Two questions about the Closing Disclosure.

1. Can a cover letter be included with the Closing Disclosure? 1026.38(t) makes it clear that only the informaton required, in the format of the model form, should be included. Does this prohibit a cover letter?

2. Is the lender obligated to close a loan once the CD has been provided to the applicant, or can it still be declined?

The prohibitions in 1026.38(t) about including other information prohibits including extraneous information in the disclosure itself. It doesn't prohibit a cover letter to accompany the CloD. For example, you can exhort the borrower to carefully study the CloD and contact (Name/Contact info) with any concerns or questions. You can include details on the time and place of closing, along with a reminder to bring funds needed to close the deal and a reference to the disclosure on where to find that amount, along with the form the funds must be in (cashier's check, etc.)

As to your second question, it could depend on the language of your loan commitment letter.

Thanks John!

To elaborate on my question about declining a loan after the Closing Disclosure is provided, I see two scenarios - one in which the Bank issues the Closing Disclosure before the loan has gone through final approval (perhaps waiting for the appraisal); the second in which the loan is approved, but at the last minute the Bank becomes aware of additional information such as the fact that the customer lost his job or took out another loan. In the second scenario, I believe we would need to decline the loan if the new information impacts the customer's ability to repay. For the first scenario though, I think the Bank should make a final loan decision based on all information required to make that loan decision prior to sending the Closing Disclosure. Thoughts?

Any commitment to lend made before the appraisal has been received, reviewed and approved should always be conditional, so you could pull the plug. And I could not imagine issuing a CloD if I didn't have final approval, but I suppose it could happen.

On the abrupt change in the borrower's ability to repay, yes, you'd be able to decline the loan. Most commitments to lend today include an escape clause if there is a material change in the borrower's "situation" prior to closing.

Thanks again!

Are there any specific requirements for the cover letter that issues with a revised CD post consummation? For example, we have a general letter that goes out with the revised CD if there are any corrections performed post consummation.

No. You will find nothing about a cover letter in the regulations.