Closing Disclosure Accuracy

During our Virtual Live Conference we had a section on TRID Trouble Spots. Join Jerod as he talks about Closing Disclosure Accuracy.

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You have to reach out to the insurance agent, to the title company, to the consumer, to the realtor, to attempt to get the numbers that need to go on your disclosure that’s supposed to go out today so you can close next Wednesday. You first have to make the attempt. Number two is where the real win is for the banking industry. If despite your best efforts to reach out to third parties, to get information, to have a accurate closing disclosure, if despite your best efforts those third parties don’t play ball, the example I’ll give you is this. You’re trying to get the real estate commissions from the realtor because you know they have to go on page two of the borrower’s closing disclosure, but the realtor won’t return your call. They won’t play ball and it’s Wednesday. And we got to get the disclosure out today in the mail so we can close next Wednesday.

Because the realtor won’t get back to me today, does that mean I have to postpone closing as the lender? No. What number two says, and I’m going to read the bold print here and maybe a little more of it, so B2, page 10. “If the actual term is unknown,” let me add some words, because the third party realtor won’t pick up the phone and call you back or answer it, “the creditor may utilize estimates using the best information reasonably available.” Let me jump down to the third line about halfway over. “However, creditor may not utilize an estimate without exercising due diligence to obtain the actual term for the transaction.” What they’re saying is you can rely on number two provided you tried in number one to reach out. If you didn’t make the effort to reach the good faith standard by picking up the phone and calling these third parties and attempting to get that information, then you don’t get to guess based on the best information you have to your knowledge at that time.

What this does is it sets us up so that we can close next Wednesday if that realtor doesn’t play ball and get us the numbers today. We’ll guess based on the best information, what we believe the commissions will be knowing that we’re likely going to have to provide an updated disclosure at or before closing. We’ll talk more about that time in a moment. Now, this comes with one huge caution, hence the caution tape up on the screen. The CFPB has all along said, “Hey, lenders, we know that you can do a revised closing disclosure. We wrote that into the rule, but do not take advantage of the opportunity to provide a revised closing disclosure.” And here’s the best way I can give you to describe it. Understand what they’re saying and see, make sure you read that, but here’s in plain English what they’re getting at. This is a three week time period, any given three week time period.

Hey, there’s no holidays involved. We’re planning to close on the third week, Wednesday. Well in TRID terms, that means that the closing disclosure, if we’re going to mail it out, the latest it can be dropped in the mail is the second week, Wednesday. Okay? So starting there, you can of see how we came up with our timeframes. In order to close on time it’s going to go out second week, Wednesday. Well, that time period that comes before the second week, Wednesday, we’re going to call the TRID CD due diligence zone. That’s where you’re supposed to be reaching out to third parties like realtors and title companies, insurance agents, and the consumer, and getting the information necessary to represent an accurate closing disclosure. You’re doing all that in that timeframe up until the second week, Wednesday where your deadline exists. You issue of the closing disclosure so you can close the following Wednesday.

If you issue the closing disclosure earlier than what’s necessary, it’s not that you’re prohibited from doing so, but if you do so, you do so at your own risk. If you’ve issued the closing disclosure knowing that you don’t yet have the accurate final numbers from the realtor, from the insurance agent, from the title company, that is going to be a problem for you someday down the road, both in an examination and if you ever get sued because the borrower can’t pay. There’s a lot of teeth in TRID. You don’t want that to be the reason that there’s a problem when you go to court and you don’t win the court case.

You don’t want that to be the reason that you have a tolerance issue when you get to closing, because you thought you could just re-disclose and make everything work out when in fact you disclose too early because it was earlier than what was necessary to meet the TRID closing deadline. So be very careful about issuing closing disclosures earlier than a week out. Not that that’s not okay. If somebody says, “We’re going on vacation, is there a way to get it to me earlier,” that would be a reason, right? That story in the file. Remember, details matter, right? The story don’t make people imagine what’s going on. Don’t try to remember six months, a year or two or whatever down the road what may have happened to get to where we are in the game.

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