TRID’s “Black Hole” remains in place, but new CFPB proposal aims to address it

Written By: Joel Palmer, Op-Ed Writer

Last month, the Consumer Financial Protection Bureau (CFPB) finalized amendments to the “Know Before You Owe” mortgage disclosure rule. Formally known as the as the TILA-RESPA Integrated Disclosure rule (TRID), the regulation requires mandatory compliance beginning Oct. 1, 2018, about three years after it first took effect.

A major provision of TRID remains unsettled, however. The final TRID amendments did not include finalized comments on what has become known in the industry as the “black hole” of CFPB’s mortgage disclosure rule. The bureau instead issued a completely new proposal, for which it is accepting comments.

The “black hole” relates to the disclosure of mortgage fees. Specifically, it refers to situations when certain fees and costs have increased between the issuance of the Closing Disclosure and the actual closing date.

When it comes to how much fees are allowed to increase, TRID has identified three categories of fee tolerance thresholds:  

•    Zero tolerance, which are fees the lender cannot increase between the issuance of the Loan Estimate to the Closing Disclosure.

•    10 percent cumulative tolerance, which are fees that when added together can not increase by more than 10 percent from what is indicated on the Loan Estimate to what is finalized on the Closing Disclosure.

•    Unlimited tolerance, which are not subject to anytolerance limits.

Under the TRID rule, a Loan Estimate is used to reset tolerances, but the final version of this document must be received by the borrower within four days of closing. In situations when lenders learned of fee increases within the four-day window, they were not able to use the Closing Disclosure to reset tolerances. This created the “black hole.”

TRID’s proposed amendments issued last year “appeared to retain the timing element of the existing provision that creates the black hole issue for an initial Closing Disclosure, but permit the use of a corrected Closing Disclosure to reset tolerances without regard to the timing element,” according to a commentary by the law firm Ballard Spahr LLP, which practices real estate law.

But according to CFPB, there were many conflicting comments and interpretations of the proposal during the comment period. In the summary section of the new proposed rule, CFPB stated:

“When issuing the 2016 Proposal, the Bureau believed that stakeholders generally understood that, if certain conditions are met, creditors may use an initial Closing Disclosure to reflect changes in costs that will be used to determine if an estimated closing cost was disclosed in good faith.” 

However, “many interpreted it as allowing creditors to use corrected Closing Disclosures to reflect changes in costs that will be used to determine if an estimated closing cost was disclosed in good faith, irrespective of when the corrected Closing Disclosure was provided relative to the timing of consummation. These commenters generally interpreted the proposal as retaining the four-business day limit for using initial Closing Disclosures to reflect changes in costs for purposes of determining if an estimated closing cost was disclosed in good faith.”

CFBP indicated that instead of finalizing the amendment on this issue, it decided to issue a separate proposal in order to “pose explicitly the question of whether to remove the current four-business day limit for resetting tolerances with both initial and corrected Closing Disclosures.”

Comments on the proposal, identified by Docket No. CFPB-2017-0018 or RIN 3170-AA61, can be emailed to: Include Docket No. CFPB-2017-0018 or RIN 3170-AA61 in the subject line of the email.

You can also submit comments online at Follow the instructions for submitting comments.

About the Author

As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.

Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.