[Federal Register Volume 83, Number 85 (Wednesday, May 2, 2018)]
[Rules and Regulations]
[Pages 19159-19176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09243]



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 Rules and Regulations
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
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 The Code of Federal Regulations is sold by the Superintendent of Documents. 
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  Federal Register / Vol. 83, No. 85 / Wednesday, May 2, 2018 / Rules 
and Regulations  

[[Page 19159]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

[Docket No. CFPB-2017-0018]
RIN 3170-AA71


Federal Mortgage Disclosure Requirements Under the Truth in 
Lending Act (Regulation Z)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
amending Federal mortgage disclosure requirements under the Real Estate 
Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) 
that are implemented in Regulation Z. The amendments relate to when a 
creditor may compare charges paid by or imposed on the consumer to 
amounts disclosed on a Closing Disclosure, instead of a Loan Estimate, 
to determine if an estimated closing cost was disclosed in good faith.

DATES: The final rule is effective June 1, 2018.

FOR FURTHER INFORMATION CONTACT: Shaakira Gold-Ramirez, Paralegal 
Specialist, Pedro De Oliveira, David Friend, and Priscilla Walton-Fein, 
Senior Counsels, Office of Regulations, Bureau of Consumer Financial 
Protection, at 202-435-7700 or https://reginquiries.consumerfinance.gov/. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Summary of the Final Rule

    The TILA-RESPA Rule \1\ requires creditors to provide consumers 
with good faith estimates of the loan terms and closing costs required 
to be disclosed on a Loan Estimate. Under the rule, an estimated 
closing cost is disclosed in good faith if the charge paid by or 
imposed on the consumer does not exceed the amount originally 
disclosed, subject to certain exceptions.\2\ In some circumstances, 
creditors may use revised estimates, instead of the estimate originally 
disclosed to the consumer, to compare to the charges actually paid by 
or imposed on the consumer for purposes of determining whether an 
estimated closing cost was disclosed in good faith. If the conditions 
for using such revised estimates are met, the creditor generally may 
provide revised estimates on a revised Loan Estimate or, in certain 
circumstances, on a Closing Disclosure. However, under the current 
rule, circumstances may arise in which a cost increases but the 
creditor is unable to use an otherwise permissible revised estimate on 
either a Loan Estimate or a Closing Disclosure for purposes of 
determining whether an estimated closing cost was disclosed in good 
faith. This situation, which may arise when the creditor has already 
provided a Closing Disclosure to the consumer when it learns about the 
cost increase, occurs because of the intersection of timing rules 
regarding the provision of revised estimates. This has been referred to 
in industry as a ``gap'' or ``black hole'' in the TILA-RESPA Rule.
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    \1\ In November 2013, pursuant to sections 1098 and 1100A of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act), the Bureau issued the Integrated Mortgage Disclosures 
under the Real Estate Settlement Procedures Act (Regulation X) and 
the Truth in Lending Act (Regulation Z) (2013 TILA-RESPA Final 
Rule), combining certain disclosures that consumers receive in 
connection with applying for and closing on a mortgage loan into two 
new forms: The Loan Estimate and Closing Disclosure. 78 FR 79730 
(Dec. 31, 2013). The Bureau has since finalized amendments to the 
2013 TILA-RESPA Final Rule, including in January and July of 2015 
and in July of 2017. See 80 FR 8767 (Feb. 19, 2015) (January 2015 
Amendments); 80 FR 43911 (July 24, 2015) (July 2015 Amendments); 82 
FR 37656 (Aug. 11, 2017) (July 2017 Amendments). The 2013 TILA-RESPA 
Final Rule and subsequent amendments to that rule are referred to 
collectively herein as the TILA-RESPA Rule.
    \2\ 12 CFR 1026.19(e)(3)(i). Those exceptions are listed in 
Sec.  1026.19(e)(3)(ii) through (iv).
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    The Bureau understands that these circumstances have led to 
uncertainty in the market and created implementation challenges that 
may have consequences for both consumers and creditors. If creditors 
cannot pass increased costs to consumers in the specific transactions 
where the costs arise, creditors may spread the costs across all 
consumers by pricing their loan products with added margins. The Bureau 
also understands that some creditors may be denying applications, even 
after providing the Closing Disclosure, in some circumstances where the 
creditor cannot pass otherwise permissible cost increases directly to 
affected consumers, which can have negative effects for those 
consumers. For these reasons, in July 2017, the Bureau proposed to 
address the issue by specifically providing that creditors may use 
Closing Disclosures to reflect changes in costs for purposes of 
determining if an estimated closing cost was disclosed in good faith, 
regardless of when the Closing Disclosure is provided relative to 
consummation (2017 Proposal or ``the proposal'').\3\ The Bureau is 
finalizing those amendments as proposed, with minor clarifying changes.
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    \3\ 82 FR 37794 (Aug. 11, 2017).
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II. Background

    In Dodd-Frank Act sections 1032(f), 1098, and 1100A, Congress 
directed the Bureau to integrate certain mortgage loan disclosures 
under TILA and RESPA.\4\ The Bureau issued proposed integrated 
disclosure forms and rules for comment on July 9, 2012 (2012 TILA-RESPA 
Proposal) \5\ and issued the 2013 TILA-RESPA Final Rule on November 20, 
2013. The rule included model forms, samples illustrating the use of 
those forms for different types of loans, and Official Interpretations, 
which provided authoritative guidance explaining the new disclosures. 
The 2013 TILA-RESPA Final Rule took effect on October 3, 2015.\6\
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    \4\ Public Law 111-203, 124 Stat. 1376, 2007, 2103-04, 2107-09 
(2010).
    \5\ 77 FR 51116 (Aug. 23, 2012).
    \6\ The rule had an initial effective date of August 1, 2015. 78 
FR 79730, 80071 (Dec. 31, 2013). However, the Bureau ultimately 
extended that effective date another two months, to October 3, 2015, 
in a subsequent rulemaking. 80 FR 43911 (July 24, 2015).
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    The Bureau has provided resources to support implementation of the 
TILA-RESPA Rule.\7\ The Bureau has also stated its commitment to be 
sensitive to the good faith efforts made by institutions to come into 
compliance. In addition, since the promulgation of the 2013 TILA-RESPA 
Final Rule, the

[[Page 19160]]

Bureau has made various amendments to facilitate compliance. Most 
recently, the Bureau finalized the July 2017 Amendments, which 
memorialized the Bureau's informal guidance on various issues, made 
clarifying and technical amendments, and also made a limited number of 
substantive changes where the Bureau identified discrete solutions to 
specific implementation challenges. Concurrently with the July 2017 
Amendments, the Bureau issued the 2017 Proposal to address an 
additional implementation issue regarding when a creditor may compare 
charges paid by or imposed on the consumer to amounts disclosed on a 
Closing Disclosure to determine if an estimated closing cost was 
disclosed in good faith.
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    \7\ The Bureau's implementation resources can be found on the 
Bureau's website at www.consumerfinance.gov/regulatory-implementation/tila-respa.
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III. Comments

    The Bureau issued the 2017 Proposal on July 6, 2017, and it was 
published in the Federal Register on August 11, 2017. In response to 
the 2017 Proposal, the Bureau received 43 unique comments from industry 
commenters (including trade associations, creditors, and industry 
representatives), a consumer advocate group, and others. As discussed 
below, the Bureau has considered the comments in adopting this final 
rule.

IV. Legal Authority

    The Bureau is issuing this final rule pursuant to its authority 
under TILA, RESPA, and the Dodd-Frank Act, including the authorities 
discussed below. In general, the provisions of Regulation Z that this 
final rule amends were previously adopted by the Bureau in the TILA-
RESPA Rule. In doing so, the Bureau relied on one or more of the 
authorities discussed below, as well as other authority. The Bureau is 
issuing this final rule in reliance on the same authority and for the 
same reasons relied on in adopting the relevant provisions of the TILA-
RESPA Rule, which are described in detail in the Legal Authority and 
Section-by-Section Analysis parts of the 2013 TILA-RESPA Final Rule and 
January 2015 Amendments, respectively.\8\
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    \8\ 78 FR 79730, 79753-56, 79834-37 (Dec. 31, 2013); 80 FR 8767, 
8768-70 (Feb. 19, 2015).
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A. The Integrated Disclosure Mandate

    Section 1032(f) of the Dodd-Frank Act required the Bureau to 
propose, for public comment, rules and model disclosures combining the 
disclosures required under TILA and sections 4 and 5 of RESPA into a 
single, integrated disclosure for mortgage loan transactions covered by 
those laws, unless the Bureau determined that any proposal issued by 
the Board of Governors of the Federal Reserve System (Board) and the 
Department of Housing and Urban Development (HUD) carried out the same 
purpose.\9\ In addition, the Dodd-Frank Act amended section 105(b) of 
TILA and section 4(a) of RESPA to require the integration of the TILA 
disclosures and the disclosures required by sections 4 and 5 of 
RESPA.\10\ The purpose of the integrated disclosure is to facilitate 
compliance with the disclosure requirements of TILA and RESPA and to 
improve borrower understanding of the transaction. The Bureau provided 
additional discussion of this integrated disclosure mandate in the 2013 
TILA-RESPA Final Rule.\11\
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    \9\ Public Law 111-203, 124 Stat. 1376, 2007 (2010) (codified at 
12 U.S.C. 5532(f)).
    \10\ Public Law 111-203, 124 Stat. 1376, 2108 (2010) (codified 
at 15 U.S.C. 1604(b)); Public Law 111-203, 124 Stat. 1376, 2103 
(2010) (codified at 12 U.S.C. 2603(a)).
    \11\ 78 FR 79730, 79753-54 (Dec. 31, 2013).
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B. Truth in Lending Act

    TILA section 105(a). As amended by the Dodd-Frank Act, TILA section 
105(a) \12\ directs the Bureau to prescribe regulations to carry out 
the purposes of TILA and provides that such regulations may contain 
additional requirements, classifications, differentiations, or other 
provisions and may further provide for such adjustments and exceptions 
for all or any class of transactions that the Bureau judges are 
necessary or proper to effectuate the purposes of TILA, to prevent 
circumvention or evasion thereof, or to facilitate compliance 
therewith. A purpose of TILA is to assure a meaningful disclosure of 
credit terms so that the consumer will be able to compare more readily 
the various available credit terms and avoid the uninformed use of 
credit.\13\ In enacting TILA, Congress found that economic 
stabilization would be enhanced and the competition among the various 
financial institutions and other firms engaged in the extension of 
consumer credit would be strengthened by the informed use of 
credit.\14\ Strengthened competition among financial institutions is a 
goal of TILA, achieved through the meaningful disclosure of credit 
terms.\15\ For the reasons discussed below and in the TILA-RESPA Rule, 
the Bureau finalizes these amendments pursuant to its authority under 
TILA section 105(a). The Bureau believes the finalized amendments 
effectuate the purpose of TILA under TILA section 102(a) of meaningful 
disclosure of credit terms to consumers and facilitate compliance with 
the statute by clarifying when particular disclosures may be provided. 
The Bureau also believes that the final rule furthers TILA's goals by 
ensuring more reliable estimates, which foster competition among 
financial institutions. In addition, the Bureau believes the final rule 
will prevent circumvention or evasion of TILA.
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    \12\ 15 U.S.C. 1604(a).
    \13\ 15 U.S.C. 1601(a).
    \14\ Id.
    \15\ The Bureau provided additional discussion of the history of 
TILA section 105(a) and its interaction with the provisions of TILA 
section 129 that apply to high-cost mortgages in the 2013 TILA-RESPA 
Final Rule. As the Bureau explained, the Bureau's authority under 
TILA section 105(a) to make adjustments and exceptions applies to 
all transactions subject to TILA, including high-cost mortgages, 
except with respect to the provisions of TILA section 129 that apply 
uniquely to such high-cost mortgages. 78 FR 79730, 79754 (Dec. 31, 
2013).
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    TILA section 129B(e). Dodd-Frank Act section 1405(a) amended TILA 
to add new section 129B(e).\16\ That section authorizes the Bureau to 
prohibit or condition terms, acts, or practices relating to residential 
mortgage loans that the Bureau finds to be abusive, unfair, deceptive, 
predatory, necessary, or proper to ensure that responsible, affordable 
mortgage credit remains available to consumers in a manner consistent 
with the purposes of sections 129B and 129C of TILA, to prevent 
circumvention or evasion thereof, or to facilitate compliance with such 
sections, or are not in the interest of the borrower. In developing 
rules under TILA section 129B(e), the Bureau has considered whether the 
rules are in the interest of the borrower, as required by the statute. 
For the reasons discussed below and in the TILA-RESPA Rule, the Bureau 
finalizes these amendments pursuant to its authority under TILA section 
129B(e). The Bureau believes this final rule is consistent with TILA 
section 129B(e).
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    \16\ Public Law 111-203, 124 Stat. 1376, 2141 (2010) (codified 
at 15 U.S.C. 1639B(e)).
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C. Real Estate Settlement Procedures Act Section 19(a)

    Section 19(a) of RESPA authorizes the Bureau to prescribe such 
rules and regulations and to make such interpretations and grant such 
reasonable exemptions for classes of transactions as may be necessary 
to achieve the purposes of RESPA.\17\ One purpose of RESPA is to effect 
certain changes in the settlement process for residential real estate 
that will result in more effective advance disclosure to home buyers 
and sellers of settlement costs.\18\ In addition, in enacting RESPA, 
Congress found that consumers are entitled to greater and more timely

[[Page 19161]]

information on the nature and costs of the settlement process and to be 
protected from unnecessarily high settlement charges caused by certain 
abusive practices in some areas of the country.\19\ In developing rules 
under RESPA section 19(a), the Bureau has considered the purposes of 
RESPA, including to effect certain changes in the settlement process 
that will result in more effective advance disclosure of settlement 
costs. The Bureau finalizes these amendments pursuant to its authority 
under RESPA section 19(a). For the reasons discussed below and in the 
TILA-RESPA Rule, the Bureau believes the final rule is consistent with 
the purposes of RESPA by fostering more effective advance disclosure to 
home buyers and sellers of settlement costs.
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    \17\ 12 U.S.C. 2617(a).
    \18\ 12 U.S.C. 2601(b).
    \19\ Id. at 2601(a). In the past, RESPA section 19(a) has served 
as a broad source of authority to prescribe disclosures and 
substantive requirements to carry out the purposes of RESPA.
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D. Dodd-Frank Act

    Dodd-Frank Act section 1032. Section 1032(a) of the Dodd-Frank Act 
provides that the Bureau may prescribe rules to ensure that the 
features of any consumer financial product or service, both initially 
and over the term of the product or service, are fully, accurately, and 
effectively disclosed to consumers in a manner that permits consumers 
to understand the costs, benefits, and risks associated with the 
product or service, in light of the facts and circumstances.\20\ The 
authority granted to the Bureau in section 1032(a) is broad and 
empowers the Bureau to prescribe rules regarding the disclosure of the 
features of consumer financial products and services generally. 
Accordingly, the Bureau may prescribe rules containing disclosure 
requirements even if other Federal consumer financial laws do not 
specifically require disclosure of such features. Dodd-Frank Act 
section 1032(c) provides that, in prescribing rules pursuant to section 
1032, the Bureau shall consider available evidence about consumer 
awareness, understanding of, and responses to disclosures or 
communications about the risks, costs, and benefits of consumer 
financial products or services.\21\ Accordingly, in developing the 
TILA-RESPA Rule under Dodd-Frank Act section 1032(a), the Bureau 
considered available studies, reports, and other evidence about 
consumer awareness, understanding of, and responses to disclosures or 
communications about the risks, costs, and benefits of consumer 
financial products or services. Moreover, the Bureau considered the 
evidence developed through its consumer testing of the integrated 
disclosures as well as prior testing done by the Board and HUD 
regarding TILA and RESPA disclosures. See part III of the 2013 TILA-
RESPA Final Rule for a discussion of the Bureau's consumer testing.\22\
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    \20\ Public Law 111-203, 124 Stat. 1376, 2006-07 (2010) 
(codified at 12 U.S.C. 5532(a)).
    \21\ Public Law 111-203, 124 Stat. 1376, 2007 (2010) (codified 
at 12 U.S.C. 5532(c)).
    \22\ 78 FR 79730, 79743-50 (Dec. 31, 2013).
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    The Bureau finalizes these amendments pursuant to its authority 
under Dodd-Frank Act section 1032(a). For the reasons discussed below 
and in the TILA-RESPA Rule, the Bureau believes that the final rule is 
consistent with Dodd-Frank Act section 1032(a) because it promotes 
full, accurate, and effective disclosure of the features of consumer 
credit transactions secured by real property in a manner that permits 
consumers to understand the costs, benefits, and risks associated with 
the product or service, in light of the facts and circumstances.
    Dodd-Frank Act section 1405(b). Section 1405(b) of the Dodd-Frank 
Act provides that, notwithstanding any other provision of title XIV of 
the Dodd-Frank Act, in order to improve consumer awareness and 
understanding of transactions involving residential mortgage loans 
through the use of disclosures, the Bureau may exempt from or modify 
disclosure requirements, in whole or in part, for any class of 
residential mortgage loans if the Bureau determines that such exemption 
or modification is in the interest of consumers and in the public 
interest.\23\ Section 1401 of the Dodd-Frank Act, which amends TILA 
section 103(cc)(5), generally defines a residential mortgage loan as 
any consumer credit transaction that is secured by a mortgage on a 
dwelling or on residential real property that includes a dwelling, 
other than an open-end credit plan or an extension of credit secured by 
a consumer's interest in a timeshare plan.\24\ Notably, the authority 
granted by section 1405(b) applies to disclosure requirements generally 
and is not limited to a specific statute or statutes. Accordingly, 
Dodd-Frank Act section 1405(b) is a broad source of authority to exempt 
from or modify the disclosure requirements of TILA and RESPA. In 
developing rules for residential mortgage loans under Dodd-Frank Act 
section 1405(b), the Bureau has considered the purposes of improving 
consumer awareness and understanding of transactions involving 
residential mortgage loans through the use of disclosures and the 
interests of consumers and the public. The Bureau finalizes these 
amendments pursuant to its authority under Dodd-Frank Act section 
1405(b). For the reasons discussed below and in the TILA-RESPA Rule, 
the Bureau believes the final rule is in the interest of consumers and 
in the public interest, consistent with Dodd-Frank Act section 1405(b).
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    \23\ Public Law 111-203, 124 Stat. 1376, 2142 (2010) (codified 
at 15 U.S.C. 1601 note).
    \24\ Public Law 111-203, 124 Stat. 1376, 2138 (2010) (codified 
at 15 U.S.C. 1602(cc)(5)).
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V. Section-by-Section Analysis

Section 1026.19 Certain Mortgage and Variable-Rate Transactions

19(e) Mortgage Loans--Early Disclosures

19(e)(4) Provision and Receipt of Revised Disclosures

    The 2013 TILA-RESPA Final Rule combined certain disclosures that 
consumers receive in connection with applying for and closing on a 
mortgage loan into two new, integrated forms. The first new form, the 
Loan Estimate, replaced the RESPA Good Faith Estimate and the early 
Truth in Lending disclosure. The rule requires creditors to deliver or 
place in the mail the Loan Estimate no later than three business days 
after the consumer submits a loan application.\25\ The second form, the 
Closing Disclosure, replaced the HUD-1 Settlement Statement and the 
final Truth in Lending disclosure. The rule requires creditors to 
ensure that consumers receive the Closing Disclosure at least three 
business days before consummation.\26\
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    \25\ 12 CFR 1026.19(e)(1)(iii).
    \26\ Id. at Sec.  1026.19(f)(1)(ii).
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    Section 1026.19(e)(1)(i) of the 2013 TILA-RESPA Final Rule requires 
creditors to provide consumers with good faith estimates of the 
disclosures required in Sec.  1026.37, which describes the loan terms 
and closing costs required to be disclosed on the Loan Estimate. Under 
Sec.  1026.19(e)(3)(i), an estimated closing cost is disclosed in good 
faith if the charge paid by or imposed on the consumer does not exceed 
the amount originally disclosed, except as otherwise provided in Sec.  
1026.19(e)(3)(ii) through (iv). Section 1026.19(e)(3)(ii) provides that 
estimates for certain third-party services and recording fees are in 
good faith if the sum of all such charges paid by or imposed on the 
consumer does not exceed the sum of all such charges disclosed on the 
Loan Estimate by more

[[Page 19162]]

than 10 percent.\27\ Section 1026.19(e)(3)(iii) further provides that 
certain other estimates are disclosed in good faith so long as they are 
consistent with the best information reasonably available to the 
creditor at the time they are disclosed, regardless of whether and by 
how much the amount paid by the consumer exceeds the disclosed 
estimate.\28\ The allowed variances between estimated closing costs and 
the actual amounts paid by or imposed on the consumer are referred to 
as tolerances.
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    \27\ This section also requires that, for the 10 percent 
tolerance to apply, the charge for the third-party service must not 
be paid to the creditor or an affiliate of the creditor and the 
creditor must permit the consumer to shop for the third-party 
service, consistent with Sec.  1026.19(e)(1)(vi). See 12 CFR 
1026.19(e)(3)(ii)(B)-(C).
    \28\ Section 1026.19(e)(3)(iii) provides that an estimate of the 
following charges is in good faith if it is consistent with the best 
information reasonably available to the creditor at the time it is 
disclosed, regardless of whether the amount paid by the consumer 
exceeds the amount originally disclosed: (1) Prepaid interest; (2) 
property insurance premiums; (3) amounts placed into an escrow, 
impound, reserve, or similar account; (4) charges paid to third-
party service providers selected by the consumer consistent with 
Sec.  1026.19(e)(1)(vi)(A) that are not on the list provided 
pursuant to Sec.  1026.19(e)(1)(vi)(C); and (5) property taxes and 
other charges paid for third-party services not required by the 
creditor.
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    Section 1026.19(e)(3)(iv) permits creditors, in certain limited 
circumstances, to use revised estimates of charges, instead of the 
estimate of charges originally disclosed to the consumer, to compare to 
the charges actually paid by or imposed on the consumer for purposes of 
determining whether an estimated closing cost was disclosed in good 
faith pursuant to Sec.  1026.19(e)(3)(i) and (ii) (i.e., determining 
whether the actual charge exceeds the allowed tolerance).\29\ The 
provision of such revised estimates is referred to herein as resetting 
tolerances. The circumstances under which creditors may reset 
tolerances are: (1) A defined set of changed circumstances that cause 
estimated charges to increase or, in the case of certain estimated 
charges, cause the aggregate amount of such charges to increase by more 
than 10 percent; \30\ (2) the consumer is ineligible for an estimated 
charge previously disclosed because of a changed circumstance that 
affects the consumer's creditworthiness or the value of the property 
securing the transaction; (3) the consumer requests revisions to the 
credit terms or the settlement that cause an estimated charge to 
increase; (4) points or lender credits change because the interest rate 
was not locked when the Loan Estimate was provided; (5) the consumer 
indicates an intent to proceed with the transaction more than 10 
business days, or more than any additional number of days specified by 
the creditor before the offer expires, after the Loan Estimate was 
provided to the consumer; and (6) the loan is a construction loan that 
is not expected to close until more than 60 days after the Loan 
Estimate has been provided to the consumer and the creditor clearly and 
conspicuously states that a revised disclosure may be issued.
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    \29\ The creditor is required to retain evidence that it 
performed the required actions as well as made the required 
disclosures under Regulation Z, which includes evidence that the 
creditor properly documented the reasons for the use of revised 
estimates of charges. See Sec.  1026.25(c)(1) and comment 25(c)(1)-
1.
    \30\ Changed circumstance means: (1) An extraordinary event 
beyond the control of any interested party or other unexpected event 
specific to the consumer or transaction; (2) information specific to 
the consumer or transaction that the creditor relied upon when 
providing the Loan Estimate and that was inaccurate or changed after 
the disclosures were provided; or (3) new information specific to 
the consumer or transaction that the creditor did not rely on when 
providing the original Loan Estimate. 12 CFR 1026.19(e)(3)(iv)(A).
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    Section 1026.19(e)(4) contains rules for the provision and receipt 
of revised estimates used to reset tolerances. Section 1026.19(e)(4)(i) 
provides the general rule that, subject to the requirements of Sec.  
1026.19(e)(4)(ii), if a creditor uses a revised estimate to determine 
good faith (i.e., to reset tolerances), the creditor shall provide a 
Loan Estimate reflecting the revised estimate within three business 
days of receiving information sufficient to establish that a 
permissible reason for revision applies. Section 1026.19(e)(4)(ii) 
imposes timing restrictions on the provision of revised Loan Estimates. 
Specifically, Sec.  1026.19(e)(4)(ii) states that the creditor shall 
not provide a revised Loan Estimate on or after the date on which the 
creditor provides the Closing Disclosure. Section 1026.19(e)(4)(ii) 
also provides that the consumer must receive any revised Loan Estimate 
not later than four business days prior to consummation.
    Regulation Z therefore limits creditors' ability to provide revised 
Loan Estimates relative to the provision of the Closing Disclosure and 
to consummation. In issuing the 2013 TILA-RESPA Final Rule, the Bureau 
explained that it was aware of cases where creditors provided revised 
RESPA Good Faith Estimates at the real estate closing, along with the 
HUD-1 settlement statement.\31\ The Bureau was concerned that the 
practice of providing both good faith estimates of closing costs and an 
actual statement of closing costs at the same time could be confusing 
for consumers and could diminish their awareness and understanding of 
the transaction. The Bureau was also concerned about consumers 
receiving seemingly duplicative disclosures that could contribute to 
information overload. For this reason, the Bureau adopted the provision 
of Sec.  1026.19(e)(4)(ii) that prohibits creditors from providing 
revised Loan Estimates on or after the date the creditor provides the 
Closing Disclosure. The Bureau adopted the provision of Sec.  
1026.19(e)(4)(ii) that requires that consumers receive the revised Loan 
Estimate not later than four business days prior to consummation to 
ensure that consumers do not receive a revised Loan Estimate on the 
same date as the Closing Disclosure in cases where the revised Loan 
Estimate is not provided to the consumer in person.
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    \31\ 78 FR 79730, 79836 (Dec. 31, 2013).
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    Comment 19(e)(4)(ii)-1 clarifies when creditors may reset 
tolerances with a Closing Disclosure instead of with a revised Loan 
Estimate. Specifically, the comment explains that if there are fewer 
than four business days between the time the revised version of the 
disclosures is required to be provided pursuant to Sec.  
1026.19(e)(4)(i) (i.e., within three business days of receiving 
information sufficient to establish a reason for revision) and 
consummation, creditors can reflect revised disclosures to reset 
tolerances on the Closing Disclosure. This is referred to herein as the 
``four-business day limit.''
    Although the Bureau originally proposed commentary in 2012 that 
would have stated that creditors may reflect the revised disclosures on 
the Closing Disclosure, without regard to the timing of consummation, 
the 2013 TILA-RESPA Final Rule contained the four-business day 
limit.\32\ As stated in the 2017 Proposal, the Bureau now understands 
that there is significant confusion in the market and that the four-
business day limit has caused situations where creditors cannot provide 
either a revised Loan Estimate or Closing Disclosure to reset 
tolerances even if a reason for revision under Sec.  1026.19(e)(3)(iv) 
would otherwise permit the creditor to reset tolerances. In particular, 
the Bureau understands that this situation may occur if the creditor 
has already provided the Closing Disclosure and an event occurs or a 
consumer requests a change that causes an increase in closing costs 
that

[[Page 19163]]

would be a reason for revision under Sec.  1026.19(e)(3)(iv), but there 
are four or more days between the time the revised disclosures would be 
required to be provided pursuant to Sec.  1026.19(e)(4)(i) and 
consummation. This situation may occur if there was also a delay in the 
scheduled consummation date after the initial Closing Disclosure is 
provided to the consumer.
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    \32\ See proposed comment 19(e)(4)-2 at 77 FR 51116, 51426 (Aug. 
23, 2012) (``Creditors comply with the requirements of Sec.  
1026.19(e)(4) if the revised disclosures are reflected in the 
disclosures required by Sec.  1026.19(f)(1)(i).'').
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    This situation can arise because of the intersection of various 
timing rules regarding the provision of revised estimates to reset 
tolerances. As noted, Sec.  1026.19(e)(4)(ii) prohibits creditors from 
providing Loan Estimates on or after the date on which the creditor 
provides the Closing Disclosure. In many cases, this limitation would 
not create issues for creditors because current comment 19(e)(4)(ii)-1 
explains that creditors may reflect revised estimates on a Closing 
Disclosure to reset tolerances if there are less than four business 
days between the time the revised version of the disclosures is 
required to be provided pursuant to Sec.  1026.19(e)(4)(i) and 
consummation. But there is no similar provision that explicitly 
provides that creditors may use a Closing Disclosure to reflect the 
revised estimates if there are four or more business days between the 
time the revised version of the disclosures is required to be provided 
pursuant to Sec.  1026.19(e)(4)(i) and consummation.

The 2016 Proposal

    On July 28, 2016, the Bureau proposed clarifications and technical 
amendments to the TILA-RESPA Rule, along with several proposed 
substantive changes (2016 Proposal).\33\ In the 2016 Proposal, the 
Bureau proposed comment 19(e)(4)(ii)-2 to clarify that creditors may 
use corrected Closing Disclosures provided under Sec.  1026.19(f)(2)(i) 
or (ii) (in addition to the initial Closing Disclosure) to reflect 
changes in costs that will be used to reset tolerances.\34\ As 
discussed above, existing comment 19(e)(4)(ii)-1 clarifies that 
creditors may reflect revised estimates on the Closing Disclosure to 
reset tolerances if there are less than four business days between the 
time the revised version of the disclosures is required to be provided 
pursuant to Sec.  1026.19(e)(4)(i) and consummation. Although comment 
19(e)(4)(ii)-1 expressly references only the Closing Disclosure 
required by Sec.  1026.19(f)(1)(i), the Bureau had stated in informal 
guidance that the provision also applies to corrected Closing 
Disclosures provided pursuant to Sec.  1026.19(f)(2)(i) or (ii). The 
Bureau proposed comment 19(e)(4)(ii)-2 in the 2016 Proposal to clarify 
this point.
---------------------------------------------------------------------------

    \33\ 81 FR 54317 (Aug. 15, 2016).
    \34\ Id. at 54334.
---------------------------------------------------------------------------

    However, some commenters to the 2016 Proposal interpreted proposed 
comment 19(e)(4)(ii)-2 as allowing creditors to use corrected Closing 
Disclosures to reset tolerances regardless of when consummation is 
expected to occur, as long as the creditor provides the corrected 
Closing Disclosure within three business days of receiving information 
sufficient to establish a reason for revision applies pursuant to Sec.  
1029.19(e)(4)(i). Under this interpretation, the four-business day 
limit would still apply to resetting tolerances with the initial 
Closing Disclosure, but would not apply to resetting tolerances with a 
corrected Closing Disclosure. Commenters were not uniform in their 
interpretation of proposed comment 19(e)(4)(ii)-2. Commenters who 
interpreted proposed comment 19(e)(4)(ii)-2 as removing the four-
business day limit as it applies to corrected Closing Disclosures were 
generally supportive, citing uncertainty about the proper 
interpretation of current rules and stating that the timing rules 
regarding resetting tolerances with a Closing Disclosure are 
unworkable. Many commenters perceived that proposed comment 
19(e)(4)(ii)-2 would resolve these issues because they interpreted it 
as allowing creditors to use corrected Closing Disclosures to reset 
tolerances even if there are four or more business days between the 
time the revised version of the disclosures is required to be provided 
pursuant to Sec.  1026.19(e)(4)(i) and consummation. Some commenters 
who interpreted the proposed comment in this way supported it, but also 
cautioned about unintended consequences. For example, some commenters 
stated that eliminating the four-business day limit for corrected 
Closing Disclosures might remove a disincentive that currently exists 
under the rule from providing the initial Closing Disclosure extremely 
early in the mortgage origination process, which these commenters 
stated would not be consistent with the Bureau's intent that the 
Closing Disclosure be a statement of actual costs.

The 2017 Proposal

    The Bureau did not finalize proposed comment 19(e)(4)(ii)-2 as part 
of the July 2017 Amendments. Instead, the Bureau issued the 2017 
Proposal to amend Sec.  1026.19(e)(4) and associated commentary to 
expressly remove the four-business day limit for providing Closing 
Disclosures for purposes of resetting tolerances and determining if an 
estimated closing cost was disclosed in good faith. The Bureau issued 
the 2017 Proposal in light of comments received in response to the 2016 
Proposal and prior outreach indicating that timing rules regarding 
resetting tolerances with Closing Disclosures have led to uncertainty 
in the market and created implementation challenges that could have 
unintended consequences for both consumers and creditors, as explained 
above.
    Consistent with current comment 19(e)(4)(ii)-1, the proposal would 
have allowed creditors to reset tolerances by providing a Closing 
Disclosure (including any corrected disclosures provided under Sec.  
1026.19(f)(2)(i) or (ii)) within three business days of receiving 
information sufficient to establish that a reason for revision applies. 
Unlike current comment 19(e)(4)(ii)-1, however, the proposal would not 
have restricted the creditor's ability to reset tolerances with a 
Closing Disclosure to the period of less than four business days 
between the time the revised version of the disclosures is required to 
be provided pursuant to Sec.  1026.19(e)(4)(i) and consummation.
    In the proposal, the Bureau explained that it believes that, in 
most cases in which a creditor learns about cost increases that are a 
permissible reason to reset tolerances, the creditor will not yet have 
provided a Closing Disclosure to the consumer. The proposal explained 
that, to the extent there is a cost increase of a type that would allow 
tolerances to be reset, the Bureau expects that creditors will 
typically provide a revised Loan Estimate (and not a Closing 
Disclosure) for the purpose of resetting tolerances and that these 
revised Loan Estimates will be used in determining good faith under 
Sec.  1026.19(e)(3)(i) and (ii). However, there are circumstances in 
which creditors will instead reset tolerances with a Closing 
Disclosure. For example, the proposal noted that events that can affect 
closing costs may occur close to the time of consummation, even after 
the initial Closing Disclosure has been provided to the consumer. The 
proposal also noted that events may result in consummation being 
delayed past the time that was expected when the creditor provided the 
Closing Disclosure to the consumer. Some events can both affect closing 
costs and lead to a delay in consummation. These events may be outside 
the control of the creditor and, in some cases, requested by the 
consumer. The proposal cited as examples weather-related events that 
delay closing and lead to additional appraisal or inspection costs or 
illness by a buyer or seller that could delay closing and lead to the 
imposition of

[[Page 19164]]

additional costs, such as a rate lock extension fee. In these 
circumstances, creditors may wish to reset tolerances with a Closing 
Disclosure even outside the time permitted by the four-business day 
limit. If creditors cannot pass these increased costs to consumers in 
the specific transactions where they arise, creditors may spread the 
costs across all consumers by pricing their loan products with added 
margins. The proposal also noted that some creditors may be seeking 
other ways to avoid absorbing these unexpected costs, such as denying 
applications from consumers, even after providing the consumer a 
Closing Disclosure.
    For these reasons, the Bureau proposed to allow creditors to reset 
tolerances using a Closing Disclosure without regard to the four-
business day limit. Under the proposal, as under the current rule, to 
reset tolerances with a Closing Disclosure, creditors would have been 
required to provide the Closing Disclosure to the consumer within three 
business days of receiving information sufficient to establish that a 
reason for revision applies. Further, as under the current rule, 
creditors would have been allowed to reset tolerances only under the 
limited circumstances described in Sec.  1026.19(e)(3)(iv).
    The proposal would have removed the four-business day limit for 
resetting tolerances with both initial and corrected Closing 
Disclosures. The proposal cited two reasons for this approach. First, 
the proposal noted a concern that applying the four-business day limit 
to initial Closing Disclosures but not corrected Closing Disclosures 
could incentivize creditors to provide consumers with initial Closing 
Disclosures very early in the lending process, which in some 
circumstances might be inconsistent with the description of the Closing 
Disclosure as a ``statement of the final loan terms and closing 
costs,'' \35\ and the requirement under Sec.  1026.19(f)(1)(i) that the 
disclosures on the Closing Disclosure are to be a statement of ``the 
actual terms of the transaction.'' Second, the proposal noted that 
applying the four-business day limit to initial Closing Disclosures but 
not corrected Closing Disclosures could create operational challenges 
and burden for creditors.
---------------------------------------------------------------------------

    \35\ 12 CFR 1026.38(a)(2).
---------------------------------------------------------------------------

    Accordingly, the Bureau proposed to amend Sec.  1026.19(e)(4)(i) to 
provide that, subject to the requirements of Sec.  1026.19(e)(4)(ii), 
if a creditor uses a revised estimate pursuant to Sec.  
1026.19(e)(3)(iv) for the purpose of determining good faith under Sec.  
1026.19(e)(3)(i) and (ii), the creditor shall provide a revised version 
of the disclosures required under Sec.  1026.19(e)(1)(i) or the 
disclosures required under Sec.  1026.19(f)(1)(i) (including any 
corrected disclosures provided under Sec.  1026.19(f)(2)(i) or (ii)) 
reflecting the revised estimate within three business days of receiving 
information sufficient to establish that one of the reasons for 
revision applies.
    The Bureau also proposed to amend comment 19(e)(4)(ii)-1 to remove 
the reference to the four-business day limit, for consistency with the 
proposed amendments to Sec.  1026.19(e)(4)(i). In addition, the 
proposal would have amended the comment to provide two additional 
examples that further clarify how creditors may provide revised 
estimates on Closing Disclosures in lieu of Loan Estimates for purposes 
of determining good faith. The Bureau also proposed conforming 
amendments to the heading of Sec.  1026.19(e)(4)(ii) and to comments 
19(e)(1)(ii)-1 and 19(e)(4)(i)-1 in light of these proposed amendments.
    Finally, the proposal would have made several changes to Sec.  
1026.19(e)(4) and its commentary to reflect amendments to the rule made 
by the January 2015 Amendments regarding interest rate dependent 
charges. Section 1026.19(e)(3)(iv)(D), as adopted by the 2013 TILA-
RESPA Final Rule, previously required creditors to provide the consumer 
with a revised disclosure with the revised interest rate, the points 
disclosed pursuant to Sec.  1026.37(f)(1), lender credits, and any 
other interest rate dependent charges and terms on the date the 
interest rate is locked. The January 2015 Amendments changed Sec.  
1026.19(e)(3)(iv)(D) to provide creditors with more time (three 
business days) to provide the revised disclosures. This amendment 
harmonized the timing requirement in Sec.  1026.19(e)(3)(iv)(D) with 
other timing requirements for providing a revised Loan Estimate adopted 
in the 2013 TILA-RESPA Final Rule and addressed operational challenges 
associated with the prior requirement that gave creditors less time to 
provide revised disclosures regarding interest rate dependent charges. 
To implement this change, the Bureau revised Sec.  1026.19(e)(3)(iv)(D) 
to state that, no later than three business days after the date the 
interest rate is locked, the creditor shall provide a revised version 
of the disclosures required under Sec.  1026.19(e)(1)(i) to the 
consumer with the revised interest rate, the points disclosed pursuant 
to Sec.  1026.37(f)(1), lender credits, and any other interest rate 
dependent charges and terms. In the January 2015 Amendments, the Bureau 
also adopted modified versions of proposed comments 19(e)(3)(iv)(D)-1 
and 19(e)(4)(i)-2 to reflect that change. To further reflect the 
changes made by the January 2015 Amendments to Sec.  
1026.19(e)(3)(iv)(D), the Bureau proposed to amend Sec.  
1026.19(e)(4)(i) and comment 19(e)(4)(i)-1. The Bureau also proposed to 
remove existing comment 19(e)(4)(i)-2, regarding the relationship to 
Sec.  1026.19(e)(3)(iv)(D), which the proposal stated may no longer be 
necessary.
    The Bureau solicited comment on several specific issues related to 
the proposal, including on the extent to which the four-business day 
limit has caused situations where creditors cannot provide either a 
revised Loan Estimate or Closing Disclosure to reset tolerances even if 
a reason for revision under Sec.  1026.19(e)(3)(iv) would otherwise 
permit the creditor to reset tolerances. The Bureau requested 
information on the frequency and the cause of such occurrences and on 
the average costs and the nature of such costs associated with such 
occurrences.
    The Bureau also requested information that would assist in 
evaluating potential consequences of the proposal. In particular, some 
commenters in response to the 2016 Proposal expressed concern that 
removal of the four-business day limit could result in some creditors 
providing Closing Disclosures very early in the lending process and 
that doing so could have negative effects on some consumers. The 
proposal noted the Bureau's understanding that some creditors currently 
provide the Closing Disclosure to consumers so early in the process 
that the terms and costs are nearly certain to be revised. Commenters 
stated in response to the 2016 Proposal that eliminating the four-
business day limit for resetting tolerances with a Closing Disclosure 
could remove a disincentive to providing Closing Disclosures before 
final terms and costs are reliably available (i.e., under the current 
rule, waiting to provide the Closing Disclosure until close to the time 
of consummation decreases, to some extent, the likelihood of a timing 
issue arising with respect to resetting tolerances with corrected 
Closing Disclosures). Accordingly, the Bureau requested comment on the 
extent to which creditors are providing Closing Disclosures to 
consumers so that they are received substantially before the required 
three business days prior to consummation with terms and costs that are 
nearly certain to be revised. The Bureau requested comment on the 
number of business days before consummation consumers are receiving

[[Page 19165]]

the Closing Disclosure and whether creditors are issuing corrected 
Closing Disclosures pursuant to Sec.  1026.19(f)(2). In addition, the 
Bureau requested comment on the extent to which creditors might change 
their practices regarding provision of the Closing Disclosure if the 
proposal to remove the four-business day limit is adopted. The Bureau 
also requested comment on potential harms to consumers where creditors 
provide Closing Disclosures to consumers so that they are received more 
than the required three business days prior to consummation with terms 
and costs that are nearly certain to be revised. The Bureau 
additionally requested comment on whether it should consider adopting 
measures to prevent such harms in a future rulemaking.
    The Bureau also requested comment on other potential consequences 
that might result from removing the four-business day limit that 
applies to resetting tolerances with a Closing Disclosure. For example, 
compared to current rules, the proposed changes could allow creditors 
to pass more costs on to consumers. The Bureau solicited comment on 
whether the circumstances for resetting tolerances in Sec.  
1026.19(e)(3)(iv) provide sufficient protection against potential 
consumer harm or whether additional limitations are appropriate for 
resetting tolerances after the issuance of a Closing Disclosure. For 
example, the Bureau requested comment on whether it would be 
appropriate to allow creditors to reset tolerances with a corrected 
Closing Disclosure in circumstances that are more limited than those 
described in Sec.  1026.19(e)(3)(iv) (for example, only when the 
increased costs result from a consumer request or unforeseeable event, 
such as a natural disaster). The Bureau also requested comment on 
whether the rule should be more restrictive with respect to resetting 
tolerances with a corrected Closing Disclosure for certain third-party 
costs (such as appraisal fees) and creditor fees (such as interest rate 
lock extension fees) and the types of costs and fees that might be 
subject to any more restrictive rules. The Bureau also requested 
comment on whether removing the four-business day limit might result in 
confusion or information overload to the consumer as a result of 
receiving more corrected Closing Disclosures. The Bureau requested 
comment on additional consumer protections that might be appropriate to 
promote the purposes of the disclosures or prevent circumvention or 
evasion and additional potential consumer harms the Bureau had not 
identified.

Comments

    The Bureau received 43 unique comments from industry commenters 
(including trade associations, creditors, and industry 
representatives), a consumer advocate group, and others. Most industry 
commenters supported the proposal to remove the four-business day 
limit. These commenters generally stated that the four-business day 
limit arbitrarily leads to situations where creditors must absorb costs 
that could otherwise be passed to consumers through resetting 
tolerances, and that those costs are passed to all consumers in the 
form of an increased cost of credit. Industry commenters also noted 
legal and compliance risks associated with the uncertainty around 
current rules, and stated that this uncertainty has had an adverse 
impact on the cost of credit. These commenters supported the proposal 
because it would address these issues by expressly permitting creditors 
to use either initial or corrected Closing Disclosures to reflect 
changes in costs for purposes of determining if an estimated closing 
cost was disclosed in good faith, regardless of when the Closing 
Disclosure is provided relative to consummation. Other industry 
commenters, while generally supportive of the proposal, expressed 
concerns about unintended consequences and some suggested additional 
parameters or guidance around the timing or accuracy rules that apply 
to Closing Disclosures. These comments are discussed more fully below.
    Only one consumer advocate group commented on the proposal. That 
commenter urged the Bureau not to adopt the proposal, primarily citing 
concerns about consumer confusion and information overload. That 
commenter suggested that the proposal would lead to consumers receiving 
an increased number of disclosures, which the commenter believes would 
undermine the purpose of the Closing Disclosure and overwhelm 
consumers. The consumer advocate group commenter also stated that the 
proposal would remove the disincentive from providing Closing 
Disclosures to consumers very early, which the commenter believes would 
undermine the distinction between the Loan Estimate and the Closing 
Disclosure. Instead of finalizing the proposal, that commenter urged 
the Bureau to amend the rule to provide that a Closing Disclosure can 
only be given three business days before consummation, with 
redisclosure permitted thereafter only under the circumstances in Sec.  
1026.19(f)(2)(i) and (ii).
    One individual commenter expressed opposition to the proposal and 
urged the Bureau to increase the four-business day limit to a seven-
business day limit, rather than eliminating it altogether, so as to 
retain a deterrent against early Closing Disclosures. An industry 
commenter opposed such an approach, stating that simply extending the 
four-business day limit to a larger number of days would not fully 
address current issues.
    Numerous commenters responded to the Bureau's specific requests for 
comment on issues related to the four-business day limit and the 
potential effects of the proposal. These comments are discussed below.
The Effect of the Four-Business Day Limit
    As noted above, the proposal requested information on the extent to 
which the four-business day limit has created situations where 
creditors cannot provide either a revised Loan Estimate or a corrected 
Closing Disclosure to reset tolerances. The proposal requested 
information on the frequency and the cause of such occurrences and on 
the average costs and the nature of such costs associated with such 
occurrences.
    Industry commenters generally stated that the four-business day 
limit has created compliance problems and imposed costs on creditors. 
One industry trade association commenter noted that a large creditor 
had reported tolerance cures of $60,000 in one month attributable to 
issues with the four-business day limit. That same commenter noted that 
a mid-sized creditor had reported that between 13 and 37 percent of its 
tolerance cures each month during a five-month period were attributable 
to the four-business day limit. The commenter also noted that absorbing 
such costs is more difficult for small creditors. Another commenter 
estimated costs incurred by creditors for some common events associated 
with the four-business day limit: $825 per affected loan for lock 
extension fees and a minimum of $150 per affected loan for property 
inspections due to weather events.
    Other commenters provided specific examples of problems created by 
the four-business day limit. For example, one industry commenter 
described a delay in the final construction of a home and a 
corresponding rate lock extension fee being incurred after the initial 
Closing Disclosure had been sent to the consumer six days before the 
originally scheduled consummation date. That

[[Page 19166]]

commenter noted another example of additional survey costs incurred due 
to a newly filed property lien during the six days before consummation. 
In both instances, the creditor absorbed the increased costs because of 
the four-business day limit. Another industry commenter provided other 
examples, including another instance of fees that were incurred due to 
issues discovered during a title search close to the consummation date.
    An industry trade association commenter noted that its member banks 
did not report the frequent need to reset tolerances in close proximity 
to consummation, but said that its members reported isolated situations 
of absorbing costs from valid changed circumstances, denying requests 
for changes to loan terms, or starting the loan process over rather 
than accommodating the change. Another industry commenter stated that 
it typically works with the same title companies and other service 
providers and does not price its loans to absorb costs associated with 
the four-business day limit. That commenter has not denied applications 
because of the inability to reset tolerances, but stated that it has 
heard reports of such occurrences at other creditors from potential 
customers, including that some consumers have lost home purchase 
contracts where applications are denied late in the process. Another 
industry commenter stated that it believes most lenders absorb the 
additional costs associated with the four-business day limit, rather 
than denying applications, due to concerns about customer service and 
the risk of delay.
    While not citing specific instances of problems with the four-
business day limit, numerous other industry commenters stated that 
costs will frequently change after a Closing Disclosure has been 
provided to the consumer for reasons outside of the creditor's control, 
or due to consumer requests, even if the initial Closing Disclosure is 
provided close to the anticipated time of consummation. Rate lock 
extension fees were the fee type most frequently cited as being 
associated with such cost changes. Several industry commenters also 
noted that consumers may request changes to interest rates and lender 
credits or points after the initial Closing Disclosure has been 
provided to the consumer. Another commenter noted that the four-
business day limit is especially problematic in new construction 
transactions when consumers submit change order requests to their 
builder that increase the loan amount. Commenters also noted that 
delays in anticipated closing dates frequently occur. These commenters 
cited numerous reasons that closings might be delayed, even close to 
the time of the initially scheduled closing, including home inspection 
issues that require correction, storm damage, title issues, late 
appraisals, and consumer requests for closing delays. The consumer 
advocate group that commented on the proposal did not comment on this 
aspect of it.
Closing Disclosure Timing Practices
    The proposal also requested comment on the extent to which 
creditors are providing Closing Disclosures to consumers so that they 
are received substantially before the required three business days 
prior to consummation with terms and costs that are nearly certain to 
be revised (and, if so, the number of days before consummation). In 
addition, the proposal requested comment on the extent to which 
creditors might change their practices regarding provision of the 
Closing Disclosure if the proposal is finalized.
    Numerous industry commenters responded to the Bureau's requests for 
comment related to Closing Disclosure timing. Several commenters noted 
that there are inconsistent approaches to Closing Disclosure timing 
across the industry, with some issuing the Closing Disclosure at an 
early point in the process and others waiting until closer to the time 
of consummation when final amounts are more likely to be known. Some 
commenters who noted this difference in approach also noted that 
providing Closing Disclosures very early does not seem consistent with 
the Bureau's intent that the Closing Disclosure act as a statement of 
final loan terms and closing costs. One industry commenter stated that 
it would be possible for a creditor to set up a process that would 
allow it to issue a Closing Disclosure earlier, while still containing 
accurate loan terms. That commenter suggested holding creditors 
responsible for having adequate policies and procedures to ensure that 
the disclosure is representative of the loan terms and actual costs 
known at the time of delivery.
    Some commenters, including both industry commenters and the 
consumer advocate group commenter, expressed concern that the proposal 
could incentivize creditors to provide Closing Disclosures earlier in 
the process. One industry commenter stated that creditors who do 
provide Closing Disclosures very early may be at a competitive 
advantage to those that do not. Another industry commenter stated a 
concern that some creditors might issue Closing Disclosures very early 
to appear more efficient than their competitors. Another industry 
commenter indicated that some creditors issue Closing Disclosures very 
early to provide more flexibility with scheduling closing, and noted 
that the four-business day limit provides a disincentive against the 
practice. As discussed below, some commenters who stated that the 
proposal could incentivize creditors to provide Closing Disclosures 
earlier also expressed concern that such a practice could have a 
detrimental effect on consumer understanding of the transaction.
    One industry commenter stated that it currently provides the 
Closing Disclosure three business days before consummation, but noted 
that it would likely provide the first Closing Disclosure a week 
earlier if the proposal is finalized. This commenter asserted that such 
a practice would give consumers additional time to review the Closing 
Disclosure and ask questions. Some commenters noted that they provide 
Closing Disclosures close to the time of consummation and did not 
express that their practices would change. Other industry commenters 
generally stated that concerns that removing the four-business day 
limit would incentivize creditors to provide Closing Disclosures early 
are unfounded because early provision of the Closing Disclosure would 
be difficult to accomplish while meeting the requirements to act in 
good faith and exercise due diligence, and would create additional work 
for creditors and cause confusion for consumers. One industry trade 
association commenter noted that some of its member banks had expressed 
that providing Closing Disclosures early does not provide any 
advantage, because there is a high likelihood that the disclosure will 
undergo revisions.
Closing Disclosure Timing and Consumer Understanding
    The Bureau requested comment on potential harms to consumers when 
creditors provide Closing Disclosures so that they are received more 
than the required three business days prior to consummation with terms 
and costs that are nearly certain to be revised, including potential 
confusion or information overload to the consumer as a result of 
receiving more corrected Closing Disclosures. The Bureau also requested 
comment on whether it should consider adopting measures to prevent such 
harms in a future rulemaking.

[[Page 19167]]

    Some commenters stated that the proposal could result in consumer 
confusion because it would remove the current disincentive to providing 
Closing Disclosures well before the required three business days prior 
to consummation, which they assert would result in earlier, and 
therefore more frequent, Closing Disclosures. For example, the consumer 
advocate group commenter expressed concern that the proposal would 
encourage creditors to provide Closing Disclosures very early in the 
lending process, which would result in more Closing Disclosures and be 
confusing for consumers. That commenter explained that creditors are 
permitted to issue multiple Loan Estimates, including Loan Estimates 
that do not reset tolerances. The commenter expressed concern that the 
proposal could increase consumer confusion by encouraging multiple 
Closing Disclosures, and that consumers will not know which versions of 
the disclosures to compare. The consumer advocate group commenter also 
stated that consumers may become desensitized to the need to read 
disclosures carefully if they receive frequent Closing Disclosures. The 
commenter stated that increases in costs may eventually exceed what the 
consumer is willing to pay, which would cause them to shop with other 
lenders. However, if consumers are desensitized to changes, the 
commenter argued that consumers will be less likely to withdraw from 
the transaction. The consumer advocate group commenter further stated 
that the proposal would encourage creditors to provide Closing 
Disclosures that are not intended to reset tolerances, which the 
commenter asserted will be confusing for consumers.
    Several industry commenters also stated that the proposal could 
potentially increase consumer confusion by incentivizing earlier, and 
therefore more frequent, Closing Disclosures. Several commenters, 
including an industry trade association commenter, similarly stated 
that too many disclosure updates could work against consumer 
understanding, because consumers might ignore the disclosures and would 
not know which ones to use for comparison purposes.
    An industry commenter stated that consumers would be confused when 
receiving a Closing Disclosure very early and that consumers could be 
confused by a Closing Disclosure that purports to be a statement of 
final loan terms and closing costs, but is only an estimate of costs. 
That commenter noted that not all changes to the loan will require 
creditors to reset tolerances and that consumers who receive Closing 
Disclosures very early may not receive corrected Closing Disclosures 
until consummation if there are no changes that occur that would cause 
the creditor to reset tolerances (or one of the triggering events in 
Sec.  1026.19(f)(2)(ii) occurs, which would require a new disclosure 
and three-day waiting period). The commenter stated that this would be 
contrary to the purpose of the requirement to receive the Closing 
Disclosure three business days before consummation.
    Other commenters stated that the proposal would not create consumer 
confusion. Some industry commenters stated that the proposal would not 
diminish consumer understanding because creditors would remain able to 
reset tolerances only as permitted under Sec.  1026.19(e)(3)(iv) and 
that there would not be a large increase in the number of Closing 
Disclosures. One industry commenter stated that consumers should not 
experience confusion or information overload, as it would be no 
different from consumers receiving revised Loan Estimates. That 
commenter also stated that it expects lenders to communicate with 
consumers to address any confusion. Another industry commenter 
similarly suggested that consumers might benefit from earlier Closing 
Disclosures and the creditor's flexibility to issue corrected Closing 
Disclosures because it would facilitate a more transparent process. 
Some industry commenters asserted that consumers could benefit from 
receiving Closing Disclosures earlier in the process because they would 
have additional time to review the information that does not appear on 
the Loan Estimate.
    With respect to additional protections to avoid potential consumer 
harms associated with removing the four-business day limit, several 
commenters who supported the proposal also suggested that the Bureau 
address Closing Disclosure timing or accuracy rules, because of 
concerns about potential effects of the proposed rule or to address 
uncertainty about current rules. With respect to timing, an industry 
commenter requested clarification as to whether creditors can reset 
tolerances using a Closing Disclosure after issuing an initial Loan 
Estimate but without ever issuing any revised Loan Estimate. To 
maintain the disincentive against providing Closing Disclosures very 
early, an individual commenter suggested that the Bureau expand the 
window of time prior to consummation during which a creditor can reset 
tolerances with a Closing Disclosure from four business days to seven 
business days. Another commenter noted that merely expanding that time 
window by a limited number of days would only partially address the 
problems discussed in the proposal, and did not favor that approach. 
The consumer advocate group commenter suggested that the rule should 
provide that the Closing Disclosure can only be given no more than 
three business days before consummation. An anonymous commenter advised 
that, in addition to removing the four-business day limit for resetting 
tolerances with a Closing Disclosure, the Bureau should also adopt a 
new prohibition on providing Closing Disclosures unless the creditor 
reasonably anticipates that the transaction will close within ten 
business days. An industry commenter stated that the Bureau's 
supervision process could emphasize scrutiny of potentially unnecessary 
iterations of corrected Closing Disclosures. The commenter suggested 
that, as an alternative, the Bureau create a new timing requirement for 
resetting tolerances with a corrected Closing Disclosure, whereby any 
and all changes to the Closing Disclosure for resetting tolerances 
would be made at only one specific point in time during a transaction. 
Meanwhile, several commenters supported removing the timing restriction 
on resetting tolerances with a Closing Disclosure and stated that the 
Bureau should not place new timing limitations on providing Closing 
Disclosures. One commenter noted that the rule's current accuracy 
standard is already a deterrent against providing very early Closing 
Disclosures because it requires that the creditor, acting in good 
faith, exercise due diligence in obtaining the information.
    With respect to Closing Disclosure accuracy, one industry commenter 
stated that, in addition to removing the time limit for resetting 
tolerances with a Closing Disclosure, the Bureau should either apply a 
stricter accuracy standard to the Closing Disclosure or clarify the 
current accuracy standard to avoid very early Closing Disclosures. That 
commenter expressed concern that some creditors are providing initial 
Closing Disclosures to consumers using price quotes automatically 
generated by software vendors rather than requesting more accurate 
information from the settlement agent involved in the transaction. 
Another industry commenter similarly expressed concern about the 
adequacy of current accuracy standards and advised that the Bureau 
provide some specific expectation regarding Closing Disclosure timing 
in order to discern whether a creditor has

[[Page 19168]]

provided disclosures on the Closing Disclosure in good faith. Another 
industry commenter recommended that the Bureau provide a complete 
summary of good faith under all of the operative provisions of the 
rule. Another industry commenter suggested that concerns about early 
Closing Disclosure issuance can be addressed through a warning that the 
practice violates the spirit of the disclosure rule.
Permissible Reasons To Reset Tolerances
    The Bureau requested comment on whether the rule should allow 
creditors to reset tolerances with a Closing Disclosure in 
circumstances that are more limited than those that apply under the 
current rule (Sec.  1026.19(e)(3)(iv)) or whether the rule should be 
more restrictive with respect to resetting tolerances with a corrected 
Closing Disclosure for certain third-party costs and creditor fees. 
Most commenters who addressed this aspect of the proposal did not 
support applying a more restrictive set of circumstances or fees 
resetting tolerances with a Closing Disclosure. Specifically, one 
individual commenter and several industry commenters requested that the 
rule not restrict resetting tolerances with a Closing Disclosure in 
circumstances more limited than for a revised Loan Estimate. However, 
one individual commenter stated that interest rate lock fees should not 
be allowed for resetting tolerances with either revised Loan Estimates 
or Closing Disclosures unless the fee is clearly attributable to a 
consumer delay or exceptional event, such as a weather event. One 
industry commenter stated that two provisions under the current rule 
are inapplicable to resetting tolerances with a Closing Disclosure. 
Specifically, that commenter stated that the provisions that allow 
creditors to reset tolerances where a Loan Estimate expires (Sec.  
1026.19(e)(3)(iv)(E)) and in a transaction involving a construction 
loan where closings are delayed (Sec.  1026.19(e)(3)(iv)(F)) are 
inapplicable to resetting tolerances with a Closing Disclosure.

The Final Rule

    For the reasons discussed below, the Bureau is finalizing the 
amendments to Sec.  1026.19(e)(4)(i) and (ii) as proposed. The Bureau 
is also finalizing the proposed changes to comment 19(e)(1)(ii)-1, 
including a minor technical revision for clarity, and to comments 
19(e)(4)(i)-1 and -2. The Bureau is republishing comment 19(e)(1)(ii)-2 
with no changes. In addition, the Bureau is finalizing the changes to 
comment 19(e)(4)(ii)-1 substantially as proposed, including minor 
technical and conforming revisions, and providing an additional example 
in response to commenter requests for further clarification.
    The final rule removes the four-business day limit and permits 
creditors to reset tolerances with either an initial or corrected 
Closing Disclosure regardless of when the Closing Disclosure is 
provided relative to consummation. The Bureau finds that this change 
will benefit both consumers and creditors and facilitate compliance 
with the TILA-RESPA Rule and that it is appropriate under the legal 
authorities described in part IV above.
    As noted above, once the creditor provides the initial Closing 
Disclosure to the consumer, the TILA-RESPA Rule distinguishes between 
cost increases that can be passed on to consumers and those that cannot 
be passed on based on when the creditor learns about the cost increase 
relative to consummation. As noted by numerous commenters, this aspect 
of the TILA-RESPA Rule imposes on the creditor the cost of 
unanticipated changes to the loan that could otherwise be passed to the 
specific consumer incurring the increased fee through resetting 
tolerances. However, the four-business day limit can also have negative 
effects on consumers. Costs that cannot be passed to the specific 
consumers who incur them are generally passed on to all consumers over 
time through an overall increase in the cost of credit. Further, some 
creditors may choose to deny applications to avoid absorbing the 
increased costs, which can have negative effects for the consumer even 
if the consumer immediately reapplies for credit (e.g., could result in 
additional fees to extend a rate lock, further delay closing, or result 
in the loss of a home sales contract). The Bureau also agrees with some 
commenters who stated that confusion over the current rules has the 
potential to create legal and compliance risks for creditors, which 
could have a negative impact on the cost and availability of credit.
    As finalized, Sec.  1026.19(e)(4)(i) provides that, subject to the 
requirements of Sec.  1026.19(e)(4)(ii), if a creditor uses a revised 
estimate pursuant to Sec.  1026.19(e)(3)(iv) for the purpose of 
determining good faith under Sec.  1026.19(e)(3)(i) and (ii), the 
creditor shall provide a revised version of the disclosures required 
under Sec.  1026.19(e)(1)(i) or the disclosures required under Sec.  
1026.19(f)(1)(i) (including any corrected disclosures provided under 
Sec.  1026.19(f)(2)(i) or (ii)) reflecting the revised estimate within 
three business days of receiving information sufficient to establish 
that one of the reasons for revision applies.\36\
---------------------------------------------------------------------------

    \36\ The final rule does not change the current Regulation Z 
requirement that, if the Closing Disclosure becomes inaccurate 
before consummation, the creditor must provide a corrected Closing 
Disclosure reflecting any changed terms to the consumer so that the 
consumer receives the corrected Closing Disclosure at or before 
consummation, Sec.  1026.19(f)(2)(i), or, in some circumstances, 
must ensure that the consumer receives the corrected Closing 
Disclosure no later than three business days before consummation, 
Sec.  1026.19(f)(2)(ii).
---------------------------------------------------------------------------

    The Bureau considered concerns discussed in the proposal and 
expressed by some commenters about the potential effects of the 
proposal on the Closing Disclosure timing. As noted above, the timing 
restriction on resetting tolerances creates a disincentive to providing 
consumers with Closing Disclosures very early in the lending process. 
Once a creditor has provided a Closing Disclosure, it can reset 
tolerances only if there are less than four business days between the 
time the revised version of the disclosures is required to be provided 
pursuant to Sec.  1026.19(e)(4)(i) (i.e., within three business days of 
the time the creditor received information sufficient to establish the 
reason for revision) and consummation. The Bureau agrees with 
commenters who stated that the practice of providing very early Closing 
Disclosures with terms that are nearly certain to be revised would be 
contrary to the underlying purpose of the Closing Disclosure. While the 
Bureau acknowledges that eliminating the timing restriction on 
resetting tolerances with a Closing Disclosure could potentially affect 
the Closing Disclosure timing for some creditors, the Bureau does not 
believe that retaining the four-business day limit is an effective way 
to address potential issues associated with early Closing Disclosures.
    In particular, the four-business day limit is problematic where a 
scheduled closing date is delayed and additional costs are incurred 
after an initial Closing Disclosure has been provided to the consumer. 
As noted by numerous commenters, this situation can arise even when the 
initial Closing Disclosure is provided to the consumer very close to 
the time of the initially-scheduled consummation date, as closing dates 
can move at the last minute for a variety of reasons. The Bureau 
believes that the TILA-RESPA Rule should accommodate changes that occur 
as a result of delayed closings. Retaining the restriction on resetting 
tolerances with a Closing Disclosure would not accomplish that goal. In 
addition, while the Bureau agrees that the very early provision of

[[Page 19169]]

Closing Disclosures is contrary to the underlying purpose of those 
disclosures, the Bureau does not believe that finalizing the proposal 
will have an overall negative effect on consumer understanding. The 
Bureau does not expect that removal of the four-business day limit will 
result in a significant increase in the number of disclosures provided 
to consumers because the final rule does not expand the circumstances 
in which creditors are allowed to reset tolerances. And, as further 
discussed below, the Bureau believes that current rules should prevent 
creditors from sending Closing Disclosures very early in the process 
before engaging in due diligence to ensure that any costs that are not 
finalized are estimated in good faith.
    The Bureau also considered comments that suggested additional 
protections might be necessary to avoid consumer harm from removing the 
restriction on resetting tolerances with a Closing Disclosure. However, 
the Bureau is not adopting any additional substantive changes to the 
TILA-RESPA Rule's existing Closing Disclosure timing or accuracy 
provisions at this time. The Bureau concludes that the rule's existing 
provisions should prevent creditors from sending Closing Disclosures 
very early in the process before engaging in due diligence.
    With respect to the accuracy standard that applies to the Closing 
Disclosure, the Bureau concludes that substantive changes to the TILA-
RESPA Rule's existing provisions are not necessary to prevent creditors 
from sending Closing Disclosures very early in the process before 
engaging in due diligence. The Bureau believes the existing Closing 
Disclosure accuracy standard already accomplishes that objective. 
Existing Sec.  1026.19(f)(1)(i) and comment 19(f)(1)(i)-1 require 
creditors to disclose on the Closing Disclosure the actual terms of the 
credit transaction. Existing comment 19(f)(1)(i)-2 also permits 
creditors to estimate disclosures on the Closing Disclosure using the 
best information reasonably available when the actual term is not 
reasonably available to the creditor at the time the disclosures are 
made. Comment 19(f)(1)(i)-2 provides that the ``reasonably available'' 
standard requires that the creditor, acting in good faith, exercise due 
diligence in obtaining the information. Further, comment 19(f)(1)(i)-
2.i.A provides an example illustrating the ``reasonably available'' 
standard for purposes of Sec.  1026.19(f)(1)(i). Specifically, comment 
19(f)(1)(i)-2.i.A assumes that a creditor provides the Closing 
Disclosure for a transaction in which the title insurance company that 
is providing the title insurance policy is acting as the settlement 
agent in connection with the transaction, but the creditor does not 
request the actual cost of the lender's title insurance policy that the 
consumer is purchasing from the title insurance company and instead 
discloses an estimate based on information from a different 
transaction. Comment 19(f)(1)(i)-2.i.A provides that the creditor in 
the example has not exercised due diligence in obtaining the 
information about the cost of the lender's title insurance policy 
required under the ``reasonably available'' standard in connection with 
the estimate disclosed for the lender's title insurance policy. 
Regarding a commenter's request for clarification as to whether 
creditors can reset tolerances using a Closing Disclosure after issuing 
an initial Loan Estimate but without ever issuing any revised Loan 
Estimate, the rule does not prohibit creditors from doing so but 
creditors must otherwise comply with the rule, including its Closing 
Disclosure accuracy standard. The Bureau will continue to monitor the 
market for practices that do not comply with the rule's Closing 
Disclosure accuracy standard.
    With respect to the timing of the Closing Disclosure, the Bureau is 
not adopting any substantive changes to the TILA-RESPA Rule's existing 
Closing Disclosure timing provisions, other than removing the four-
business day limit as discussed above. For example, the Bureau 
considered a commenter's suggestion that the Bureau expand the window 
of time prior to consummation during which a creditor can reset 
tolerances with a Closing Disclosure (from four business days to seven 
business days). The commenter's suggested approach would mean that a 
creditor could reset tolerances with a Closing Disclosure when 
consummation is reasonably expected to occur no more than ten business 
days after the creditor learns about the valid justification (i.e., 
three business days from the time the creditor knows about the valid 
justification plus seven business days from the time the revised 
disclosure is required to be provided until consummation). The Bureau 
declines to adopt such approach. The Bureau agrees with another 
commenter who noted that merely expanding that time window by a limited 
number of days would only partially address the issue created by the 
four-business day limit under the current rule. In the example above, a 
creditor could not reset tolerances with a Closing Disclosure when 
consummation is reasonably expected to occur eleven business days or 
more after the creditor learns about the valid justification. As noted 
above, the Bureau concludes that the issues created by the four-
business day limit have negative effects on both creditors and 
consumers and that the four-business day limit should be eliminated, 
not merely expanded by a limited number of days.
    Similarly, the Bureau declines to set a new, specific timing 
requirement for Closing Disclosures. For example, the Bureau declines 
to place new limitations on providing Closing Disclosures such that an 
initial Closing Disclosure could only be given no more than three 
business days before consummation, as a consumer advocate group 
commenter advised. Such a new limitation would exacerbate rather than 
alleviate problems associated with the current rule. The Bureau also 
declines to follow the suggestion to adopt a new prohibition on 
providing Closing Disclosures unless the creditor reasonably 
anticipates that the transaction will close within 10 business days. 
The Bureau does not believe that there is an appropriate basis at this 
time for creating such a prohibition, including setting any such cutoff 
at 10 business days or any other particular number of days.
    The Bureau also considered the commenter suggestion that the Bureau 
create a new timing requirement for resetting tolerances with a 
corrected Closing Disclosure, whereby any and all changes to the 
Closing Disclosure for resetting tolerances would be made at only one 
specific point in time during a transaction. The Bureau declines to 
adopt such a timing requirement because doing so would be inconsistent 
with the purpose articulated by the Bureau when it adopted the Sec.  
1026.19(e)(4)(i) timing requirements for resetting tolerances. 
Specifically, current Sec.  1026.19(e)(4)(i) generally provides that, 
to reset tolerances, the creditor must provide revised disclosures 
within three business days of receiving information sufficient to 
establish a valid justification. In the 2013 TILA-RESPA Final Rule, the 
Bureau stated its view ``that intermittent redisclosure of the 
integrated Loan Estimate is necessary under RESPA because settlement 
service provider costs typically fluctuate during the mortgage loan 
origination process'' and ``intermittent redisclosure is consistent 
with the purposes of TILA because it promotes the informed use of 
credit by keeping the consumer apprised of changes in costs.'' \37\ The 
Bureau

[[Page 19170]]

similarly holds that view regarding intermittent redisclosure with the 
Closing Disclosure. For all these reasons, the Bureau is finalizing the 
proposal to remove the four-business day limit without adopting any 
further substantive changes to the rule's existing Closing Disclosure 
timing or accuracy provisions.
---------------------------------------------------------------------------

    \37\ 78 FR 79730, 79834 (Dec. 31, 2013).
---------------------------------------------------------------------------

    The Bureau also declines to adopt changes to the rule that would 
restrict creditors' ability to reset tolerances with a Closing 
Disclosure to circumstances that are more limited than those that apply 
under Sec.  1026.19(e)(3)(iv) or that would be more restrictive with 
respect to resetting tolerances with a Closing Disclosure for certain 
third-party costs and creditor fees. As noted above, most commenters 
who addressed this aspect of the proposal did not support applying a 
more restrictive set of circumstances or fees when resetting tolerances 
with a Closing Disclosure. The Bureau believes that the circumstances 
identified under Sec.  1026.19(e)(3)(iv) are adequate to balance 
flexibility for creditors to reset tolerances due to unforeseen 
circumstances while also providing constraints to avoid arbitrary 
increases in costs to consumers in relation to revised Loan Estimates, 
and that those circumstances are also adequate with respect to 
resetting tolerances with a Closing Disclosure.
    One individual commenter stated that interest rate lock extension 
fees should not be allowed for resetting tolerances with either revised 
Loan Estimates or Closing Disclosures unless the fee is clearly 
attributable to a consumer delay or exceptional event, such as a 
weather event. The Bureau does not believe that different treatment of 
interest rate lock extension fees with respect to resetting tolerances 
is warranted. Currently, when the consumer enters into a rate lock 
agreement for a previously floating interest rate, the creditor is 
required to provide a revised Loan Estimate that updates the interest-
rate related charges, credits, and terms pursuant to Sec.  
1026.19(e)(3)(iv)(D).\38\ This disclosure sets the applicable baseline 
for the tolerance of those interest-rate related charges, credits, and 
terms subject to a good-faith tolerance. Subsequent changes to interest 
rate charges and terms would reset tolerances if the changes are the 
result of a changed circumstance that causes the applicable charge to 
exceed the applicable tolerance, or if the consumer requests a change 
that causes the interest-rate related charges, credits, and terms to 
increase.\39\ The same timing concerns related to the four-business day 
limit apply when either the initial rate lock occurs or an extension of 
the rate lock period is sought (i.e., once the Closing Disclosure has 
been issued, the creditor can reset tolerances only if there are less 
than four business days between the time the revised version of the 
disclosures is required to be provided pursuant to Sec.  
1026.19(e)(4)(i) and consummation). As noted by commenters, the most 
common charge that is incurred due to a changed circumstance or 
consumer request after the Closing Disclosure has been provided is a 
fee to extend the relevant time period of a rate lock.
---------------------------------------------------------------------------

    \38\ Some commenters requested further clarification on the use 
of Closing Disclosures to reset tolerances when the interest rate is 
locked pursuant to Sec.  1026.19(e)(3)(iv)(D). Guidance provided in 
the section-by-section analysis of the July 2017 Amendments explains 
that Sec.  1026.19(e)(3)(iv)(D) is used in relation to providing 
revised Loan Estimates, not Closing Disclosures, and once a revised 
Loan Estimate is provided when a rate has been locked, Sec.  
1026.19(e)(3)(iv)(D) is not a basis to provide another revised Loan 
Estimate. If the interest rate has not been locked until after a 
Closing Disclosure has been provided, a corrected Closing Disclosure 
must be provided if the disclosures become inaccurate under Sec.  
1026.19(f)(2). 82 FR 37656, 37682 (Aug. 11, 2017).
    \39\ See Sec.  1026.19(e)(3)(iv)(A), (B), and (C).
---------------------------------------------------------------------------

    The Bureau does not believe it is appropriate to treat rate lock 
extension fees differently than other fees under the rule with respect 
to resetting tolerances. The Bureau does not believe that rate lock 
extension fees are fundamentally different from other creditor costs. 
Extending rate locks for consumers can create opportunity costs to 
creditors based on secondary market conditions for the delivery of the 
loans, or direct costs by requiring the renegotiation or acquisition of 
interest-rate swaps used to offset interest-rate risk. Further, the 
Bureau is concerned that treating rate lock extension fees differently 
in this regard would make it less likely that creditors would offer 
rate lock extensions, which could have unintended effects that could 
distort interest rate pricing and the mortgage market generally. The 
Bureau will monitor industry practices related to interest rate lock 
extensions to determine if additional rulemaking in this area is 
warranted in the future.
    The Bureau also considered the comment that noted that the 
provisions that allow creditors to reset tolerances when a Loan 
Estimate expires and in transactions involving construction loans where 
closings are delayed are inapplicable to resetting tolerances with a 
Closing Disclosure. Although the Bureau agrees that those provisions 
are generally inapplicable to resetting tolerances with a Closing 
Disclosure, the Bureau does not believe it is necessary to amend the 
rule further to address the issue expressly.
    The Bureau is also finalizing changes to the commentary to Sec.  
1026.19(e)(4). Consistent with the revisions to Sec.  1026.19(e)(4)(i), 
the Bureau is finalizing the proposed changes to comment 19(e)(4)(ii)-
1, which removes the reference to the four-business day limit, 
including a minor technical revision for clarity. As amended, comment 
19(e)(4)(ii)-1 expressly states that, if a creditor uses a revised 
estimate pursuant to Sec.  1026.19(e)(3)(iv) for the purpose of 
determining good faith under Sec.  1026.19(e)(3)(i) and (ii), Sec.  
1026.19(e)(4)(i) permits the creditor to provide the revised estimate 
in the disclosures required under Sec.  1026.19(f)(1)(i) (including any 
corrected disclosures provided under Sec.  1026.19(f)(2)(i) or (ii)). 
In addition, and as explained below, the Bureau is: Making conforming 
revisions to existing comments 19(e)(4)(ii)-1.i and .ii; adopting 
proposed comment 19(e)(4)(ii)-1.iii with conforming and clarifying 
revisions; and adopting proposed comment 19(e)(4)(ii)-1.iv with 
conforming revisions and renumbering it as comment 19(e)(4)(ii)-1.v. 
The conforming revisions to final comments 19(e)(4)(ii)-1.i, .ii, .iii, 
and .v reflect the illustrative June dates used elsewhere in existing 
comments 19(e)(1)(iii)-2, 19(e)(1)(v)-2, 19(f)(1)(i)-1, and 
19(f)(2)(ii)-1. Final comment 19(e)(4)(ii)-1.iii also includes a 
clarifying reference to existing Sec.  1026.19(f)(2)(i) and its 
requirement that the creditor provide corrected disclosures reflecting 
any changed terms to the consumer so that the consumer receives the 
corrected disclosures at or before consummation. The Bureau is also 
adding new comment 19(e)(4)(ii)-1.iv to provide an additional 
illustrative example in response to commenters' requests for additional 
clarification.
    Specifically, some industry commenters requested that the Bureau 
provide examples that illustrate the use of mail and electronic 
delivery of disclosures. One industry commenter requested that the 
Bureau provide an example of a situation where creditors may use a 
Closing Disclosure to reset tolerances when the consumer requests a 
rate lock extension. Several industry commenters recommended that the 
Bureau provide an example in which a Closing Disclosure is provided to 
the consumer and then a reason for revision under Sec.  
1026.19(e)(3)(iv) occurs more than four business days before 
consummation--and thus highlight the requirement in Sec.  
1026.19(e)(4)(i) that the creditor provide revised disclosures within 
three business days of receiving

[[Page 19171]]

information sufficient to establish that a reason for revision under 
Sec.  1026.19(e)(3)(iv) has occurred.
    The new example in final comment 19(e)(4)(ii)-1.iv addresses these 
requests for clarification. Specifically, the new example in final 
comment 19(e)(4)(ii)-1.iv assumes consummation is originally scheduled 
for Wednesday, June 10. The example provides that the creditor hand 
delivers the disclosures required by Sec.  [thinsp]1026.19(f)(1)(i) on 
Friday, June 5. On Monday, June 8, the consumer reschedules 
consummation for Wednesday, June 17. Also on Monday, June 8, the 
consumer requests a rate lock extension that would result in a revised 
disclosure pursuant to Sec.  1026.19(e)(3)(iv)(C) but would not require 
a new waiting period pursuant to Sec.  1026.19(f)(2)(ii). The example 
clarifies that the creditor complies with the requirements of Sec.  
1026.19(e)(4) by delivering or placing in the mail the disclosures 
required by Sec.  1026.19(f)(2)(i) reflecting the consumer-requested 
changes on Thursday, June 11. The example references existing Sec.  
1026.19(f)(2)(i) and its requirement that the creditor provide 
corrected disclosures reflecting any changed terms to the consumer so 
that the consumer receives the corrected disclosures at or before 
consummation. The example clarifies that the creditor complies with 
Sec.  1026.19(f)(2)(i) by hand delivering the disclosures on Thursday, 
June 11. The example further clarifies that, alternatively, the 
creditor complies with Sec.  1026.19(f)(2)(i) by providing the 
disclosures to the consumer by mail, including by electronic mail, on 
Thursday, June 11, because the consumer is considered to have received 
the corrected disclosures on Monday, June 15 (unless the creditor 
relies on evidence that the consumer received the corrected disclosures 
earlier). The example refers to Sec.  1026.19(f)(1)(iii) and comments 
19(f)(1)(iii)-1 and -2 regarding receipt of disclosures that are not 
provided to the consumer in person. The example also refers to Sec.  
1026.38(t)(3) and comment 19(f)(1)(iii)-2 regarding providing 
disclosures in electronic form.
    An industry commenter requested clarification regarding the Sec.  
1026.19(e)(4)(i) timing requirement where a reason for revision under 
Sec.  1026.19(e)(3)(iv) occurs within three business days of 
consummation. Another industry commenter requested clarification that 
providing a Closing Disclosure to reset tolerances under Sec.  
1026.19(e)(4) does not necessarily require a new waiting period 
pursuant to Sec.  1026.19(f)(2)(ii). The example in final comment 
19(e)(4)(ii)-1.iii addresses these requests for clarification. 
Specifically, the example in final comment 19(e)(4)(ii)-1.iii assumes 
consummation is scheduled for Thursday, June 4. The example provides 
that the creditor hand delivers the disclosures required by Sec.  
1026.19(f)(1)(i) on Monday, June 1, and, on Tuesday, June 2, the 
consumer requests a change to the loan that would result in a revised 
disclosure pursuant to Sec.  1026.19(e)(3)(iv)(C) but would not require 
a new waiting period pursuant to Sec.  1026.19(f)(2)(ii). The example 
references existing Sec.  1026.19(f)(2)(i) and its requirement that the 
creditor provide corrected disclosures reflecting any changed terms to 
the consumer so that the consumer receives the corrected disclosures at 
or before consummation. The example clarifies that the creditor 
complies with the requirements of Sec.  1026.19(e)(4) by hand 
delivering the disclosures required by Sec.  1026.19(f)(2)(i) 
reflecting the consumer-requested changes on Thursday, June 4.
    The Bureau is finalizing proposed comment 19(e)(4)(ii)-1.iv with 
conforming revisions and renumbering it as comment 19(e)(4)(ii)-1.v. As 
finalized comment 19(e)(4)(ii)-1.v assumes that consummation is 
originally scheduled for Wednesday, June 10. The comment provides that 
the creditor hand delivers the disclosures required by Sec.  
1026.19(f)(1)(i) on Friday, June 5, and the APR becomes inaccurate on 
Monday, June 8, such that the creditor is required to delay 
consummation and provide corrected disclosures, including any other 
changed terms, so that the consumer receives them at least three 
business days before consummation under Sec.  1026.19(f)(2)(ii). 
Consummation is rescheduled for Friday, June 12. The comment clarifies 
that the creditor complies with the requirements of Sec.  1026.19(e)(4) 
by hand delivering the disclosures required by Sec.  1026.19(f)(2)(ii) 
reflecting the revised APR and any other changed terms to the consumer 
on Tuesday, June 9. The comment references Sec.  1026.19(f)(2)(ii) and 
associated commentary regarding changes before consummation requiring a 
new waiting period. The comment also references comment 19(e)(4)(i)-1 
for further guidance on when sufficient information has been received 
to establish an event has occurred.
    The Bureau notes that some commenters requested that the final rule 
incorporate other clarifications and examples. For example, an industry 
commenter requested clarification as to whether Sec.  1026.19(e)(4)(ii) 
requires consumers to receive a Closing Disclosure not later than four 
business days prior to consummation. The commenter also requested that 
the Bureau permit creditors to reset tolerances after consummation when 
settlement occurs after consummation. Another industry commenter 
broadly requested clarification regarding how to reset tolerances with 
a Closing Disclosure under various scenarios, including when different 
communication channels are used for providing Loan Estimates and 
Closing Disclosures, there is a non-borrowing spouse, or there are 
multiple changed circumstances. The Bureau declines to make specific 
changes to the rule in response to these comments, because the existing 
regulation and commentary address these issues as outlined below.
    Regarding a commenter's request for clarification as to whether 
Sec.  1026.19(e)(4)(ii) requires consumers to receive a Closing 
Disclosure not later than four business days prior to consummation, the 
Bureau notes that Sec.  1026.19(e)(4)(ii) provides that the consumer 
must receive any revised version of the disclosures required under 
Sec.  1026.19(e)(1)(i) (i.e., the Loan Estimate) not later than four 
business days prior to consummation, but that timing requirement does 
not reference the Closing Disclosure.
    Regarding a commenter's request to allow creditors to reset 
tolerances after consummation when settlement occurs after 
consummation, the Bureau declines to adopt this change because existing 
Sec.  1026.2(a)(13) provides that, once consummation occurs, the 
consumer is already contractually obligated on the credit transaction. 
The Bureau also declines to further amend the rule in response to a 
commenter's broad request for clarification regarding how to reset 
tolerances with a Closing Disclosure under various scenarios, including 
when different communication channels are used for providing Loan 
Estimates and Closing Disclosures, there is a non-borrowing spouse, or 
there are multiple changed circumstances. The Bureau believes that the 
TILA-RESPA Rule already provides sufficient guidance on the topics 
identified by the commenter. Specifically, guidance for resetting 
tolerances with a Closing Disclosure can be found in Sec.  
1026.19(e)(4) and its associated commentary, as amended by this final 
rule. Guidance as to providing disclosures via different communication 
channels can be found in Sec.  1026.19(e)(1)(iv) and Sec.  
1026.19(f)(1)(iii) and the associated commentary. Guidance as to 
providing disclosures for a non-borrowing spouse can be found in Sec.  
1026.17(d) and associated commentary. Guidance as to

[[Page 19172]]

providing revised disclosures where there are multiple changed 
circumstances can be found in Sec.  1026.19(e)(3)(iv) and Sec.  
1026.19(e)(4) and the associated commentary.
    Finally, the Bureau notes that it is adopting as proposed the 
changes to Sec.  1026.19(e)(4) and its commentary to reflect amendments 
to the TILA-RESPA Rule made by the January 2015 Amendments regarding 
interest rate dependent charges, for the reasons noted above in the 
discussion of the 2017 Proposal. Specifically, the Bureau is finalizing 
the amendments to Sec.  1026.19(e)(4)(i) and comment 19(e)(4)(i)-1, and 
removing existing comment 19(e)(4)(i)-2, regarding the relationship to 
Sec.  1026.19(e)(3)(iv)(D).

VI. Effective Date

    The Bureau proposed an effective date of 30 days after publication 
in the Federal Register of any final rule based on the proposal. The 
Bureau also requested comment on when the changes proposed should be 
effective. In the proposal, the Bureau stated that it believed that the 
proposed changes should enable industry to implement the provisions set 
forth in the TILA-RESPA Rule more cost-effectively and that industry 
should be able to implement these changes relatively quickly. At the 
same time, the Bureau stated that it recognized that some of the 
proposed changes might require changes to systems or procedures.
    The Bureau received several comments addressing the proposed 
effective date. One industry commenter agreed with the Bureau's 
proposed effective date of 30 days after publication. That commenter, 
as well as another industry commenter, noted that the proposed 
provisions would not impose new burdens on creditors. One commenter 
noted that a creditor would not be out of compliance if it continued to 
follow the current rule after the proposed changes take effect. Another 
industry commenter requested that the final rule become effective no 
sooner than 90 days after publication in the Federal Register to allow 
adequate time to implement the timing changes. The commenter also 
requested that the final rule apply to applications received on or 
after the effective date, or some specific date. Another industry 
commenter suggested that the Bureau adopt an optional early compliance 
approach, with an effective date 60 days after publication and a 
mandatory compliance date one year thereafter. An industry commenter 
requested that this final rule be effective for any transaction covered 
by the 2013 TILA-RESPA Final Rule. Another industry commenter 
encouraged the Bureau to heed recommendations from loan origination 
system vendors; however, the Bureau did not receive any such 
recommendations.
    The amendments in the final rule will become effective 30 days 
after publication in the Federal Register.The Bureau believes the 
changes should enable industry to implement the provisions set forth in 
the TILA-RESPA Rule more cost-effectively and that industry should be 
able to implement these changes relatively quickly. Regarding some 
commenters' requests for a later effective date, an optional early 
compliance period, or an effective date that distinguishes among 
transactions based on when a loan application was received, the Bureau 
declines to adopt such approaches because the final rule does not 
impose any new burdens on creditors. Once the final rule becomes 
effective, the ability to reset tolerances prior to consummation for a 
given transaction will not be limited by when the application was 
received. The Bureau declines to make this final rule retroactive, as 
retroactive rulemaking is disfavored by the courts and the commenter 
has not established why it would be appropriate here.

VII. Dodd-Frank Act Section 1022(b)(2) Analysis

A. Overview

    In developing this final rule, the Bureau has considered the 
potential benefits, costs, and impacts.\40\ The Bureau has consulted, 
or offered to consult with, the prudential regulators, the Securities 
and Exchange Commission, the Department of Housing and Urban 
Development, the Federal Housing Finance Agency, the Federal Trade 
Commission, the Department of Veterans Affairs, the Department of 
Agriculture, and the Department of the Treasury, including regarding 
consistency with any prudential, market, or systemic objectives 
administered by such agencies.
---------------------------------------------------------------------------

    \40\ Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act 
calls for the Bureau to consider the potential benefits and costs of 
a regulation to consumers and covered persons, including the 
potential reduction of access by consumers to consumer financial 
products or services; the impact on depository institutions and 
credit unions with $10 billion or less in total assets as described 
in section 1026 of the Dodd-Frank Act; and the impact on consumers 
in rural areas.
---------------------------------------------------------------------------

    This final rule makes a substantive change to the current TILA-
RESPA Rule, by allowing creditors to reset tolerances with a Closing 
Disclosure (both initial and corrected), irrespective of the date of 
consummation. This new provision is restricted to circumstances where 
the TILA-RESPA Rule currently allows creditors to reset tolerances, 
such as changes in costs resulting from changed circumstances; new 
information regarding eligibility of the borrower; and borrower-
requested change (for instance, rate lock extension). The potential 
benefits and costs of the provisions contained in the final rule are 
evaluated relative to the baseline where the current provisions of the 
TILA-RESPA Rule remain in place. Under the TILA-RESPA Rule, there is no 
specific provision that allows creditors to use a Closing Disclosure to 
reset tolerances if there are four or more days between the time the 
revised version of the disclosures is required to be provided pursuant 
to Sec.  1026.19(e)(4)(i) and consummation. Consequently, a creditor 
may not be allowed to reset tolerances if it has already provided the 
Closing Disclosure to the consumer when it learns about the increase in 
cost. In such cases, some creditors, faced with the prospect of 
absorbing cost increases, may choose to deny the application.
    The proposal solicited data that could inform the analysis of 
benefits, costs, and impacts of the proposal, but the Bureau did not 
receive any such data in response. In particular, the Bureau requested 
information on the extent to which the current rule has caused 
situations in which creditors cannot reset tolerances despite a valid 
changed circumstance. While some commenters reported such occurrences, 
none provided data to quantitatively assess the frequency of such 
occurrences or the associated costs and benefits. Since operational 
data at a level of detail to capture the date of the Closing Disclosure 
and the consummation date, or the application denial date, is not 
available for purchase or gathered in routine regulatory collections, 
the Bureau does not have, and is not aware of, data currently available 
that would allow it to quantify the frequency of instances of creditors 
being unable to issue Closing Disclosures to reset tolerances. As a 
result, this discussion of the potential benefits, costs, and impacts 
on consumers and covered persons, which takes the existing statutory 
and regulatory framework as the baseline, is largely qualitative.

B. Potential Benefits and Costs to Consumers and Covered Persons

    The Bureau believes the final rule will benefit creditors by 
providing them with an option of resetting tolerances in situations 
where they currently do not have that option. The Bureau does not 
believe there would be any increased

[[Page 19173]]

costs to creditors from this final rule compared to the baseline where 
the current provisions of the TILA-RESPA Rule remain in place, as the 
provisions of this final rule are less restrictive for creditors than 
the current provisions.
    The Bureau believes consumers will generally benefit from this 
final rule. It is helpful to consider benefits and costs to consumers 
separately in the following scenarios.
    First, there may be cases where an initial Closing Disclosure has 
been provided to the consumer well in advance of consummation where the 
creditor subsequently learns about a change in cost that would be a 
cause to reset tolerances. The creditor may be unable to reset 
tolerances currently due to the four-business day limit and may choose 
to absorb extra costs rather than deny the application. In these cases, 
this final rule will create costs for consumers because now any changes 
in costs due to unexpected events would in these cases likely be passed 
on to consumers. However, in some situations, such as cost increases 
due to a borrower-requested change, these extra costs might be 
avoidable. In addition, to the extent that creditors are currently 
pricing in the risk of having to absorb unexpected cost increases, this 
final rule will remove this extra layer of risk adjustment and create a 
benefit to consumers in the form of lower cost of credit.
    Second, there may be cases where an initial Closing Disclosure 
already has been provided to the consumer well in advance of 
consummation and the creditor subsequently learns about a change in 
cost that would be a cause to reset tolerances. The creditor may be 
unable to reset tolerances currently due to the four-business day limit 
and may choose to deny the application for this reason. In such cases, 
this final rule will benefit borrowers by giving them an option of 
paying extra costs instead of having their applications denied; the 
Bureau believes that some borrowers may prefer to pay extra costs 
rather than have their applications denied.
    Third, there are hypothetically situations where a creditor would 
prefer to provide the initial Closing Disclosure earlier, but is 
deterred from doing so by the risk of not being able to reset 
tolerances in case an unexpected change occurs. In such cases, the 
proposed change may result in more situations where the initial Closing 
Disclosure is provided well in advance of consummation; this may affect 
the accuracy of the disclosure if unexpected cost changes occur between 
the issuance and the consummation. The Bureau believes creditors 
themselves may generally prefer to provide the initial Closing 
Disclosure closer to the consummation date because it is a good 
customer service.

C. Impact on Covered Persons With No More Than $10 Billion in Assets

    As discussed previously, the Bureau believes this final rule will 
not create costs for creditors, including those with no more than $10 
billion in assets.

D. Impact on Access to Credit

    The Bureau does not believe this final rule will have a negative 
effect on access to credit. On the contrary, the Bureau believes it may 
have a beneficial effect on access to credit. This may occur to the 
extent that the current restrictions on resetting tolerances using a 
Closing Disclosure are reflected in credit pricing, and to the extent 
that removing such restrictions would result in creditors reducing 
prices accordingly. Furthermore, this final rule will provide an option 
to consumers in situations where the creditor is unwilling to absorb 
the cost increase, and would have denied the application in the absence 
of this final rule.

E. Impact on Rural Areas

    The Bureau does not believe this final rule will have an adverse 
impact on consumers in rural areas.

VIII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (the RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small nonprofit organizations. The RFA defines a ``small business'' as 
a business that meets the size standard developed by the Small Business 
Administration pursuant to the Small Business Act.
    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and-comment 
rulemaking requirements, unless the agency certifies that the rule will 
not have a significant economic impact on a substantial number of small 
entities. The Bureau also is subject to certain additional procedures 
under the RFA involving the convening of a panel to consult with small 
business representatives prior to proposing a rule for which an IRFA is 
required.
    The Bureau believes this final rule will not create a significant 
economic impact on a substantial number of small entities. As described 
above, this final rule would reduce burden in a specific set of 
circumstances that an individual small entity would not frequently 
encounter. Therefore, a FRFA is not required.
    Accordingly, the undersigned certifies that this final rule would 
not have a significant economic impact on a substantial number of small 
entities.

IX. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), Federal agencies are generally required to seek the Office of 
Management and Budget (OMB) approval for information collection 
requirements prior to implementation. The collections of information 
related to Regulations Z and X have been previously reviewed and 
approved by OMB in accordance with the PRA and assigned OMB Control 
Number 3170-0015 (Regulation Z) and 3170-0016 (Regulation X). Under the 
PRA, the Bureau may not conduct or sponsor, and, notwithstanding any 
other provision of law, a person is not required to respond to an 
information collection unless the information collection displays a 
valid control number assigned by OMB.
    The Bureau has determined that this final rule does not contain any 
information collection requirements as defined by the PRA.

X. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Bureau will submit a report containing this rule and other required 
information to the U.S. Senate, the U.S. House of Representatives, and 
the Comptroller General of the United States prior to the rule's 
published effective date. The Office of Information and Regulatory 
Affairs has designated this rule as not a ``major rule'' as defined by 
5 U.S.C. 804(2).

List of Subjects in 12 CFR Part 1026

    Advertising, Appraisal, Appraiser, Banking, Banks, Consumer 
protection, Credit, Credit unions, Mortgages, National banks, Reporting 
and recordkeeping requirements, Savings associations, Truth in lending.

Authority and Issuance

    For the reasons set forth above, the Bureau amends Regulation Z, 12 
CFR part 1026, as set forth below:

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
1. The authority citation for part 1026 continues to read as follows:


[[Page 19174]]


    Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353, 
5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.

Subpart C--Closed-End Credit

0
2. Section 1026.19 is amended by revising paragraphs (e)(4)(i) and (ii) 
to read as follows:


Sec.  1026.19  Certain mortgage and variable-rate transactions.

* * * * *
    (e) * * *
    (4) * * *
    (i) General rule. Subject to the requirements of paragraph 
(e)(4)(ii) of this section, if a creditor uses a revised estimate 
pursuant to paragraph (e)(3)(iv) of this section for the purpose of 
determining good faith under paragraphs (e)(3)(i) and (ii) of this 
section, the creditor shall provide a revised version of the 
disclosures required under paragraph (e)(1)(i) of this section or the 
disclosures required under paragraph (f)(1)(i) of this section 
(including any corrected disclosures provided under paragraph (f)(2)(i) 
or (ii) of this section) reflecting the revised estimate within three 
business days of receiving information sufficient to establish that one 
of the reasons for revision provided under paragraphs (e)(3)(iv)(A) 
through (F) of this section applies.
    (ii) Relationship between revised Loan Estimates and Closing 
Disclosures. The creditor shall not provide a revised version of the 
disclosures required under paragraph (e)(1)(i) of this section on or 
after the date on which the creditor provides the disclosures required 
under paragraph (f)(1)(i) of this section. The consumer must receive 
any revised version of the disclosures required under paragraph 
(e)(1)(i) of this section not later than four business days prior to 
consummation. If the revised version of the disclosures required under 
paragraph (e)(1)(i) of this section is not provided to the consumer in 
person, the consumer is considered to have received such version three 
business days after the creditor delivers or places such version in the 
mail.
* * * * *

0
3. In Supplement I to Part 1026, under Section 1026.19--Certain 
Mortgage and Variable-Rate Transactions:
0
A. 19(e)(1)(ii) Mortgage broker is revised.
0
B. 19(e)(4)(i) General rule is revised.
0
C. 19(e)(4)(ii) Relationship to disclosures required under Sec.  
1026.19(f)(1)(i) is revised.
    The revisions read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Section 1026.19--Certain Mortgage and Variable-Rate Transactions

* * * * *

19(e)(1)(ii) Mortgage broker.

    1. Mortgage broker responsibilities. Section 1026.19(e)(1)(ii)(A) 
provides that if a mortgage broker receives a consumer's application, 
either the creditor or the mortgage broker must provide the consumer 
with the disclosures required under Sec.  1026.19(e)(1)(i) in 
accordance with Sec.  1026.19(e)(1)(iii). Section 1026.19(e)(1)(ii)(A) 
also provides that if the mortgage broker provides the required 
disclosures, it must comply with all relevant requirements of Sec.  
1026.19(e). This means that ``mortgage broker'' should be read in the 
place of ``creditor'' for all provisions of Sec.  1026.19(e), except to 
the extent that such a reading would create responsibility for mortgage 
brokers under Sec.  1026.19(f). To illustrate, Sec.  1026.19(e)(4)(i) 
states that if a creditor uses a revised estimate pursuant to Sec.  
1026.19(e)(3)(iv) for the purpose of determining good faith under Sec.  
1026.19(e)(3)(i) and (ii), the creditor shall provide a revised version 
of the disclosures required under Sec.  1026.19(e)(1)(i) or the 
disclosures required under Sec.  1026.19(f)(1)(i) (including any 
corrected disclosures provided under Sec.  1026.19(f)(2)(i) or (ii)) 
reflecting the revised estimate. ``Mortgage broker'' could not be read 
in place of ``creditor'' in reference to the disclosures required under 
Sec.  1026.19(f)(1)(i), (f)(2)(i), or (f)(2)(ii) because mortgage 
brokers are not responsible for the disclosures required under Sec.  
1026.19(f)(1)(i), (f)(2)(i), or (f)(2)(ii). In addition, Sec.  
1026.19(e)(1)(ii)(A) provides that the creditor must ensure that 
disclosures provided by mortgage brokers comply with all requirements 
of Sec.  1026.19(e), and that disclosures provided by mortgage brokers 
that do comply with all such requirements satisfy the creditor's 
obligation under Sec.  1026.19(e). The term ``mortgage broker,'' as 
used in Sec.  1026.19(e)(1)(ii), has the same meaning as in Sec.  
1026.36(a)(2). See also comment 36(a)-2. Section 1026.19(e)(1)(ii)(B) 
provides that if a mortgage broker provides any disclosure required 
under Sec.  1026.19(e), the mortgage broker must also comply with the 
requirements of Sec.  1026.25(c). For example, if a mortgage broker 
provides the disclosures required under Sec.  1026.19(e)(1)(i), it must 
maintain records for three years, in compliance with Sec.  
1026.25(c)(1)(i).
    2. Creditor responsibilities. If a mortgage broker issues any 
disclosure required under Sec.  1026.19(e) in the creditor's place, the 
creditor remains responsible under Sec.  1026.19(e) for ensuring that 
the requirements of Sec.  1026.19(e) have been satisfied. For example, 
if a mortgage broker receives a consumer's application and provides the 
consumer with the disclosures required under Sec.  1026.19(e)(1)(i), 
the creditor does not satisfy the requirements of Sec.  
1026.19(e)(1)(i) if it provides duplicative disclosures to the 
consumer. In the same example, even if the broker provides an erroneous 
disclosure, the creditor is responsible and may not issue a revised 
disclosure correcting the error. The creditor is expected to maintain 
communication with the broker to ensure that the broker is acting in 
place of the creditor.
* * * * *

19(e)(4)(i) General Rule

    1. Three-business-day requirement. Section 1026.19(e)(4)(i) 
provides that, subject to the requirements of Sec.  1026.19(e)(4)(ii), 
if a creditor uses a revised estimate pursuant to Sec.  
1026.19(e)(3)(iv) for the purpose of determining good faith under Sec.  
1026.19(e)(3)(i) and (ii), the creditor shall provide a revised version 
of the disclosures required under Sec.  1026.19(e)(1)(i) or the 
disclosures required under Sec.  1026.19(f)(1)(i) (including any 
corrected disclosures provided under Sec.  1026.19(f)(2)(i) or (ii)) 
reflecting the revised estimate within three business days of receiving 
information sufficient to establish that one of the reasons for 
revision provided under Sec.  1026.19(e)(3)(iv)(A) through (F) has 
occurred. The following examples illustrate these requirements:
    i. Assume a creditor requires a pest inspection. The unaffiliated 
pest inspection company informs the creditor on Monday that the subject 
property contains evidence of termite damage, requiring a further 
inspection, the cost of which will cause an increase in estimated 
settlement charges subject to Sec.  1026.19(e)(3)(ii) by more than 10 
percent. The creditor must provide revised disclosures by Thursday to 
comply with Sec.  1026.19(e)(4)(i).
    ii. Assume a creditor receives information on Monday that, because 
of a changed circumstance under Sec.  1026.19(e)(3)(iv)(A), the title 
fees will increase by an amount totaling six percent of the originally 
estimated settlement charges subject to Sec.  1026.19(e)(3)(ii). The 
creditor had

[[Page 19175]]

received information three weeks before that, because of a changed 
circumstance under Sec.  1026.19(e)(3)(iv)(A), the pest inspection fees 
increased by an amount totaling five percent of the originally 
estimated settlement charges subject to Sec.  1026.19(e)(3)(ii). Thus, 
on Monday, the creditor has received sufficient information to 
establish a valid reason for revision and must provide revised 
disclosures reflecting the 11 percent increase by Thursday to comply 
with Sec.  1026.19(e)(4)(i).
    iii. Assume a creditor requires an appraisal. The creditor receives 
the appraisal report, which indicates that the value of the home is 
significantly lower than expected. However, the creditor has reason to 
doubt the validity of the appraisal report. A reason for revision has 
not been established because the creditor reasonably believes that the 
appraisal report is incorrect. The creditor then chooses to send a 
different appraiser for a second opinion, but the second appraiser 
returns a similar report. At this point, the creditor has received 
information sufficient to establish that a reason for revision has, in 
fact, occurred, and must provide corrected disclosures within three 
business days of receiving the second appraisal report. In this 
example, in order to comply with Sec. Sec.  1026.19(e)(3)(iv) and 
1026.25, the creditor must maintain records documenting the creditor's 
doubts regarding the validity of the appraisal to demonstrate that the 
reason for revision did not occur upon receipt of the first appraisal 
report.

19(e)(4)(ii) Relationship Between Revised Loan Estimates and Closing 
Disclosures

    1. Revised Loan Estimate may not be delivered at the same time as 
the Closing Disclosure. Section 1026.19(e)(4)(ii) prohibits a creditor 
from providing a revised version of the disclosures required under 
Sec.  1026.19(e)(1)(i) on or after the date on which the creditor 
provides the disclosures required under Sec.  1026.19(f)(1)(i). Section 
1026.19(e)(4)(ii) also requires that the consumer must receive any 
revised version of the disclosures required under Sec.  
1026.19(e)(1)(i) no later than four business days prior to 
consummation, and provides that if the revised version of the 
disclosures are not provided to the consumer in person, the consumer is 
considered to have received the revised version of the disclosures 
three business days after the creditor delivers or places in the mail 
the revised version of the disclosures. See also comments 19(e)(1)(iv)-
1 and -2. However, if a creditor uses a revised estimate pursuant to 
Sec.  1026.19(e)(3)(iv) for the purpose of determining good faith under 
Sec.  1026.19(e)(3)(i) and (ii), Sec.  1026.19(e)(4)(i) permits the 
creditor to provide the revised estimate in the disclosures required 
under Sec.  1026.19(f)(1)(i) (including any corrected disclosures 
provided under Sec.  1026.19(f)(2)(i) or (ii)). See below for 
illustrative examples:
    i. If the creditor is scheduled to meet with the consumer and 
provide the disclosures required by Sec.  1026.19(f)(1)(i) on 
Wednesday, June 3, and the APR becomes inaccurate on Tuesday, June 2, 
the creditor complies with the requirements of Sec.  1026.19(e)(4) by 
providing the disclosures required under Sec.  1026.19(f)(1)(i) 
reflecting the revised APR on Wednesday, June 3. However, the creditor 
does not comply with the requirements of Sec.  1026.19(e)(4) if it 
provides both a revised version of the disclosures required under Sec.  
1026.19(e)(1)(i) reflecting the revised APR on Wednesday, June 3, and 
also provides the disclosures required under Sec.  1026.19(f)(1)(i) on 
Wednesday, June 3.
    ii. If the creditor is scheduled to email the disclosures required 
under Sec.  1026.19(f)(1)(i) to the consumer on Wednesday, June 3, and 
the consumer requests a change to the loan that would result in revised 
disclosures pursuant to Sec.  1026.19(e)(3)(iv)(C) on Tuesday, June 2, 
the creditor complies with the requirements of Sec.  1026.19(e)(4) by 
providing the disclosures required under Sec.  1026.19(f)(1)(i) 
reflecting the consumer-requested changes on Wednesday, June 3. 
However, the creditor does not comply with the requirements of Sec.  
1026.19(e)(4) if it provides disclosures reflecting the consumer-
requested changes using both the revised version of the disclosures 
required under Sec.  1026.19(e)(1)(i) on Wednesday, June 3, and also 
the disclosures required under Sec.  1026.19(f)(1)(i) on Wednesday, 
June 3.
    iii. Consummation is scheduled for Thursday, June 4. The creditor 
hand delivers the disclosures required by Sec.  1026.19(f)(1)(i) on 
Monday, June 1, and, on Tuesday, June 2, the consumer requests a change 
to the loan that would result in revised disclosures pursuant to Sec.  
1026.19(e)(3)(iv)(C) but would not require a new waiting period 
pursuant to Sec.  1026.19(f)(2)(ii). Under Sec.  1026.19(f)(2)(i), the 
creditor is required to provide corrected disclosures reflecting any 
changed terms to the consumer so that the consumer receives the 
corrected disclosures at or before consummation. The creditor complies 
with the requirements of Sec.  1026.19(e)(4) by hand delivering the 
disclosures required by Sec.  1026.19(f)(2)(i) reflecting the consumer-
requested changes on Thursday, June 4.
    iv. Consummation is originally scheduled for Wednesday, June 10. 
The creditor hand delivers the disclosures required by Sec.  
1026.19(f)(1)(i) on Friday, June 5. On Monday, June 8, the consumer 
reschedules consummation for Wednesday, June 17. Also on Monday, June 
8, the consumer requests a rate lock extension that would result in 
revised disclosures pursuant to Sec.  1026.19(e)(3)(iv)(C) but would 
not require a new waiting period pursuant to Sec.  1026.19(f)(2)(ii). 
The creditor complies with the requirements of Sec.  1026.19(e)(4) by 
delivering or placing in the mail the disclosures required by Sec.  
1026.19(f)(2)(i) reflecting the consumer-requested changes on Thursday, 
June 11. Under Sec.  1026.19(f)(2)(i), the creditor is required to 
provide corrected disclosures reflecting any changed terms to the 
consumer so that the consumer receives the corrected disclosures at or 
before consummation. The creditor complies with Sec.  1026.19(f)(2)(i) 
by hand delivering the disclosures on Thursday, June 11. Alternatively, 
the creditor complies with Sec.  1026.19(f)(2)(i) by providing the 
disclosures to the consumer by mail, including by electronic mail, on 
Thursday, June 11, because the consumer is considered to have received 
the corrected disclosures on Monday, June 15 (unless the creditor 
relies on evidence that the consumer received the corrected disclosures 
earlier). See Sec.  1026.19(f)(1)(iii) and comments 19(f)(1)(iii)-1 and 
-2. See also Sec.  1026.38(t)(3) and comment 19(f)(1)(iii)-2 regarding 
providing the disclosures required by Sec.  1026.19(f)(1)(i) (including 
any corrected disclosures provided under Sec.  1026.19(f)(2)(i) or 
(ii)) in electronic form.
    v. Consummation is originally scheduled for Wednesday, June 10. The 
creditor hand delivers the disclosures required by Sec.  
1026.19(f)(1)(i) on Friday, June 5, and the APR becomes inaccurate on 
Monday, June 8, such that the creditor is required to delay 
consummation and provide corrected disclosures, including any other 
changed terms, so that the consumer receives them at least three 
business days before consummation under Sec.  1026.19(f)(2)(ii). 
Consummation is rescheduled for Friday, June 12. The creditor complies 
with the requirements of Sec.  1026.19(e)(4) by hand delivering the 
disclosures required by Sec.  1026.19(f)(2)(ii) reflecting the revised 
APR and any other changed terms to the consumer on Tuesday, June 9. See 
Sec.  1026.19(f)(2)(ii) and associated

[[Page 19176]]

commentary regarding changes before consummation requiring a new 
waiting period. See comment 19(e)(4)(i)-1 for further guidance on when 
sufficient information has been received to establish an event has 
occurred.
* * * * *

     Dated: April 26, 2018.
Mick Mulvaney,
Acting Director, Bureau of Consumer Financial Protection.
[FR Doc. 2018-09243 Filed 5-1-18; 8:45 am]
BILLING CODE 4810-AM-P