TRID and Spousal Homestead Right

Does TRID require anywhere that non-owner spouses who have a homestead right in the property as their primary residence have to sign the Closing Disclosure?

The title company is trying to claim that they have to sign it but I can't find anything anywhere in TRID that would substantiate that.

As always, thank you in advance!

It depends:

Official Interpretation

1026.2(a)(11) Consumer

2. Rescission rules. For purposes of rescission under §§1026.15 and 1026.23, a consumer includes any natural person whose ownership interest in his or her principal dwelling is subject to the risk of loss. Thus, if a security interest is taken in A's ownership interest in a house and that house is A's principal dwelling, A is a consumer for purposes of rescission, even if A is not liable, either primarily or secondarily, on the underlying consumer credit transaction. An ownership interest does not include, for example, leaseholds or inchoate rights, such as dower.

However, State laws may vary. If you are in Texas, for example, and this is not a purchase transaction and it involves a homestead, the spouse has the right of rescission and has to receive the closing disclosure one day prior to closing. While there is no regulation that says anyone has to sign a closing disclosure, title companies usually require it for proof of delivery.

Thanks rlcarey!

I've always taken this section to mean having the "right to cancel" signed by the spouse, which we do, but I'm still struggling to identify the applicability of rescission rules to the Closing Disclosure. To me they are meant to perform two different functions and do not have an obvious connection making this section of Reg Z applicable. Do you have any insight on this?

Used to be that FNMA required the non-borrowing spouse to get the HUD-1, Final TIL and RoR.
The CD takes the place of the HUD-1 and the Final TIL which is why investors want it signed.

The relationship between the proof of delivery of the CD and rescission is found here:

1026.23(a)(3)(i) The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first. In the case of certain administrative proceedings, the rescission period shall be extended in accordance with section 125(f) of the Act.

The CD is a material disclosure and thus has to be delivered to all individuals with the right of rescission in order to close the rescission window.

Perfect! Thank you again for sharing your expertise with the unlearned residing within the basket containing the deplorables. smile

I have a follow-up question:

Where the provision of the closing disclosure is tied to the right of rescission, is a non-owner spouse entitled to also receive the Closing Disclosure 3 days before consummation or could it simply be provided at consummation and thus at the same time the rescission period begins?

I ask this question keeping in mind the non-owner spouse is not an obligor on the loan so I'm not convinced we'd be required to provide the Closing Disclosure to them 3 days before consummation.

I believe you're back to the 'state laws may vary' part of Randy's first answer above.
I'm in a marital property state so, whether the spouse is on title or not, they have an ownership interest that must be satisfied by delivering the CD.

But the "3 days before consummation" requirement is a federal law. So are you saying the federal law is not applicable and state law would govern?

Your follow-up question included: "is a non-owner spouse entitled to also receive the Closing Disclosure 3 days before consummation "

A non-owner (as defined in Regulation Z) spouse would not have the right of rescission under Regulation Z and if State law separately requires that they be given a right of rescission, what other disclosures and the timing of those disclosure would be found in State law.

I apologize, I meant to imply a spouse who isn't vested as an owner on the property but does have homestead rights and is therefore entitled to a right to cancel. In that scenario, I refer back to my question with the change:

Where the provision of the closing disclosure is tied to the right of rescission, is a spouse with homestead rights only entitled to also receive the Closing Disclosure 3 days before consummation or could it simply be provided at consummation and thus at the same time the rescission period begins?

Three business days:

(f) Mortgage loans secured by real property—final disclosures.

(1) Provision of disclosures.

(i) Scope. In a closed-end consumer credit transaction secured by real property, other than a reverse mortgage subject to § 1026.33, the creditor shall provide the consumer with the disclosures in § 1026.38 reflecting the actual terms of the transaction.

(ii) Timing.

(A) In general. Except as provided in paragraphs (f)(1)(ii)(B), (f)(2)(i), (f)(2)(iii), (f)(2)(iv), and (f)(2)(v) of this section, the creditor shall ensure that the consumer receives the disclosures required under paragraph (f)(1)(i) of this section no later than three business days before consummation.


1026.2(a)(11) Consumer means a cardholder or natural person to whom consumer credit is offered or extended. However, for purposes of rescission under §§ 1026.15 and 1026.23, the term also includes a natural person in whose principal dwelling a security interest is or will be retained or acquired, if that person's ownership interest in the dwelling is or will be subject to the security interest.

Thanks a ton Randy!