Compliance Q&A: Using a Closing Disclosure to Reset Tolerence on a Zero Tolerence Item

Question: We have some confusion in regard to using a Closing Disclosure to reset the tolerance on a “0” tolerance item (origination charge) if there is a bona fide Change in Circumstance. On November 8, 2018, the customer requests an increase in the loan amount to $115,000, which is approved since the appraisal would allow for additional funds. The initial Closing Disclosure had not been delivered before this requested Change in Circumstance. The processor prepares an initial Closing Disclosure using a loan amount of $115,000 and shows the increased origination charge and a closing date of November 19, 2018. This was given to the borrower in person. My question is, since there was adequate time before the closing date of November 19, 2018, should we have not issued a new Loan Estimate on November 8, 2018 showing the increased loan amount and origination charge since the CD did not have to go out on November 8, 2018?

Answer:Under the recent “black hole” amendments, the bank would be allowed to “reset” these on the CD rather than the LE. Note, however, that it still has to be given within three business days of the changed circumstance and that may or may not have been the case from what you described above, as set out here:

…The creditor must provide the consumer with the Closing Disclosure reflecting the revised estimate at or before consummation and within three business days of receiving information sufficient to establish that the changed circumstance or other triggering event has occurred. …

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