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The TRID guidelines require that a Closing Disclosure (CD) be received by a consumer no later than three business days before loan consummation.
We often hear institutions refer to this as the “initial” CD.
But, it’s important to remember that the Regulation doesn’t talk about an initial CD. The CD provided prior to consummation is intended to be the CD. In other words, it is supposed to be accurate, with final numbers, etc. Now, we all know that things can and do change after the CD is issued.
So, what are you to do?
Jerod explains more in the video.
Transcripts:
The thing that concerns me the most I think is how we look at closing disclosures and what they are and how they're supposed to work. When you issue a closing disclosure, it's supposed to be accurate, with final numbers in the borrower's hands three days before closing, and you could choose to hand-deliver these things, you can electronically deliver them, but most of us are mailing them, so today is Thursday, we drop it in the mail on Thursday, Friday, Saturday, Monday it's in hand, Tuesday, Wednesday, next Thursday we can close. So there's a week between when we drop it in the mail and they're actually going to close the loan.
And so if a week is going to go by between when we create the disclosure and actually close, we're not going to be naïve, things can change and you're going to have instances where you issued a closing disclosure and something has come up to make it be inaccurate between when you deliver it and when you actually close next Thursday because that's a whole week's worth of time.
And so there are a lot of instances where you have to give updated versions of the closing disclosure.
But the misunderstanding or misconception that I am gathering is that there is this belief out there that there is a thing called a preliminary closing disclosure or an initial closing disclosure or an early closing disclosure and you won't find that in TRID, that's not a thing.
Early disclosures, let's just go back here, a little bit of a history lesson.
Before TRID, there was a preliminary truth-in-lending disclosure and a good faith estimate. Those were early if you will, and then the closing documents were the settlement statement and the final truth-in-lending. Well, what TRID did is said, "Well why do we got to have four things? Can't we just have two things?" So they made two things out of four. They took the preliminary truth-in-lending and the good faith estimate and they combined them together and that's the loan estimate. That's the early or preliminary disclosure. They took the settlement statement in the HUD, the HUD-1A, and they took the final truth-in-lending and smashed them together and said, "We're going to call it a closing disclosure." That's the final, and so there really isn't supposed to be a preliminary or an early closing disclosure, there's supposed to be the closing disclosure.
And so in a best-case scenario, you put together a closing disclosure and you deliver it today and it's the same one that you'll go to the closing table a week from now. And maybe you slide an updated version of it across the table, I'm sorry, you slide a courtesy copy of it across the table, with the same date that you delivered last week. If you update the date on the closing disclosure on the day of closing and nothing has changed, you're saying that something has changed. Nothing in any regulation says that you should provide an updated date on a closing disclosure where there are no changes from the original one that went out. Because I can tell you this, auditors and examiners, when they see a different date on a disclosure, they're going to go, "Okay, what changed from this one to the last one?" And if you don't tell them that it's the same thing, what they're going to do is go and look line by line and likely find things maybe you don't want them to find, mistakes you hope they wouldn't see. Whereas if you have it be the same date, "Oh, that's the same, okay, we're good to go here."
And so if it's exactly the same, put the same date on it. If it's a courtesy copy, slide it across the table. Now that said, if you have issued a closing disclosure so it hits the borrower's hands three days before closing, so you drop it in the mail today on Thursday, Friday, Saturday, Monday it's in their hand, and sometime in that timeframe, before we get to next Thursday, you acquire information that makes what you originally provided inaccurately, rule number one is this. You have to make sure you provide an updated, accurate version 100% of the time.
I'm not going to even get into timeframe delays yet. If you've issued a closing disclosure and it becomes inaccurate, you have to provide another one that is accurate. And if that one becomes inaccurate, you'll provide another one that's accurate. You always have to make sure an accurate disclosure has been provided. But be careful with your reference to preliminary, initial or early closing disclosure. It's not a thing. It's I issued a closing disclosure and I acquired new information that made that previous version inaccurate, so I'm providing another one. But understand that that original version that went out was supposed to have been accurate in the first place. When you state that it was preliminary or early, I think it's giving people the idea that it doesn't have to be accurate. No, it's supposed to be accurate, and then if it becomes inaccurate, we provide an updated version.
