The CFPB recently published 10 new TRID FAQs related to lender credits.
Previously the CFPB staff provided informal verbal guidance regarding lender credits, and the 2017 amendments to the TRID rule, often referred to as TRID 2.0, added commentary to TRID provisions of Regulation Z that address the disclosure and treatment of lender credits. However, there has continued to be confusion in the industry on how to properly disclose lender credits on the Loan Estimate and Closing Disclosure, and especially how to treat tolerances and changed circumstances as they apply to lender credits.
Most of the FAQs are consistent verbal guidance previously provided by the CFPB staff. Some examples include 1. expanded descriptions of general versus specific credits, 2. the disclosure of such credits on the Loan Estimate and Closing Disclosure, and 3. the ability to not disclose (or back out) fees that a creditor will absorb on the Loan Estimate and then subsequently disclose such fees on the Closing Disclosure.
Most notably, FAQ #10 addresses the treatment of lender credits for tolerance purposes. In this FAQ, the CFPB describes lender credits as “a negative charge to the consumer subject to the good faith requirements of the TRID Rule.” As such, if “[t]he actual total amount of the lender credits, whether specific or general … provided by the creditor” is less than initially disclosed, then it is to be treated as an increased charge for the purposes of evaluating tolerances and cures. The FAQ clearly states that lender credits may only be reduced, thereby increasing the charge to the consumer, if “there is an accompanying changed circumstance or other triggering event” allowing a tolerance reset pursuant to 1026.19(e)(3)(iv).
Although most of the guidance included in the new FAQs is largely settled industry understanding and consistent with past informal verbal guidance from the CFPB staff, the FAQs will likely be positively received by the industry as a continued effort by the CFPB to publish written guidance, something that was resisted in the past. However, while FAQ #10 addressing lender credits is also consistent with the preamble to the original TRID rule, which was reinforced in the preamble to TRID 2.0, some industry members may still hesitate to adopt the position that a lender credit can be reduced by a valid change in circumstance or other regulatory trigger for change absent an amendment to Regulation Z or its commentary. The TRID rule itself expressly provides for a reduction in a lender credit only in a situation in which the interest rate was floating at the time of the initial Loan Estimate, and the subsequently locking of the rate provides for a different lender credit amount.
