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
| Published date | 04 May 2020 |
| Citation | 85 FR 26319 |
| Record Number | 2020-09515 |
| Section | Rules and Regulations |
| Court | Consumer Financial Protection Bureau |
Federal Register, Volume 85 Issue 86 (Monday, May 4, 2020)
[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
Federal Register
________________________________________________________________________
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.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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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
