Do we need to issue a CIC if we revised a CD due to lowering a lender credit to cover lock extension?

You can't have a CIC once you issue a CloD. You would have to cure.

Are we allowed to issue a revised CloD if the borrower was initially putting the property into her trust, but then decided she wasn't going to? Her recording fee dropped by enough that they reduced the loan amount by $100.

You would issue a new CloD at closing with the correct figures. You just have updated numbers. There are no CICs after the initial CloD is issued.

Thank you Randy. As always, I appreciate your help.

Since there is no CIC after an initial CD is disclosed, what happens if a borrower chooses to have a POA after the CD is mailed? Does the banks have to eat this cost?

If the bank wants to continue to move forward - yes. There should be clear communications to borrowers long before a CloD is issued that lets them know that any borrower requested changes after a CloD is issued may result in having to start the whole process over again.

By "whole process," what do you mean?.....new LE, 7-day waiting period, CD......or ditch the file and start over from scratch. I stay really confused about changes that occur after the CD is provided. Sorry for the ignorance.

If a borrower requested change (I'm not sure what costs are involved when adding a POA to a loan as mentioned above) results in a significant increase in costs that the bank does not want to absorb after the bank has issued the initial CloD. I would treat the original request for credit withdrawn and treat the revised request for credit as a new transaction and start over.

So a revised CD can only be issued under the three scenarios listed; APR/Loan Product/Prepayment Penalty.

How would a loan product change, if not requested by the borrower?

How would the APR change, if not requested by the borrower or initiated by a borrower requested change? i.e.
borrower can't make the closing date or wants to change the closing date due to illness of one party or other.

Just a very confusing set of circumstances.

You are talking about re-issuing a CloD and it triggering a new three day wait. You always have to issue a revised CloD for any change that takes place between the initial CloD and the day of consummation or beyond if changes become known. None of these reset tolerances.

How can the APR change? Don't lock the rate and see what happens in a rapidly moving interest rate environment.

Got it, thanks.

Taken from the CFPB's Small Entity Guide- page 50. Seems to permit resetting tolerance using the initial CD or revising the one provided at closing, if the CIC event occurs within this "window":

9.5 What if a changed circumstance occurs too close to consummation for the creditor to provide a revised Loan Estimate? (Comment 19(e)(4)(ii)-1)
If there are less than four business days in between the time a the revised Loan Estimate would have been required to be provided to the consumer and consummation, creditors may provide consumers with a Closing Disclosure reflecting any revised charges resulting from the changed circumstance and rely on those figures (rather than the amounts disclosed on the Loan Estimate) for purposes of determining good faith and the applicable tolerance. (Comment 19(e)(4)(ii)-1)

If the changed circumstance or other triggering event occurs between the fourth and third business days from consummation, the creditor may reflect the revised charges on the Closing Disclosure provided to the consumer three business days before consummation.

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)

If you have a CIC and there is less than four business days to closing, you can issue your initial CloD and reset your tolerances. Once the last LE or the initial CloD is issued under this limited circumstance, you are done with resets. Read the regulation, the small entity guide is written very poorly.

Yikes, now I'm confused. I read the Small Entity Guide section quoted above, and believed that if the borrower changes, say, the loan amount after the initial CD is issued, we were ok resetting tolerances based on the CD provided at closing. Say, the borrower asks for an increased loan amount, $10,000 more which we agree to/approve (it's a portfolio loan), then we can increase our loan origination fee and title/settlement fees (which are percentages of the loan amount.)

Am I thinking about this incorrectly?

IMHO - Yes. Both the bank and the borrower are locked into the loan when the initial CD is issued. If the bank wants to honor the borrower's last minute request, they would have to eat any tolerance violation that it may cause.

I agree with Randy. 1026.9(e) allows revisions to the LE due to changes requested by the consumer but 1026.19(f) does not have such an allowance for the CD once it has been issued that I can find.

I know there has been much discussion on this point, and differing opinions, but it seems there is the possibility of using a CD to reset tolerances (if you call the CFPB that will be their interpretation as well). Below I say days, but mean business days.

1026.19(e)(4) is the provision on revised disclosures. It is the provision on using a LE to reset good faith tolerances when issued within 3 days of the changed circumstance (this is in romanette 1). Romanette 2 adds that the LE can be given no later than 4 business days prior to closing. The general timing requirements for a CD are in 19(f)(1)(ii) and provide it must be no later than 3 days prior to closing.

1026.19(e)(4)(ii)-1 is an exception to the general rules in 1026.19(e)(4) for redisclosure timing of LEs. It applies in the event there are less than four business days prior to closing. In that event, i.e., less than four business days, then you can use a CD (the disclosures required by 1026.19(f)(1)).

Now the key to all this is the statement in .19(e)(4)(ii)-1 that says, IF there are less than 4 days prior to consummation to issue revised disclosures(i.e., the LE), “creditors comply with the requirements of 1026.19(e)(4) [you comply with the resetting of tolerances in romanette i, you comply with the timing prior to consummation of revised disclosures in romanette ii, i.e., you comply with all of the requirements in .19(e)(4), romanettes i and ii.] if the revised disclosures are reflected in the disclosures required by 1026.19(f)(1)(i) [the closing disclosure].”

The exception is an exception to 19(e)(4)(ii), since 19(e)(4)(ii) states it must be 4 days prior. The exception lets you do a revision with less than 4 days prior. The caveat is that you use the disclosure in 1026.19(f)(1). This exception does not reference the CD timing in 19(f)(1)(ii). The exception also does not reference the timing in 19(e)(4)(ii); after all, the exception is official staff comment 1 to that section and expressly exempts the 4 days prior timing. So it seems that once the CD for redisclosure exception is invoked, you are out of 19(e)(4)(ii)’s timing requirements. This exception simply states that if there are less than four days, you use the CD: “creditors comply with the requirements of 1026.19(e)(4) [romanette i tolerance resetting and ii timing requirements] if the revised disclosures are reflected in the disclosures required by 1026.19(f)(1)(i) [the closing disclosure].” It says you comply with all requirements of 19(e)(4) when there are less than 4 days to do a valid redisclosure and you issue a CD.

If they didn't want the CD used to reset tolerances they could have just referenced romanette ii (which is the romanette that says the LE must be 4 days prior to closing; if they had written it this way, then the CD would not reset tolerances and would just be out of the timing restrictions). Instead, they gave a blanket reference that a creditor complies with all of 1026.19(e)(4). They could have excluded romanette i (which contains the resetting tolerances mechanism) but chose not to (or forgot to if we are being uncharitable).

1026.19(e)(4) [resetting tolerances and the timing of revised LE to reset tolerances]:
i. General rule. Subject to the requirements of paragraph (e)(4)(ii) of this section, if a creditor uses a revised estimate pursuant to paragraph (e)(3)(iv) of this section for the purpose of determining good faith under paragraphs (e)(3)(i) and (ii) of this section, the creditor shall provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section reflecting the revised estimate within three business days of receiving information sufficient to establish that one of the reasons for revision provided under paragraphs (e)(3)(iv)(A) through (C), (E) and (F) of this section applies.

1026.19(e)(4)(ii)-1.[resetting tolerances and the timing of a revised CD to reset tolerances]
“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) [this section is the romanette on resetting tolerances by redisclosing within 3 days of a changed circumstance and references romanette ii on the timing of at least 4 days prior] and consummation, creditors comply with the requirements of § 1026.19(e)(4) [this is all the requirements on redisclosure, including romanette 1 for resetting tolerances] if the revised disclosures are reflected in the disclosures required by § 1026.19(f)(1)(i) [this states you should use the disclosure in 1026.38 and that citation is the closing disclosure].”

IMHO this refers to resetting the tolerances due to a CIC from the last LE with the initial CD if less than 4 days is left before the scheduled closing, but once the initial CD has been issued you can no longer reset the tolerances with a revised CD.

–“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) [Small Entity Compliance Guide § 9.5]

I found the rest of this section helpful in understanding what TomTom was trying to get at above.
(Sorry, TomTom, but just like listening to the CFPB presentations, I got lost in all your romanettes. )

Two things argue against TomTom's reasoning, although I do appreciate his argument as well as the fact that the small entity guide (which is not an official interpretation of the rule) suggests that a "revised CloD" can be used to adjust the basis for estimates to be compared against actual costs.

First, one of the primary reasons for having the CloD receipt timing requirement of three business days prior to consummation is to eliminate one of consumers' major complaints about the closing process -- last-minute changes that increase the cash required to close. So there's all sorts of emphasis on chasing vendors to get final bills in on time to prepare the CloD in time for the timing rule. What sense does it make to skirt the purpose of the timing requirement to be able to add to the borrower's closing costs?

Second, the Bureau had the perfect opportunity to make its intent clear by including an example in the Official Interpretations that shows how a revised CloD would work. Yet the two examples provided in Comment 19(e)(4)(ii)-1 reflect the use of an initial CloD to "stand-in" for a revised LE when it's too late to provide the LE but not too late for the CloD. There is no example of a "revised CloD" used to adjust a disclosed cost's basis for good-faith tolerance purposes. And nowhere in the regulation or the commentary is there a suggestion that a revised CloD can be used to accommodate a basis adjustment for a changed circumstance after a CloD has been issued.

I will be happy to cave on this issue if and when the Bureau issues something official. From my perspective, I can't responsibly do so otherwise.

Also, read the CFPB statements from the 8/26/14 Outlook Webinar very carefully.

I just re-listened to the 8/26/2014 Outlook Webinar on redisclosure timing (pg 14 of the handout) and believe the CFPB did not address what to do with a CIC that occurs AFTER the CD has been issued (if it's not provided early), and the CIC occurs within 3 days of closing. I want to foolishly believe that: 1) the Small Entity Compliance Guide quoted above, and 2) the intent of the Closing Factsheet to clarify that ONLY the three listed events would require an additional 3 day waiting period, that both point to the CFPB realizing that legitimate changes DO occur within 3 days of closing, including borrower requested changes. I do not want to accept that the CFPB would expect a bank to eat legitimate increases in fees from a borrower requested change that occurs within 3 days of closing. (I know, I am often accused of being foolishly naïve for a compliance officer...)

I agree the intent of the providing the CD 3 days before closing is to avoid last minute/unknown increases in fees. But if a borrower requested change is not allowed (which is what the CFPB is saying if they won't allow banks to collect legitimate increases in related fees) how is that benefitting the consumer?

Your complaint assumes that the lender is at the mercy of the borrower in such cases. That's simply not true. Your loan commitment is for a specific loan amount under specified loan terms. Once you've issued that CloD, if the borrower wants to change something other than the hour of the closing appointment (exaggeration to prove a point), you have the right to stop the game, deny the loan (except on the committed terms) and require a restart (new application, new LE, etc.).

Lenders should make it clear to borrowers that there's a point after which they can't "fine tune" their loan requests, and after that point, their choices are limited to closing the loan on the committed terms or not.

Thank you John, I appreciate your comments/perspective. I agree, we can easily tell the borrower no changes, unless they want to "restart the clock" for required disclosures. But as all lenders would agree, competition is fierce, and if a strong borrower requests a change, our goal it to accommodate their request if we can. We are a small portfolio lender, and one of our strengths is being flexible. I believe lenders should have the ability to make a good credit decisions and serve their borrowers and neither should be penalized (which eating fees or delaying closings would be.)