Since the inception of TRID, it has not been completely clear for creditors whether they may reset tolerances if a consumer provides an intent to proceed after the 10-business-day period, but within a longer period that a creditor disclosed on the original Loan Estimate. This confusion is due, in part, by the way the original language of Regulation Z is worded as it specifically states that a creditor may use a revised estimate for tolerance purposes if a consumer indicates an intent to proceed with the transaction more than ten business days after the Loan Estimate is issued. While that wording appears to be clear, it leaves some question as to how the tolerance calculations apply when a creditor voluntarily provides a period longer than the minimum 10 business day requirement. Fortunately for lenders, TRID 2.0 has provided clarification on this topic and it seems pretty straightforward.
The 2016 Proposal For Resetting Tolerances
To fully understand the final amendments to Regulation Z, we can look to the August 2016 proposal for a somewhat clear explanation. In the proposal, the preamble stated that the CFPB proposed to amend 1026.19(e)(3)(iv)(E) and add a new comment (#2) to part 1026.19(e)(3)(iv)(E). This proposed comment was set to clarify that, if a creditor voluntarily extended the period disclosed under 1026.37(A)(13)(ii) to a period greater than 10 business days, that the longer time period would become the relevant time period for purposes of using revised estimates to calculate tolerances. The proposed comment (#2) to 1026.19(e)(3)(iv)(E) even went on to state that a an extension beyond 10 days could even be communicated to the applicant orally, for the the longer extended date to apply for tolerance calculations.
Final Rule for Resetting Tolerances Based on Closing Cost Expiration Date
As outlined in the proposal, the final rule makes it clear that a creditor may choose a longer expiration period (than the required minimum of 10 business days) for estimated fees, but that the longer expiration period provides the applicable baseline for the good faith tolerance requirements.
New comment (#2) to 1026.37(a)(13) states the following:
“Expiration date. The disclosure required by 1026.37(a)(13)(ii) related to estimated closing costs is required regardless of whether the interest rate is locked for a specific period of time or whether the terms and costs are otherwise accepted or extended. If the consumer fails to indicate an intent to proceed with the transaction within 10 business days after the disclosures were originally provided under 1026.19(e)(1)(iii) (or within any longer time period established by the creditor), then, for determining good faith under 1026.19(e)(3)(i) and (ii), a creditor may use a revised estimate of charge instead of the amount originally disclosed under 1026.19(e)(1)(i)."
In addition, 1026.19(e)(3)(iv)(E) has been revised to state the following:
“Expiration. 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 disclosures required under paragraph (e)(1)(i) of this section are provided pursuant to paragraph (e)(1)(iii) of this section."
Comment #2 to 1026.19(e)(3)(iv)(E) now states the following:
“Longer time period. For transactions in which the interest rate is locked for a specific period of time, 1026.37(a)(13)(ii) requires the creditor to provide the date and time (including the applicable time zone) when that period ends. If the creditor establishes a period greater than 10 business days after the disclosures were originally provided (or subsequently extends it to such a longer period) before the estimated closing costs expire, notwithstanding the 10-business-day period discussed in comment 19(e)(3)(iv)(E)-1, that longer time period becomes the relevant time period for purposes of 1026.19(e)(3)(iv)(i) and (ii) under 1026.19(e)(3)(iv)(E) until after the longer time period has expired. A creditor establishes such a period greater than 10 business day by communicating the greater time period to the consumer, including through oral communication."