On April 29, 2020, the Consumer Financial Protection Bureau released an interpretive ruling effective on May 4, 2020 providing rescission relief. If a consumer refinances or applies for a mortgage loan and needs funds due to the COVID-19 pandemic before the end of the waiting periods, lenders can waive and modify the waiting period for the funds under the umbrella of a bona fide personal financial emergency.
Because these changes are considered interpretive rules, there is no phase-in timeframe or comment period for the TRID and Rescission changes.
As a refresher:
- The Regulation Z TRID Rule requires delivery of the Loan Estimate to consumers no later than seven business days before consummation, and receipt of the Closing Disclosure no later than three business days before consummation.
- The Regulation Z Rescission Rule provides consumers with at least three business days from consummation to rescind and creditors are required to provide consumers with a disclosure informing them of their right to rescind.
- Regulation Z already contains provisions to allow the timing of special circumstances to be waived in the event of a “bona fide financial emergency that necessitates consummating the credit transaction before the end of the waiting period.” For the waiting periods to be modified or waived, the creditor must have a dated, written (handwritten) statement by the consumer that:
- describes the emergency,
- specifically modifies or waives the waiting period, and
- bears the signature of all consumers who are primarily liable on the legal obligation (for the TRID Rule) or who are entitled to rescind (for the Regulation Z Rescission Rules).
This interpretive ruling references the Bureau’s “Statement on Supervisory Practices Regarding Financial Institutions and Consumers Affected by a Major Disaster or Emergency“ issued on September 14, 2018. The 2018 Supervisory Statement explained that the Regulation Z bona fide personal financial emergency waiver “can help expedite access to credit for consumers facing a bona fide personal financial emergency following a major disaster or emergency.”
The Bureau clarified that if the consumer determines a loan closing is needed to meet a bona fide personal financial emergency the borrower can make a brief statement explaining that the financial need is due to the COVID-19 pandemic and funds are needed before the end of the applicable TRID Rule waiting period (seven business days from Loan Estimate/three business days from Closing Disclosure) or the Regulation Z Rescission Rules waiting period (three business days from consummation), then the consumer has a bona fide personal financial emergency that would permit the consumer to utilize the modification and waiver provisions.
While Regulation Z does not mandate that creditors inform consumers of their ability to use the modification and waiver provisions, the Bureau encourages creditors to consider voluntarily informing consumers of this right during the COVID-19 pandemic.
The Bureau also determined the COVID-19 pandemic qualifies as a “changed circumstance” for purposes of TRID Rule provisions, allowing creditors to use revised estimates reflecting changes in settlement charges for purposes of determining good faith as COVID-19, as with wars or natural disasters. The pandemic is an example of an extraordinary event beyond the control of any interested party and thus qualifies as a changed circumstance and for purposes of determining good faith. Creditors may use revised estimates of settlement charges that consumers would incur in connection with the mortgage transaction.
TCA is your source for A Better Way to comply. Contact us at [email protected] or at (800) 934-7347 for all your compliance needs.