges have changed) to the last document that was issued under 19(e), whether that was the original LE, a revised LE or the initial closing disclosure because the special rules in 19(e)(4)(ii) applied.

I am however open to other fact based opinions as this is going to be one of the most controversial issues regarding the establishments of tolerances.

I think that the statement beginning at the bottom of page 50 of the small entity guide (second bullet in the list) is poorly worded at best, and doesn't provide any substance for a wishful argument that you can change the good faith basis of a cost estimate after the CloD has been issued. We have to keep reminding ourselves that the small entity guide is not an official interpretation of the rules.

Randy and John,

Let's talk plain english rather than reg citations for a moment. I think it makes it easier for others to follow. Do you agree or not agree with the following.

8/10 - I hand delvier a Loan Estimate
8/11 - I hand deliver a CloD (Closing is slated for 8/14)
8/13 - I have a legitimate CofC that affects 10% tolerance items
8/13 - I hand deliver a revised CloD
8/14 - Loan Closes, for tolerance purposes you'll compare the 10% numbers in the 8/13 CloD to numbers from the 8/10 LE except for any numbers affected by the 8/13 CofC, for those you'll actually use the 8/13 CloD. In other words it will be LE/CloD cumulative 10% numbers vs CloD cumulative 10% numbers.

Let's start there and see where this goes. Thanks guys!

Jerod, that about sums it up. This is the craziest rule!

Isn't Randy saying (Randy, not trying to speak for you, please correct me if wrong) that the 8/13 revised CD wouldn't be allowed?

I've taken his posts that way; and so far, i think he makes a pretty compelling argument. (Again, hopefully i'm understanding him correctly.)

I assume the 8/10 LE is a revised LE because of the timing??

If that is the case then the fees on your final CloD will be compared only to the fees on the LE of 8/10.

After the 8/11 CloD was issued, any reissue of the CloD would be governed under 19(f)(2).

(Sorry Jerod, it is very difficult to address this issue without reference to the regulation.)

There are no provisions in 19(f)(2) that resets tolerances.

Randy, let's say you're right. What do we do with the following? In two different arenas the CFPB lays out utilizing a revised CloD to facilitate a CofC including a tolerance reset. I find it hard to believe there's not some way to do this.


From the Small Entity Guide:

What if a changed circumstance occurs within four business days of consummation? (Comment 19(e)(4)(ii)-1)

If the event occurs after the first Closing Disclosure has been provided to the consumer (i.e., within the three-business-day waiting period before consummation), the creditor may use revised charges on the Closing Disclosure provided to the consumer at consummation, and compare those amounts to the amounts charged for purposes of determining good faith and tolerance. (Comment 19(e)(4)(ii)-1)



From the 8/26/14 Outlook Webinar:

The Rule does recognize that changed circumstances or other events may occur at times where the creditor receives information sufficient to establish a ground for redisclosure at a point in time that is too late to provide a revised Loan Estimate within these restrictions. The Bureau, in crafting the Final Rule, acknowledged this possibility and provided some flexibility to creditors through comment 
§1026.19(e)(4)(ii)-1 in the event that there are less than four business days between the time the revised version of the Loan Estimate would be required to be provided under §1026.19(e)(4)(i) and consummation. In this limited circumstance, comment § 1026.19(e)(4)(ii)-1 allows creditors to comply with the timing requirements of § 1026.19(e)(4), in other words to redisclose, if the revised disclosures are reflected on the Closing Disclosure, or as the Rule says, the disclosures required by § 1026.19(f)(1)(i).

Therefore, in circumstances where there are less than four business days in between the time the revised disclosures would be required to be provided, that’s again generally going to be within three business days of receiving information sufficient to establish, then the Closing Disclosure may be used to redisclose any estimates that increase due to a triggering event and some examples are laid out in the commentary.

In tying back to the initial question, the question that Dania teed up, the Rule does not provide any other means for a Closing Disclosure to be used to redisclose and reset applicable tolerance levels in other circumstances, including when the Closing Disclosure is provided earlier than is required to under the rules unless, somehow, that event would fit within this window as described in that comment.



What I've heard from some of our clients and peers:

1. The CFPB is aware of the post CloD > 3 day black hole.

2. A former CFPB attorney who helped write the rule has said that it was an unintended outcome due to wording in the rule.

3. The CFPB while aware has said that it does not intend to provide further clarification at this time.

4. For a price, there are former CFPB attorneys that will prepare a legal opinion to cover a bank that plans to rely on a revised CloD for CofC that occurs during the black hole.

Outlook Live is hosting another CFPB webinar on TRID on May 26 - Implementation Challenges and Questions. Maybe we'll get another shot at getting much needed clarification on this point, but not necessarily optimistic.

Jerod - nothing like a good debate

Let's take a look at this statement:

"If the event occurs after the first Closing Disclosure has been provided to the consumer (i.e., within the three-business-day waiting period before consummation), the creditor may use revised charges on the Closing Disclosure provided to the consumer at consummation, and compare those amounts to the amounts charged for purposes of determining good faith and tolerance. (Comment 19(e)(4)(ii)-1)"

This is a very poorly worded statement and people are reading into this statement something that does not exist. What this statement is saying is:

If an event occurs after the first Closing Disclosure statement is issued under the limited exception contained in 19(e)(4)(ii)-1, then any revised charges shown on the final Closing Disclosure would be compared to the charges shown on the initial Closing Disclosure (rather than the last LE provided).

So, there is no implication in this paragraph in the Small Entity Guide that a revised Closing Disclosure can be used to reset tolerances after the first Closing Disclosure is issued.

For those individuals arguing that a revised Closing Disclosure to reset tolerances is possible, I think they may be ignoring the first sentence in the commentary at 19(e)(4)(ii)-1:

"Section 1026.19(e)(4)(ii) prohibits a creditor from providing a revised version of the disclosures required under § 1026.19(e)(1)(i) on or after the date on which the creditor provides the disclosures required under § 1026.19(f)(1)(i)."

That statement is the key. You can only reset tolerances under 19(e). Once you issue a Closing Disclosure under 19(f)(1) that door is officially closed.

As far as the commentary from the Outlook presentation, it is saying the same thing. You failed to highlight the key term in the last line of the first paragraph: "In this limited circumstance".

It is referring to the limited circumstance in which it is within four business days of consummation and a Closing Disclosure has not already been issued.

They also directly stated that: "the Rule does not provide any other means for a Closing Disclosure to be used to redisclose and reset applicable tolerance levels in other circumstances".

The last portion of that sentence "unless, somehow, that event would fit within this window" just means that as in all CFPB presentations they can't think of a scenario that this could be possible but they will not go out on limb. Remember the question was based on what happens if you issue a Closing Statement early, can you reissue a Closing Statement to reset the tolerances if a CofC occurs. The presenter in summary, indicated the short answer was "no". He then launched into the only exception under which tolerances could be reset with an initial Closing Disclosure - which is the exception found under 1026.19(e)(4)(ii).

As far as what you have heard, I have heard the exact same thing and here is my opinion:

The CFPB attorneys that drafted the TRID regulations are all very smart and intelligent men and women. One cannot think for a moment that they didn't know what they were doing and if they were going to allow a CofC after the initial Closing Disclosure was issued, they would have come right out and provided the rules regarding the circumstances and requirements for such an action.

The CFPB had only one goal in mind when drafting these regulations. The borrower, under no circumstances, was ever going to be surprised by a change in closing costs after the initial Closing Disclosure is issued to them. Even the Outlook presentation indicated the whole goal behind this scheme was to totally eliminate the mystery GFE that shows up just before closing with higher closing costs.

While there may be former CFPB attorneys willing to provide such an opinion for a price and test their E&O insurance liability limits----well-----until I read one of those opinions, I will just say - show me. Myself, I don't plan on testing my E&O insurance liability limits by instructing my clients in such a manner.

Since when is intent versus actual law any consideration?? If the intent of the CFPB was otherwise - why the silence on the issue. The reason for the silence is they know what the regulations say and that is exactly their intent.

I have fallen into step with Randy on this controversy. What did it for me was the fact that neither of the two examples in Comment 19(e)(4)(ii)-1 addresses a post-CloD changed circumstance. In both examples, a pre-CloD changed circumstance is too late for the creditor to issue a revised LE, but can use the 19(f)(1)(i) CloD as a proxy for the revised LE to disclose the changed fees and adjust their bases.

If the Bureau had intended for post-CloD CCs to be reflected in a revised CloD at or before closing, it would have made the verbiage of the rule or Comment say so. That it somehow managed to slip into the Small Entity Compliance Guide is unfortunate, and I would never want to use the SECG as a defense given the disclaimers from the Bureau that are draped all over it.

I sent in a question asking for clarification during the May 26 webinar that the Bureau is putting on via the Federal Reserve's portal. If the Bureau persists in its refusal to revisit the question, it will be a shame, because it will simply extend the confusion and could result in compliance exam citations if lenders make the wrong choice on this issue.

Good stuff guys, give me a day or two to noodle. I'm on the road with limited access and will chime back in later this week.

Randy and John, thanks for taking time to go though this. Here's what our team has come up with to support our interpretation.



If this sentence is only intended to say that the charges on your final Closing Disclosure are compared to the charges shown on your initial Closing Disclosure, instead of the LE, I’m wondering why they would state that you compare revised charges on the Closing Disclosure provided at closing to those amounts charged.

However, as John indicated, any reliance on this provision should be prefaced with the fact that it comes only from the SECG, with all the legal disclaimers that come with it.



A Loan Estimate cannot be issued after a Closing Disclosure and Section §1026.19(e)(4)(i) would seem to close the door on resetting tolerances if you can no longer issue a Loan Estimate, “if a creditor uses a revised estimate…for…determining good faith…, the creditor shall provide a revised version of the disclosures required under…(e)(1)(i)”.

However, the commentary to §1026.19(e)(4)(ii) would seem to open this door back up, by stating, "If, however, there are less than four business days between the time the revised version of the disclosures is required to be provided pursuant to § 1026.19(e)(4)(i) and consummation, creditors comply with the requirements of § 1026.19(e)(4) if the revised disclosures are reflected in the disclosures required by § 1026.19(f)(1)(i)…"

This would seem to give another ability to be in compliance with §1026.19(e)(4), with the CloD under §1026.19(f)(1)(i). The commentary here never specifies that the revised disclosures need to be provided on the initial CloD under §1026.19(f)(1)(i). If that was what was intended, it seems the commentary here should specify that the time period covered would only be that small window between less than four business days prior to closing up until delivery of the initial Closing Disclosure.



The use of “in this limited circumstance” can also support that the Closing Disclosure can only be used to re-disclose in the event of a changed circumstance occurring after the CloD has already been provided (i.e. within those three business days). The reference that the Rule “does not provide any other means” would seem to indicate that a Closing Disclosure can reset tolerances, but they don’t want creditors to begin issuing Closing Disclosures early in the process (in place of revised Loan Estimates), which led them to the reference that the Closing Disclosure could not be used if it is provided earlier than required. Granted, this has to be all taken “in context” and as with the SECG, the legal disclaimers of the CFPB should be taken into account.

Unfortunately, the CFPB has also pointed out instances where the Preamble reflects inaccurate information, but the Preamble also states that the CFPB tried to address concerns about closing being delayed due to fee changes by allowing revisions to be reflected on the Closing Disclosure. There’s not a reference to whether they mean this to be allowed to be addressed only with the initial CloD, but it seems odd that they would only provide an avenue to deal with such increases that occur after any final LE is to be provided (4 business days) and before the initial CloD (3 business days).

It’s unfortunate that the CFPB addresses this most directly only outside of the Rule itself. I feel the Rule itself is almost silent (and obviously subject to different interpretations) on this. One can take that to mean it has to be, for example, an initial Closing Disclosure, to reset tolerances, but since it doesn’t seem to specifically state as such, it seems to leave the door open to allow subsequent Closing Disclosures to reset tolerances, as well. This seems to be the exact scenario for which we should be able to go to the webinars and SECG for some interpretive guidance☺. If the CFPB intentionally set out to avoid addressing this, it seems weird they would address it in the SECG or the webinars.

If resetting tolerances with use of a revised Closing Disclosure is prohibited under §1026.19(e)(4), I would question what is to be meant by this statement in the commentary to §1026.19(e)(4)(ii): "creditors comply with the requirements of § 1026.19(e)(4) if the revised disclosures are reflected in the disclosures required by § 1026.19(f)(1)(i)." There are no timing requirement in §1026.19(f)(1)(i), so if they only intended revised fees/tolerances to be reflected on the initial CloD, I don’t feel this is accomplished by this reference alone.

And so there you have it. Two sides of the difference of opinion. What's missing is anything official from the Bureau that clearly answers the question. And, given the stakes involved, it seems that the Bureau, with its advocacy for clear and understandable regulations, needs to step up and provide an intelligible response. All we need to see is a "Yes, because ...." or "No, because ...."

The industry should not have to wait until someone gets sued for a court to decide the Bureau's intent.