For loans that require a Loan Estimate, which include most closed-end mortgage loans secured by real property) and that proceed to closing, creditors must provide a new Closing Disclosure reflecting the actual terms of the transaction.
The creditor is required to provide the consumer Closing Disclosure at least three business days before consummation. The CFPB says that “business day” for purposes of the Closing Disclosure is the rescission-based business day definition, and means all calendar days except Sundays and legal public holidays.
According to the CFPB, creditors may estimate fees using the best information reasonably available when the actual cost is not available at the time the Closing Disclosure must be delivered.
“However, creditors must act in good faith and use due diligence in obtaining the information,” the CFPB states in its examination procedure manual. “The creditor normally may rely on the representations of other parties in obtaining the information, including, for example, the settlement agent.”
A corrected Closing Disclosure containing the actual terms of the transaction must be provided at or before consummation. If the creditor provides a corrected disclosure, it must provide the consumer with an additional three-business-day waiting period prior to consummation if:
- the annual percentage rate changes 1/8 of a percent
- the loan product changes
- a prepayment penalty is added to the transaction
The creditor is responsible for ensuring that the Closing Disclosure meets the content, delivery and timing requirements. If the Closing Disclosure is provided in person, it is considered received by the consumer on the day it is provided. If it is mailed or delivered electronically, the consumer is considered to have received the Closing Disclosure three business days after it is delivered or placed in the mail.
If the creditor mails the disclosure six business days prior to consummation, it can assume that it was received three business days after sending, and therefore three business days prior to consummation, according to the CFPB. Creditors may contract with settlement agents to provide the Closing Disclosure to consumers, provided the settlement agent complies with all relevant requirements.
The rule does not indicate that any specific proof is needed to show the Closing Disclosure was placed in the mail. Similar to contract law, if the sender places the Closing Disclosure in the mail, has it addressed to the consumer properly and has proper postage, it is assumed to be received by the consumer three business days later. The sender could always mail the Closing Disclosure certified or require a signature upon receipt if they wanted to have proof it was delivered properly, but that is not required by the rule. This highlights the importance of having documented policies and procedures. Title production systems should be able to create records of when the Closing Disclosure was generated. Having policies showing when a company places documents in the mail can go a long way to showing a strong pattern of compliance. Also, some postal services allow customers to generate postage (instead of stamps) and create a log of each envelope that is post marked.
Lastly, while the examples the CFPB provides in the rule all focus on physical delivery of the disclosure, electronic delivery is allowed in accordance with the E-SIGN or Uniform Electronic Transaction Act laws. The timing requirements are the same as for physical delivery and would require obtaining some evidence of receipt (i.e., an email confirmation, system log or other indicia) or complying with the mailbox rule for presuming receipt three days after placing the documents in the mail.
Creditors and settlement agents also may agree to divide responsibility with regard to completing the Closing Disclosure, with the settlement agent assuming responsibility to complete some or all the Closing Disclosure. In these situations, the creditor must maintain communication with the settlement agent to ensure that the Closing Disclosure and its delivery satisfy regulatory requirements, The creditor is legally responsible for any errors or defects.
In transactions involving a seller, the settlement agent is required to provide the seller with the Closing Disclosure reflecting the actual terms of the seller’s transaction no later than the day of consummation.
In transactions that are not rescindable, the Closing Disclosure may be provided to any consumer with primary liability on the obligation. In rescindable transactions, the creditor must provide the Closing Disclosure separately and meet the timing requirements for each consumer who has the right to rescind under TILA.
The consumer may waive the three-day period if there is a bona fide personal financial emergency. Bona-fide personal financial emergencies are extremely rare. Determining whether one exists is fact intensive. The only example provided by the Bureau is the imminent sale of the consumers home through foreclosure where the proceeds of the new mortgage can save the home from foreclosure.