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11/24/2015

How to Comply with the Closing Disclosure's Three-day Rule

According to the Consumer Financial Protection Bureau’s final rule, the creditor must deliver the Closing Disclosure to the consumer at least three business days prior to the date of consummation of the transaction. (Note that the Closing Disclosure and Loan Estimate must be implemented by Oct. 3, 2015, on certain loans.

In the final rule, the CFPB said creditors may use settlement agents to provide the Closing Disclosure, provided that the settlement agents comply with the final rule’s requirements for the Closing Disclosure.

As an example, if settlement is scheduled for Thursday then the Closing Disclosure can be hand delivered on Monday. A company could also deliver the disclosure by courier or other shipping or postal service so long as a signature is obtained from the borrower showing receipt on Monday. If a company does not use a service that provides evidence that the disclosure was received on Monday (ie: U.S. Postal Service first class mail), then it must send the disclosure by the prior Thursday. Use the chart below to help you determine when the Closing Disclosure should be sent to ensure the buyer receives it three days prior to consummation of the transaction.

Generally, if changes occur between the time the Closing Disclosure form is given and the closing, the consumer must be provided a new form. When that happens, the consumer must be given three additional business days to review that form before closing.

The CFPB listened to ALTA concerns and limited the instances that would require a new Closing Disclosure to be issued. Limiting the instances of delays in real estate transactions will help to ensure a positive experience for the consumer at the closing table.

Changes that require creditors to provide a new Closing Disclosure and an additional three-business-day waiting period after receipt include:

  • changes to the APR above 1/8 of a percent for most loans (and 1/4 of a percent for loans with irregular payments or periods)
  • changes the loan product
  • addition of a prepayment penalty to the loan

Some quick definitions can be helpful when understanding this rule. First, the starting point for determining when the three-day period starts is the day of consummation. Consummation is the day the consumer becomes contractually obligated on the loan (i.e., the day they sign the note). This is typically the same day as closing (12 C.F.R. §§ 1026.2(a)(13) & 1026.38(a)(3)(ii)). Once you have the right starting point then you need to count backwards. The three-day rule requires the counting of “business days,” which are “all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year's Day, the Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.” It is not a 72-hour requirement, but rather a day requirement so you do not need to know the time that closing will take place.

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.

Three-day chart

Comments

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So stressed tonight. Is there anyway I can forfeit one business day of the 3? The lender dropped the ball and the CD will not be sent to me until tomorrow 6/29. The close was scheduled 7/1. I still want to close! I will have to cancel soo many plans this weekend. Movers, deliveries, etc. Can I do anything?

I received and signed & returned the CD at 9:30 AM 6/29. We were scheduled to close on Fri 7/1. I was now told that due to the regulations we can't close until next week...please help!

Hello Cara, Thanks for your email. We're sorry to hear about the scheduling issue with your closing. Under the federal rules, lenders are required to provide the Closing Disclosure to the borrower at least three business days before consumer closes on loan so consumer can review CD. So, the earliest you'd be able to close would be Saturday, July 2. You should check with your lender to see if Saturday is a possibility. It may not since this is a holiday weekend.

Hello Nikkie,

We're sorry to hear there are issues with your closing. Unfortunately, there are only a few very limited circumstances where the Consumer Financial Protection Bureau's (CFPB) regulation allows the borrower to waive his or her right to wait three days after receiving the Closing Disclosure (CD) in order to close the deal sooner.

The regulation allows the borrower to waive the three day review period after receiving the disclosure ONLY if the borrower has a Bona Fide Personal Financial Emergency. The phrase is undefined but the CFPB has noted the bar is set very high for what would constitute a financial emergency. However, the entity that will determine whether or not a waiver may be used is the lender. The CFPB “recognizes that the limited guidance on what constitutes a bona fide personal financial emergency may limit the use of the waiver, but the Bureau believes the waiver should be reserved for limited use: when a consumer faces a true financial emergency, as distinct from an inconvenience.” Page 472 of the regulation. Hope this helps.

We signed our CD on June 27th...it is now July 14th and now Under Writing is asking for an updated payoff amount we are buying our house on contract and are wanting to pay off the contract. Can they do this after the CD has been signed?

We have a borrower who had e-consented to receive documents on 7/5. Her CD went out on 7/15; however Encompass is not showing that she has downloaded and reviewed her CD. Since we are now 9 days out from this, can this be perceived and we sign closing documents or do we start over?

My loan officer told me that he did NOT need to send me the closing disclosure before closing as long as it was exactly the same as the Loan Estimate. Is this correct? It actually wasn't quite the same, the taxes and insurance were a little different. When I asked him to send be the disclosure the day before we closed, he said he wouldn't send it to me but would send it directly to the title company. (Again, because he insisted it hadn't changed) Is this right? It seemed really wrong and I haven't heard anyone else make this justification. Neither did the title officer (I am a Realtor, familiar with the general requirements)

I should clarify my comment above, this was for a property that I personally bought and got a loan on. I did not see a copy of the closing disclosure until we were at the closing table.

I HAVE A SITUATION WHEREAS THE APR WAS LOWERED COMPARED TO THE INITIAL CD.
THE FINAL CD WAS ISSUES TODAY 8/8 (MONDAY) CLOSING IS SCHEDULED FOR Wednesday 8/10
IS THERE ANY WAY TO MAKE THIS HAPPEN?

Hell Roni,

According to the regulation, the Closing Disclosure must be provided three days in advance of the closing on certain loans to give the consumer time to review their transaction. Here's a link to a blog post that addresses the types of loans the rule applies to: http://blog.alta.org/2013/12/do-the-cfpbs-integrated-mortgage-disclosures-apply-to-cash-transactions.html

We hope this helps.

Is there a possible waiver for the consumer to waive this 3 day rule?

Hello Carole,

Yes, it is possible for the consumer to waive their right to view the Closing Disclosure three days before closing, however, there are only very limited circumstances.

The Consumer Financial Protection Bureau allows the borrower to waive the three day review period after receiving the disclosure ONLY if the borrower has a Bona Fide Personal Financial Emergency.

The lender of the new loan must determine whether or not a waiver may be used. The CFPB “recognizes that the limited guidance on what constitutes a bona fide personal financial emergency may limit the use of the waiver, but the Bureau believes the waiver should be reserved for limited use: when a consumer faces a true financial emergency, as distinct from an inconvenience.” Page 472 of the rule.

How does the new CD effect the Seller.
The closing attorney has just emailed me the third CD with yet additional charges i.e. additional fees .
We are scheduled to close tomorrow and I am concerned additional charges will be added tomorrow even though I have now signed the CD
This is a " Mail away " closing , so I will have no idea of what the charges are until the proceeds hit by Bank Account . Can I demand the attorney contact me if he intends to add charges not already on the CD ?

what if CD was mailed to non borrowing & non owner spouse. he signed but didn't date it. we have post marked envelope. the actual buyer acknowledged the cd electronically.

is the non borrowing spouse cd valid if he didn't date his signature

Hello Suzie, thanks for the question. The signature is what is important. While the date helps the lender confirm when it was signed, the lack of the date doesn’t impact the acknowledgement. Hope this helps.

So, CD is complete. Closing is in three days per the guideline. We have to do a mailout to one of the parties, so in order for her documents to get back for closing, she'll need to sign the day before closing and overnight back--with the other party signing at closing. Looks like she'll be signing when only two days have passed. Is that ok? Is it three days to signing? Or three to closing/funding?

Hi, if I am to sign my CD today Monday, can I close on Wednesday same week?

What if a CD has been issued and we had to lower the loan amount and rate after it was issued but the APR went down. Do we still need to wait 3 days after it's re-issued or can we send a corrected one and close the next day? The APR went down by more than 1/8.

Thanks

So I have signed my CD on Monday and we are to close on Friday. But the underwriter all of sudden wants to ask for additional information. Why send me the CD to sign if the underwriters are not even ready. Does this happen. These underwriters ask for the most dumbest stuff.

My mortgage broker provided me with the closing cost disclosure at the beginning of the month which calculated closing costs as of that date which was our originally scheduled close date. Due to other unrelated issues, the closing was delayed 3 weeks. They are telling me that they do not have to provide a new disclosure and that the old one was sufficient, even though the prepaid interest and other items changed as a result of moving the date. These changes are material. I personally don't care and I understand the impact of the changes; however, I don't want to get to my closing only to find that they should have provided with a new one and we have to bump the closing another 3 days. They seem to be unwilling to adjust it and dismiss my concerns. Any thoughts?

What about the seller? I am the seller, and have a closing day after tomorrow, and I would like to see the CD for my side to make sure the numbers are what I expect to be. Am I supposed to get the 3 days to review? I haven't seen it yet...

My company does not allow doc signing for 3 days after the CD is issued yet everything I am reading says only that the CD must be issued 3 days prior to "closing."
For example, on an owner occ refi, we get CD out on Monday and can't sign loan docs until Thursday. Then 3 day rescission allows funding on Monday which is a full week after CD.
Is this correct or, in my same example, could we issue the CD on Monday and also sign loan docs same day. Fund the same Friday?

The lender we work with has sent the CD out to the borrower and has not yet provided us with a clear to close. Their comment is that they send out the CD as many times as they need to. What are the rules on when the CD should be sent out? shouldn't it be only after a clear to close has been issued?

I am a seller and my closing date is Dec 16th, when should I receive notification that the CD has been signed by the buyer?

YOu can sign on any day the title lets you sign after the 3 days - however, banks do not fund on weekends or legal holidays so you are not actually CLOSING - merely signing documents. The funding must take place for there to be the ability to transfer title and keys.

The three days has ruined a deal today for me - and I think it is ridiculous!

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