The Closing Disclosure Three-Day Rule
Although the TILA-RESPA Integrated Disclosure Rule (TRID) has notably changed the forms used at a closing, the substantial process change that’s truly making a splash throughout the real estate lending world is The Three-Day Waiting Period.
TRID requests that consumers receive the Closing Disclosure, at least, three business days before the date of consummation of the transaction, which commonly refers to The Three Day Waiting Period. “Business day,’ of course, refers to all calendar days except Sundays and federal holidays.
The Three Day Waiting Period cannot be waived by the Consumer unless the consumer has received the Closing Disclosure, the extension of the credit is needed to meet a bona fide personal financial emergency (e.g. avoid an imminent foreclosure), or if the consumer provides the lender with a dated written statement indicating an emergency, specifically modifying or waiving the three day. The document must bear the signature of all the consumers who are accountable on the loan.
When finalizing the TRID Rule, The Consumer Financial Protection Bureau (CFPB) functioned under the understanding that for most consumers a mortgage loan would be the most significant financial obligation of their lives given the complexity and significance of the transaction. The CFPB understands that there’s significant customer interest in ensuring that consumer receives the Closing Disclosure, at least, three business days prior to consummation. The CFPB believes the consumer must be afforded the opportunity to review the terms and costs of transactions. Any broad waivers could lead to abuse.
If there are any changes to the Closing Disclosure by the consumer, the lender must determine whether said changes trigger an additional Three Day Waiting Period. This only occurs under three circumstances, and those instances are changes to the APR above ⅛ of a percent for most loans (and ¼ of a percent for loans with irregular payments or periods, the addition of a prepayment penalty to the loan and changes the to the loan product (e.g. convention to ARM).
The consumer must be issued a revised Closing Disclosure at or before consummation of all other change. For example, if the seller has not replaced the carpets, which was contractually agreed upon, but instead provided the credit to the buyer. The lender is obliged to determine where such a change will trigger a new Three Day Waiting Period. If not, the lender will only be required to provide a revised Closing Disclosure to the Buyer at or before closing.
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