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#2252693 - 04/20/21 06:55 PM Consequence of COC Not Sent Within 3 Days
MJNoone Offline
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Is there any consequence for not meeting the 3-day provision of a change of circumstance (other than regulatory criticism, of course)? Reg Z .19(e)(4) only talks about sending COC's within 3 days.

EX: Original appraiser whose costs were quoted on LE cannot appraise your property so you choose a different appraiser whose cost ends up being higher. The COC doesn't go out within 3 days of your new appraiser engagement, but rather weeks later when you get the invoice.

How do you handle the increase in fee?
Does a change in fee with your COC become invalid and you provide credit for any increase on the CD? or do you treat it just like a normal COC passing on the increased fee on the CD?
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#2252694 - 04/20/21 07:01 PM Re: Consequence of COC Not Sent Within 3 Days MJNoone
raitchjay Offline
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I don't think what you describe is a valid CC, which is why you should be quoting the highest appraisal fee from your rotating list. "Appraiser we quoted couldn't do the work" just wouldn't cut the mustard IMO.
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#2252696 - 04/20/21 07:17 PM Re: Consequence of COC Not Sent Within 3 Days MJNoone
John Burnett Offline
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I don't agree. There could be a situation in which the estimate you gave was in good faith at the time you issued the LE, but appraisal costs increase due to high demand and a short supply of appraisers, in which case, the bank MAY be able to consider it a changed circumstance if it has to get a different appraiser. I won't say that it's always a CC, because you have to consider all the circumstances surrounding the issue.

If the bank finds itself in such circumstances, and knows it will have to pay more, it has to provide a revised LE within the three-business-day period, or eat the difference. It eats the difference at closing when it either shows the difference as paid by the lender or charged the consumer the full amount and provides a lender credit for the difference.

Directly to the question -- if the lender doesn't get a new estimate for the service when it should have and doesn't learn of the actual cost until it gets the invoice, the lender has missed the boat and eats the cost difference.
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#2252697 - 04/20/21 07:20 PM Re: Consequence of COC Not Sent Within 3 Days MJNoone
John Burnett Offline
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Better yet, the lender should try to get a cost commitment from each of its appraisers that is good for some period of time, and renewal from time to time so it can depend on the pricing schedules.
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#2252700 - 04/20/21 08:09 PM Re: Consequence of COC Not Sent Within 3 Days John Burnett
MJNoone Offline
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Thank you for the feedback!
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#2254483 - 05/27/21 02:06 PM Re: Consequence of COC Not Sent Within 3 Days MJNoone
MAFCCons Offline
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Tagging on to this thread - my situation is a little different but still deals with a missed 3 day COC.

We have recently seen an uptick in rate lock extension fees. These have been rare in the past and we have missed disclosing the extension fee on several loans. For those closed loans, we never disclosed anything at all so we are going back and re-disclosing the extension fee as POC, adding tolerance cure and issuing a refund to the customer. However, my question is for a couple of loans that haven't closed yet. We collected the fee from the customer but didn't send a COC within the 3 days. How should we handle these? Do we handle the same way? Show the fee as POC and give a tolerance cure for the same amount on the CD or is there a way to go ahead and send a LE and not have to pay a tolerance cure (obviously still a violation but not needing to be cured)? My vote is tolerance cure but wanted to double check there wasn't something else I have missed.

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#2254496 - 05/27/21 03:38 PM Re: Consequence of COC Not Sent Within 3 Days MJNoone
rlcarey Offline
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More of a business decision on how to handle, but one way or the other, the customer needs to get that money back either in cash or lender credit.
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#2254719 - 06/01/21 07:02 PM Re: Consequence of COC Not Sent Within 3 Days MJNoone
John Burnett Offline
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You've passed the deadline for a revised LE to help you. Probably the easiest way to handle it, assuming the bank is eating the increased fee, is to put the amount the bank is "eating" in the Paid by Others column on page 2 of the closing disclosure. You can "tag" it as a lender-paid amount by placing "(L)" -- without the quotation marks -- to the left of the dollar amount. If you've already sent the closing disclosure, you can provide a revised one at closing. The amount in the paid by others column is never charged to the borrower, so there is no tolerance problem.
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#2254720 - 06/01/21 07:07 PM Re: Consequence of COC Not Sent Within 3 Days MJNoone
John Burnett Offline
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If the borrower has already paid the extra fee before closing, you can provide a lender credit in Section J of the closing disclosure, or you can show it as a credit in the payoffs and other payments schedule for the closing. IMHO, the latter is preferable because it spells out what the credit is for.
Last edited by John Burnett; 06/01/21 08:04 PM. Reason: clarity
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#2255125 - 06/10/21 03:29 PM Re: Consequence of COC Not Sent Within 3 Days MJNoone
KTMiteComply Offline
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only if I want to....
Hey John,

We are having a disagreement here.

If the appraiser notifies me of a fee increase due to complexity of the Appraisal, I must redisclose the LE within 3 days that I become aware of the change...NOT 3 days from when I receive an Invoice of this Change. Is that correct?

I say 3 days when I have knowledge of the change, which is documented on the website where the Appraisal has been ordered, but I'm getting push back saying that we must have an Invoice in order to send out the LE, so it's within 3 days of the Invoice we received??????
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#2255145 - 06/10/21 05:28 PM Re: Consequence of COC Not Sent Within 3 Days MJNoone
John Burnett Offline
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"we must have an invoice" is sheer BS. The regulation is VERY clear [1026.19(e)(4)(i)]:

Quote
General rule. ... 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 or the disclosures required under paragraph (f)(1)(i) of this section (including any corrected disclosures provided under paragraph (f)(2)(i) or (ii) 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 (F) of this section applies.

When the appraiser tells you about the fee increase, I have to assume the appraiser tells you what the cost will be (he knows he doesn't have carte blanche to proceed without you knowing how much the increase will be). That is when you have the information needed to establish that one of the reasons for revision will apply, and that is Day 0 in the three business-day period.
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#2255252 - 06/14/21 04:26 PM Re: Consequence of COC Not Sent Within 3 Days MJNoone
Dan Persfull Offline
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I agree 100% with John.

Look at it this way - when did you know you had sufficient information about the change in the cost; when the appraiser telephoned you and said I have to increase the fee by $100 due to the property or when you got the invoice with the $100 added?

If we got an invoice with $100 added without first being notified of the increase the appraiser would be eating that $100.
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