[Federal Register Volume 85, Number 86 (Monday, May 4, 2020)]
[Rules and Regulations]
[Pages 26319-26321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09515]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
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  Federal Register / Vol. 85, No. 86 / Monday, May 4, 2020 / Rules and 
Regulations  

[[Page 26319]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026


Application of Certain Provisions in the TILA-RESPA Integrated 
Disclosure Rule and Regulation Z Right of Rescission Rules in Light of 
the COVID-19 Pandemic

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Interpretive rule.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing this interpretive rule to provide guidance to creditors and 
other covered persons involved in the mortgage origination process. The 
Bureau understands that the COVID-19 pandemic could pose temporary 
business disruptions and challenges for covered persons that are 
involved in the mortgage origination process, including creditors, loan 
originators, settlement agents, and other parties such as real estate 
appraisers. The Bureau recognizes, furthermore, that consumers may have 
acute needs for proceeds from mortgage transactions as well as 
uncertainty and confusion about the origination process. In recent 
weeks, the Bureau has received a number of questions and requests for 
clarification from stakeholders, including creditors, industry 
representatives, and State regulators, about the application of certain 
provisions in the TILA-RESPA Integrated Disclosure (TRID) Rule and 
Regulation Z's right of rescission rules (Regulation Z Rescission 
Rules) in light of the COVID-19 pandemic. The Bureau concludes in this 
interpretive rule that if a consumer determines that his or her need to 
obtain funds due to the COVID-19 pandemic (1) necessitates consummating 
the credit transaction before the end of the TRID Rule waiting periods 
or (2) must be met before the end of the Regulation Z Rescission Rules 
waiting period, then the consumer has a bona fide personal financial 
emergency that would permit the consumer to utilize the modification 
and waiver provisions, subject to the applicable procedures set forth 
in the TRID Rule and Regulation Z Rescission Rules. The Bureau also 
concludes in this interpretive rule that the COVID-19 pandemic is a 
``changed circumstance'' for purposes of certain TRID Rule provisions, 
allowing creditors to use revised estimates reflecting changes in 
settlement charges for purposes of determining good faith. This 
interpretive rule will help expedite consumers' access to credit under 
the TRID Rule and Regulation Z Rescission Rules.

DATES: This interpretive rule is effective on May 4, 2020.

FOR FURTHER INFORMATION CONTACT: Michael G. Silver, Senior Counsel, 
Office of Regulations, (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. Discussion

A. Background

    The Bureau recognizes the serious impact the COVID-19 pandemic is 
having on many consumers and on the operations of many entities, 
including those involved in the mortgage origination process, and the 
challenges of this unique and rapidly evolving situation.
    The Bureau understands that the current crisis is causing temporary 
business disruptions and is creating challenges for some businesses 
involved in the mortgage origination process, including creditors, 
mortgage loan originators, settlement agents, and other parties such as 
real estate appraisers. The difficulties some businesses are facing 
include operational and staffing challenges in processing loan 
applications, estimating mortgage transaction costs, delivering 
disclosures, providing third party services relating to mortgage 
origination, and closing loans. The Bureau understands that these 
difficulties also are affecting some other entities, such as county 
recorders' offices, that provide information relating to the costs of 
mortgage transactions or otherwise play a role in the mortgage 
origination process.
    The Bureau recognizes, furthermore, that due to the impacts of the 
COVID-19 pandemic, some consumers have an acute need for proceeds from 
mortgage transactions as well as uncertainty or confusion about the 
origination process. Some consumers are seeking to refinance their 
homes quickly to obtain funds to meet financial needs that are due to 
the COVID-19 pandemic.
    The timely good-faith estimates of mortgage transaction costs under 
the TRID Rule and the disclosures under the Regulation Z Rescission 
Rules along with their corresponding waiting periods, the provisions 
for which are described in more detail in part I.B, facilitate prudent 
consumer decision-making. Providing these estimates and disclosures 
along with their corresponding waiting periods under the general legal 
standards in these rules, however, may result in delay in the 
transactions of some consumers seeking to respond to emergency 
conditions. However, the TRID Rule and Regulation Z Rescission Rules 
include provisions intended to provide regulatory flexibility in 
certain circumstances. This interpretive rule is intended to spotlight 
and clarify these provisions for consumers and mortgage origination 
businesses so that they can take advantage of these provisions during 
the COVID-19 pandemic.
    The TRID Rule (which is codified in Regulation Z) and the 
Regulation Z Rescission Rules implement the Truth in Lending Act 
(TILA).\1\ The TRID Rule imposes certain disclosure requirements and 
waiting periods related to mortgage transactions.\2\ The Regulation Z 
Rescission Rules provide consumers with the right to rescind certain 
credit transactions secured by their principal dwelling.\3\ The 
Regulation Z Rescission Rules also impose waiting periods.
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    \1\ 12 U.S.C. 1601 et seq.
    \2\ See 12 CFR 1026.19(e) and (f).
    \3\ See 12 CFR 1026.15, 1026.23.
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    In recent weeks, the Bureau has received a number of questions and 
requests for clarification from stakeholders, including creditors, 
industry representatives, and State regulators, about these provisions 
and their application in light of the COVID-19 pandemic. Given the 
challenges posed by the current crisis, the Bureau is issuing this 
interpretive rule to

[[Page 26320]]

provide guidance to covered persons that must comply with the TRID Rule 
or the Regulation Z Rescission Rules. The Bureau continues to seek 
stakeholder feedback and evaluate whether the Bureau should provide any 
additional guidance about the application of the laws and regulations 
under the Bureau's purview pertaining to the mortgage origination 
process in light of the COVID-19 pandemic.

B. Specific Guidance Regarding the TRID Rule and the Regulation Z 
Rescission Rules in Light of the COVID-19 Pandemic

1. Bona Fide Personal Financial Emergency
    Under the TRID Rule, creditors generally must deliver or place in 
the mail the Loan Estimate to consumers no later than seven business 
days before consummation and consumers must receive the Closing 
Disclosure no later than three business days before consummation.\4\ 
The Regulation Z Rescission Rules also provide consumers with at least 
three business days from consummation to rescind certain credit 
obligations secured by the consumer's principal dwelling, and creditors 
are required to provide consumers with a disclosure informing them of 
this rescission right.\5\ Under the TRID Rule and the Regulation Z 
Rescission Rules, however, after receiving the required disclosure(s), 
a consumer may modify or waive these waiting periods if the consumer 
determines that he or she needs credit extended to meet a bona fide 
personal financial emergency.\6\ For the waiting periods to be modified 
or waived, the creditor must have a dated written statement by the 
consumer that: (1) Describes the emergency, (2) specifically modifies 
or waives the waiting period, and (3) bears the signature of all 
consumers who are primarily liable on the legal obligation (for the 
TRID Rule) or who are entitled to rescind (for the Regulation Z 
Rescission Rules).\7\ Commentary to the TRID Rule modification and 
waiver provisions clarifies that ``[t]he consumer must have a bona fide 
personal financial emergency that necessitates consummating the credit 
transaction before the end of the waiting period.'' The commentary also 
clarifies that whether these conditions are met is determined by the 
facts or circumstances of individual situations, and provides one 
example.\8\ Commentary to the Regulation Z Rescission Rules waiver 
provision similarly clarifies that for a consumer to waive the 
rescission waiting period, ``the consumer must have a bona fide 
personal financial emergency that must be met before the end of the 
rescission period.'' \9\
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    \4\ 12 CFR 1026.19(e)(1)(iii)(B), 1026.19(f)(1)(ii)(A). Section 
1026.19(f)(2)(ii) also provides for a corrected Closing Disclosure 
and additional three-day waiting period if certain changes are made 
before consummation, which is subject to the TRID Rule modification 
and waiver provisions described below. 12 CFR 1026.19(f)(2)(ii).
    \5\ 12 CFR 1026.15(a), 1026.23(a). These Regulation Z provisions 
implement the statutory rescission right provisions in TILA section 
125. See 12 U.S.C. 1635. The rescission right generally applies to 
refinancings and other non-purchase credit transactions (subject to 
certain limitations), but not to residential mortgage transactions 
(i.e., where a security interest is created or retained in the 
consumer's principal dwelling to finance the acquisition or initial 
construction of that dwelling, as defined in Sec.  1026.2(a)(24)). 
See 12 CFR 1026.23(f). See also 12 CFR 1026.15(f).
    \6\ 12 CFR 1026.15(e); 12 CFR 1026.19(e)(1)(v), (f)(1)(iv); 12 
CFR 1026.23(e). See also 12 CFR 1026.19(a)(3). The modification and 
waiver provisions in the TRID Rule and the Regulation Z Rescission 
Rules implement the statutory provisions in TILA sections 
128(b)(2)(F) and 125(d). See 12 U.S.C. 1638(b)(2)(F), 12 U.S.C. 
1635(d).
    \7\ 12 CFR 1026.15(e); 12 CFR 1026.19(e)(1)(v), (f)(1)(iv); 12 
CFR 1026.23(e). See also 12 CFR 1026.19(a)(3).
    \8\ See comments 19(e)(1)(v)-1, 19(f)(1)(iv)-1 (``The imminent 
sale of the consumer's home at foreclosure, where the foreclosure 
sale will proceed unless loan proceeds are made available to the 
consumer during the waiting period, is one example of a bona fide 
personal financial emergency.''); see also comment 19(a)(3)-1.
    \9\ Comment 23(e)-1. Comment 23(e)-2 also clarifies that, ``To 
waive or modify the right to rescind, the consumer must give a 
written statement that specifically waives or modifies the right, 
and also includes a brief description of the emergency.'' Unlike the 
TRID Rule, the commentary to 12 CFR 1026.23(e) does not include any 
examples of what circumstances constitute a bona fide personal 
financial emergency. See also comment 15(e)-2.
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    On September 14, 2018, the Bureau issued its ``Statement on 
Supervisory Practices Regarding Financial Institutions and Consumers 
Affected by a Major Disaster or Emergency'' (2018 Supervisory 
Statement). The 2018 Supervisory Statement explained that Regulation Z 
provides that consumers may waive or modify the timing requirements 
described above if necessary to meet a bona fide personal financial 
emergency and that this ``regulatory flexibility can help expedite 
access to credit for consumers facing a bona fide personal financial 
emergency following a major disaster or emergency.'' \10\
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    \10\ Bureau of Consumer Financial Protection, ``Statement on 
Supervisory Practices Regarding Financial Institutions and Consumers 
Affected by a Major Disaster or Emergency,'' Sept. 14, 2018, 
available at: https://files.consumerfinance.gov/f/documents/bcfp_statement-on-supervisory-practices_disaster-emergency.pdf.
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    The Bureau recognizes that a consumer's need to obtain funds due to 
the COVID-19 pandemic can similarly create a bona fide personal 
financial emergency. The Bureau is responding to stakeholders' 
questions and requests for clarification about the applicability of 
these provisions during the COVID-19 pandemic. The Bureau has 
determined to issue this interpretive rule to provide general guidance 
to stakeholders and other members of the public. Accordingly, the 
Bureau is clarifying that (1) if a consumer determines that the 
extension of credit is needed to meet a bona fide personal financial 
emergency, (2) the consumer's brief statement describing the emergency 
identifies a financial need that is due to the COVID-19 pandemic, and 
(3) the emergency necessitates consummating the credit transaction 
before the end of an applicable TRID Rule waiting period or must be met 
before the end of the Regulation Z Rescission Rules waiting period, 
then the consumer has a bona fide personal financial emergency that 
would permit the consumer to utilize the modification and waiver 
provisions, subject to the applicable procedures set forth in the TRID 
Rule and the Regulation Z Rescission Rules.\11\
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    \11\ Neither the TRID Rule nor the Regulation Z Rescission Rules 
modification and waiver provisions permit creditors to use printed 
forms for consumers to agree to such modifications or waivers. See 
12 CFR 1026.15(e); 1026.19(e)(1)(v) and (f)(1)(iv); 12 CFR 
1026.23(e). The Bureau notes that this prohibition also applies to 
disclosures delivered in compliance with the Electronic Signatures 
in Global and National Commerce Act (15 U.S.C. 7001 et seq.). For 
example, the creditor cannot include a pre-populated waiver form 
within a batch of electronic disclosures provided to the consumer 
under the TRID Rule, Regulation Z, and other regulations.
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    Regulation Z does not mandate that creditors inform consumers of 
their ability to use the modification and waiver provisions in the TRID 
Rule or the Regulation Z Rescission Rules if the consumer has a bona 
fide financial emergency. Some consumers may be unaware that these 
provisions may be available to them. Thus, the Bureau encourages 
creditors to consider voluntarily informing consumers during the COVID-
19 pandemic of their ability to utilize the modification and waiver 
provisions for bona fide personal financial emergencies if the consumer 
has a need to obtain funds due to the COVID-19 pandemic prior to the 
end of an applicable waiting period.
2. Changed Circumstances
    Under the TRID Rule, creditors \12\ must estimate in good faith the 
costs that consumers will incur in connection

[[Page 26321]]

with their mortgage transaction and disclose them on the Loan 
Estimate.\13\ For purposes of determining good faith under the TRID 
Rule, creditors may use revised estimates of such costs in a limited 
number of situations pursuant to Regulation Z, Sec.  
1026.19(e)(3)(iv).\14\ One such situation is if there are ``changed 
circumstances'' that affect the settlement charges consumers would 
incur.\15\ The TRID Rule specifies that changed circumstances includes 
``an extraordinary event beyond the control of any interested party,'' 
with the commentary to the TRID Rule clarifying that a ``war or natural 
disaster'' is an example of such an extraordinary event.\16\
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    \12\ The TRID Rule also permits mortgage brokers to provide the 
Loan Estimate, but the creditor remains responsible for satisfaction 
of the requirements under Sec.  1026.19(e). See 12 CFR 
1026.19(e)(1)(ii).
    \13\ 12 CFR 1026.19(e)(3). As a general rule, an estimated 
closing cost disclosed on the Loan Estimate pursuant to Sec.  
1026.19(e)(1)(i) is in good faith if the charge paid by or imposed 
on the consumer does not exceed the amount originally disclosed. 12 
CFR 1026.19(e)(3)(i). For certain categories of settlement charges, 
good faith is determined with reference to whether: (1) The 
aggregate amount of certain charges paid by or imposed on the 
consumer does not exceed the aggregate amount of those charges 
disclosed pursuant to Sec.  1026.19(e)(1)(i) by more than 10 percent 
(see 12 CFR 1026.19(e)(3)(ii)(A)); or (2) the charge was estimated 
consistent with the best information reasonably available at the 
time it was disclosed, regardless of whether the final amount 
exceeds the estimated amount (see 12 CFR 1026.19(e)(3)(iii)).
    \14\ 12 CFR 1026.19(e)(3)(iv); 12 CFR 1026.19(e)(4)(i). Under 
Sec.  1026.19(e)(4)(i), the revised estimates must be reflected on a 
revised version of the Loan Estimate, on the Closing Disclosure, or 
on a corrected Closing Disclosure.
    \15\ 12 CFR 1026.19(e)(3)(iv)(A).
    \16\ 12 CFR 1026.19(e)(3)(iv)(A)(1); comment 19(e)(3)(iv)(A)-2.
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    Economic disruptions and shortages during the COVID-19 pandemic may 
affect the ability of stakeholders to provide accurate estimates of 
some settlement charges. Stakeholders have sought guidance from the 
Bureau as to whether the COVID-19 pandemic is an extraordinary event 
that permits creditors to provide consumers with revised estimates 
reflecting changes in settlement charges. For example, a stakeholder 
asked to clarify whether, for purposes of establishing good faith, a 
creditor could provide a revised estimate of the appraisal fee based on 
changed circumstances where (1) the amount disclosed on the Loan 
Estimate was based on a reasonable market price at the time of the 
estimate and (2) the actual appraisal fee was higher because of a 
shortage of available appraisers due to the effects of the COVID-19 
pandemic. Upon consideration of the interpretive issues, the Bureau 
concludes that, as with wars or natural disasters, the COVID-19 
pandemic is an example of an extraordinary event beyond the control of 
any interested party, and thus is a changed circumstance. Accordingly, 
for purposes of determining good faith, creditors may use revised 
estimates of settlement charges that consumers would incur in 
connection with the mortgage transaction if the COVID-19 pandemic has 
affected the estimate of such settlement charges.\17\
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    \17\ See id.; 12 CFR 1026.19(e)(4)(i). As noted above, the 
revised estimates must be reflected on a revised version of the Loan 
Estimate, on the Closing Disclosure, or on a corrected Closing 
Disclosure. 12 CFR 1026.19(e)(4)(i). See also 12 CFR 1024.2(b) 
(definition of ``Changed circumstances'' in Regulation X, which 
predates the TRID Rule changed circumstance definition, includes 
``Acts of God, war, disaster, or other emergency'').
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3. Legal Authority and TILA Safe Harbor Provisions
    The Bureau is issuing this interpretive rule based on its authority 
to interpret TILA and Regulation Z, including under section 1022(b)(1) 
of the Dodd-Frank Act, which authorizes guidance as may be necessary or 
appropriate to enable the Bureau to administer and carry out the 
purposes and objectives of the Federal consumer financial laws.\18\
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    \18\ 12 U.S.C. 5512(b)(1). The relevant provisions of TILA and 
Regulation Z form part of Federal consumer financial law. See 12 
U.S.C. 5481(12)(O), (14).
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    By operation of TILA section 130(f), no provision of TILA sections 
108(b), 108(c), 108(e), 112, or 130 imposing any liability applies to 
any act done or omitted in good faith in conformity with this 
interpretive rule, notwithstanding that after such act or omission has 
occurred, this interpretive rule is amended, rescinded, or determined 
by judicial or other authority to be invalid for any reason.\19\
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    \19\ 15 U.S.C. 1640(f).
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II. Effective Date

    Because this rule is solely interpretive, it is not subject to the 
30-day delayed effective date for substantive rules under section 
553(d) of the Administrative Procedure Act.\20\ Therefore, this rule is 
effective on May 4, 2020, the same date that it is published in the 
Federal Register.
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    \20\ 5 U.S.C. 553(d).
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III. Regulatory Requirements

    This rule articulates the Bureau's interpretation of Regulation Z 
and TILA. As an interpretive rule, it is exempt from the notice-and-
comment rulemaking requirements of the Administrative Procedure 
Act.\21\ Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis.\22\
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    \21\ 5 U.S.C. 553(b).
    \22\ 5 U.S.C. 603(a), 604(a).
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    The Bureau has determined that this interpretive rule does not 
impose any new or revise any existing recordkeeping, reporting, or 
disclosure requirements on covered entities or members of the public 
that would be collections of information requiring OMB approval under 
the Paperwork Reduction Act.\23\
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    \23\ 44 U.S.C. 3501 et seq.
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IV. Congressional Review Act

    Pursuant to the Congressional Review Act,\24\ the Bureau will 
submit a report containing this interpretive rule and other required 
information to the United States Senate, the United States 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 interpretive rule as not a 
``major rule'' as defined by 5 U.S.C. 804(2).
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    \24\ 5 U.S.C. 801 et seq.
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V. Signing Authority

    The Director of the Bureau, having reviewed and approved this 
document, is delegating the authority to electronically sign this 
document to Laura Galban, a Bureau Federal Register Liaison, for 
purposes of publication in the Federal Register.

    Dated: April 29, 2020.
Laura Galban,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2020-09515 Filed 5-1-20; 8:45 am]
BILLING CODE 4810-AM-P