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2017 TILA - RESPA Rule: Black Hole

Q: Currently, the Know Before You Owe/TILA-RESPA Integrated Disclosure Rule ("TRID") does not permit changes to a Closing Disclosure ("CD") to cure a tolerance violation more than four (4) business days prior to consummation.  Did the 2017 TILA-RESPA Rule eliminate this issue known as the "Black Hole"?

A: No.  Although the proposed 2017 TILA-RESPA Rule included language which would have permitted a lender to reset tolerances using a CD at any time, so long as the lender issued a corrected CD within three (3) business days of learning of a valid Change of Circumstance, this language was removed from the final 2017 TILA-RESPA Rule.

Rather, the CFPB issued a separate proposal to address the "Black Hole" issue and has asked the industry to comment on various issues, including:

  1. How the current four business day timing element has prevented creditors from resetting tolerances;

  2. the costs involved when the timing element has prevented creditors from resetting tolerances; and

  3. whether creditors are providing the initial CD so that it is received "substantially before the required three business days prior to consummation with terms and costs that are nearly certain to be revised."
Lenders who have repeatedly been forced to absorb increased costs when closings are delayed will need to monitor whether this proposal is adopted by the CFPB.

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