First Guaranty Mortgage Corporation - Compliance Department




What are the general requirements for the Closing Disclosure?
 

For loans that require a Loan Estimate and that proceed to closing, creditors must provide a new final disclosure reflecting the actual terms of the transaction called the Closing Disclosure. The form integrates and replaces the existing HUD-1 and the final TIL disclosure for these transactions. The creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan. (§ 1026.19(f)(1)(ii))

  • The Closing Disclosure generally must contain the actual terms and costs of the transaction. (§ 1026.19(f)(1)(i)). Creditors may estimate disclosures using the best information reasonably available when the actual term or cost is not reasonably available to the creditor at the time the disclosure is made. However, creditors must act in good faith and use due diligence in obtaining the information. The creditor normally may rely on the representations of other parties in obtaining the information, including, for example, the settlement agent. The creditor is required to provide corrected disclosures containing the actual terms of the transaction at or before consummation. (Comments 19(f)(1)(i)-2, -2.i, and -2.ii)
  • The Closing Disclosure must be in writing and contain the information prescribed in § 1026.38. The creditor must disclose only the specific information set forth in § 1026.38(a) through (s), as shown in the Bureau’s form in appendix H-25. (§ 1026.38(t))
  • If the actual terms or costs of the transaction change prior to consummation, the creditor must provide a corrected disclosure that contains the actual terms of the transaction and complies with the other requirements of § 1026.19(f), including the timing requirements, and requirements for providing corrected disclosures due to subsequent changes. (Comment 19(f)(1)(i)-1)
  • New three-day waiting period. If the creditor provides a corrected disclosure, it may also be required to provide the consumer with an additional three-business-day waiting period prior to consummation. (§ 1026.19(f)(2)) (See section12 below for a discussion of the redisclosure requirements for the Closing Disclosure)

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 10.1

 
The rule requires creditors to provide the Closing Disclosure three business days before consummation. Is "consummation" the same thing as closing settlement?
 

No, consummation may commonly occur at the same time as closing or settlement, but it is a legally distinct event. Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan, not, for example, when the consumer becomes contractually obligated to a seller on a real estate transaction.

The point in time when a consumer becomes contractually obligated to the creditor on the loan depends on applicable State law. (§ 1026.2(a)(13) and Comment 2(a)(13)-1). Creditors and settlement agents should verify the applicable State laws to determine when consummation will occur, and make sure delivery of the Closing Disclosure occurs at least three business days before this event.

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 10.2

 
Does a creditor have to use the Bureau's Closing Disclosure Form?
 

Generally, yes. For any loans subject to the TILA-RESPA rule that are federally related mortgage loans subject to RESPA (which will include most mortgages), form H-25 is a standard form, meaning creditors must use the form H-25. (§ 1026.38(t)(3)(i)) (See also § 1024.2(b) for definition of federally related mortgage loan)

For other transactions subject to the TILA-RESPA rule that are not federally related mortgage loans, form H-25 is a model form, meaning creditors are not strictly required to use form H-25, but the disclosures must contain the exact same information and be made with headings, content, and format substantially similar to form H-25. (§ 1026.38(t)(3)(ii)

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 10.3


What are the general timing and delivery requirements for the Closing Disclosure?
 

Generally, the creditor is responsible for ensuring that the consumer receives the Closing Disclosure form no later than three business days before consummation. (§ 1026.19(f)(1)(ii)(A); Comment 19(f)(1)(v)-3) (Although see section 11.4 below regarding delivery of the Closing Disclosure by a settlement agent)

The creditor also is responsible for ensuring that the Closing Disclosure meets the content, delivery, and timing requirements discussed in sections 10, 11, and 12 of this guide. (§§ 1026.19(f) and 1026.38)

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 11.1

 
How must the Closing Disclosure be delivered?
 

To ensure the consumer receives the Closing Disclosure on time, creditors must arrange for delivery as follows:

  • By providing it to the consumer in person.
  • By mailing, or by other delivery methods, including email. Creditors may use electronic delivery methods subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. 7001 et seq.). (§ 1026.38(t)(3)(iii))
  • Creditors must ensure that the consumer receives the Closing Disclosure at least three business days prior to consummation. (§ 1026.19(f)(1)(ii)(A))

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 11.2


When is the Closing Disclosure considered to be received if it is delivered in person of if it is mailed? 
 

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. (§ 1026.19(f)(1)(iii); Comment 19(f)(1)(ii)-2)

However, if the creditor has evidence that the consumer received the Closing Disclosure earlier than three business days after it is mailed or delivered, it may rely on that evidence and consider it to be received on that date. (Comments 19(f)(1)(iii)-1 and -2) (See also discussion above in section 6.4 of this guide on similar receipt rule under § 1026.19(e)(1)(iv) and commentary regarding the Loan Estimate.)

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 11.3


What if there is more than one consumer involved in a transaction?
 

In rescindable transactions, the Closing Disclosure must be given separately to each consumer who has the right to rescind under TILA (see § 1026.23), although the disclosures required for adjustable rate mortgages need only be provided to the consumer who expresses an interest in a variable-rate loan program. (§ 1026.19(b)). In transactions that are not rescindable, the Closing Disclosure may be provided to any consumer with primary liability on the obligation.

Source: Consumer Financial Protection Bureau, TILA-RESPA Integrated Disclosure Rule, Small entity compliance guide, March 2015, section 11.6


 
 
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