Another TRID Lender Announcement

This one has an interesting twist.

U.S. Bank Home Mortgage (USBHM) recently announced that it, like other large lenders, will prepare and deliver the Closing Disclosure and any necessary revisions to the consumer once the TRID rules become effective on October 3. Settlement agents (closing attorneys in South Carolina) will be responsible for the seller’s Closing Disclosure.

Here’s the twist: USBHM stated that it will only require TRID documents for loans subject to TRID, which would include most closed-end consumer credit transactions secured by real estate, for applications taken on or after October 3. Then it stated, “One exception to this is that USBHM will require TRID disclosures for properties that are title vested in an LLC.”

On its face, this statement would mean that commercial loans involving properties vested in LLCs would be subject to the new Loan Estimate and Closing Disclosure forms. Since the name of this lender is U.S. Bank Home Mortgage, we can only assume this announcement means USBHM will consider any loan secured by residential property vested in a limited liability company to be a consumer loan. As an example, loan on a rental house (an investment property) titled in an LLC, would be subject to TRID rules, according to this lender. The announcement did not make a distinction between single- and multi-member LLCs.

The announcement indicated that USBHM will use various methods of delivery for the Loan Estimate and Closing Disclosure, including regular mail, electronic delivery and tracking through eLynx. (A quick look at eLynx’ website indicates this company provides a network for paperless document collaboration and distribution throughout the financial industry.)

USBHM indicated it will work with settlement agents to prepare the Closing Disclosure for delivery to the consumer, and that collaboration on the numbers will begin seven to ten days before the scheduled consummation date. The bank will continue to place the burden on settlement agents for the accuracy of the closing figures: “The settlement agent will continue to be responsible for ensuring that the Closing Disclosure provided at consummation is accurate to the terms agreed upon with USBHM.”

After the settlement agent and USBHM have agreed on the closing figures, USBHM will deliver the closing disclosure to the consumer and the settlement agent simultaneously through eLynx. The plan is to deliver the closing documents, including the final Closing Disclosure, to the settlement agent one day prior to closing.

Locally, we have been speculating that loan documents for various lenders will arrive ten minutes prior to closing despite the three-day rule for the Closing Disclosure. This announcement gives that speculation some credence. There is no requirement of early delivery of the closing documents to the closing attorney.

Locally, we have also been speculating that making changes to the closing figures will be difficult, particularly if the closing takes place outside of normal banking hours. This announcement provides some help by indicating that USBHM will have staff available for after-hours closings provided it has notice that a borrower will be signing outside normal business hours.

To read the entire announcement, follow this link.

Dirt Lawyers Will Like This Mortgage Satisfaction Case

S.C. Supreme Court holds equity lines are subject to the timely satisfaction statute.

In an opinion written by Justice Beatty, our Supreme Court held on August 5 that open-ended mortgages are satisfied in the same manner as conventional mortgages and under the same statutory requirement for timely satisfaction by lenders.

Regions Bank v. Strawn involved a mortgage foreclosure against Robert and Nancy Borchers. The Borchers counterclaimed seeking to recover from Regions Bank under §§29-3-310 and 29-3-320 of the South Carolina Code based on the bank’s failure to satisfy the mortgage within the three-month time period required.

mortgage jenga The home had been purchased from Cammie Strawn, who had taken title from her then-husband, Richard Strawn. Mr. Strawn had previously obtained the home equity line of credit. At the time of the Borchers’ closing, the balance of the mortgage was $32,240.42. Immediately after the closing, the Borchers’ attorney, James Belk, had an employee deliver a payoff check and a mortgage satisfaction transmittal letter to Regions Bank. The check had the words “Payoff of first mortgage” typed on it.

Instead of satisfying the mortgage, the bank applied the check to the balance, bringing it to zero, and provided Richard Strawn with new checks even though he had not owned the home for more than two years. Mr. Strawn spent more than $72,000 on the equity line.

When Regions Bank attempted to collect on Mr. Strawn’s debt by foreclosing on the Borchers’ home, the Borchers answered, counterclaimed and moved for summary judgment. The bank argued that a revolving line of credit should be handled differently than conventional mortgages, and this particular mortgage could not be satisfied without instructions from Mr. Strawn.

The trial court and Court of Appeals ruled in favor of the Borchers. On appeal to the Supreme Court, Regions Bank made two basic arguments: (1) open ended mortgages are an exception to the statutory satisfaction requirement because only the original borrower is authorized to request a satisfaction; and (2) the Borchers could not assert a violation of the mortgage satisfaction statutes because their attorney had the authority to satisfy the mortgage pursuant to the attorney satisfaction statute (§29-3-330).

The Court affirmed and held that the first argument failed because the mortgage itself contemplated that the property may be sold and specifically stated that it would be binding on the mortgagor’s successors and assigns. Also, the court stated that anyone with an interest in mortgaged property is allowed to request a satisfaction upon payment, and there is no exception for equity lines of credit.

As to the argument that the Borchers’ attorney could have satisfied the mortgage, the Court stated simply that this argument is without merit because the statutory framework does not exempt a mortgage holder of an equity line from the penalty provisions for failing to satisfy a mortgage within the required time frame.

This is a good opinion for South Carolina closing lawyers!

Malpractice Case Questions Delegation of Responsibility for Title Work

SC Supreme Court decides client’s informed consent is required.

The South Carolina Supreme Court has ruled that a closing attorney cannot delegate the ultimate responsibility for delivering clear title to a purchaser without the purchaser’s informed consent. Johnson v. Alexander is an attorney malpractice case decided on July 29. This case involved Amber Johnson’s 2006 closing of a home in North Charleston. Ms. Johnson alleged that her closing attorney, Stanley Alexander, breached his duty of care by failing to discover the house had been sold at a tax sale in 2005.

The title examination had been performed by another attorney, Charles Feeley at the request of Ms. Johnson’s previous attorney, Mario Inglese. Mr. Alexander purchased the title work from Mr. Inglese and relied on the title examination, which concluded that no back taxes were owed on the property. Ms. Johnson stopped making mortgage payments when she learned she didn’t have title to the property, and the property went to foreclosure.

At trial, Ms. Johnson moved for partial summary judgment as to Mr. Alexander’s liability. At the summary judgment hearing, an affidavit of the Delinquent Tax Collector for Charleston County was proffered to prove the availability of the delinquent tax records during the time when the title would have been examined. Mr. Feeley’s affidavit indicated he could not remember the specific title work, but that he always searched titles the same way, and he always checked delinquent taxes for a ten-year period. His notes showed that he found no outstanding taxes. Further, Mr. Feeley attested that the tax sale would not have appeared in the chain of title because the tax sale deed was actually recorded after the closing.

As a side note to abstractors: recent tax sales often do not appear in chains of title because the deeds are not yet recorded. Title examiners should check for payment of taxes for a ten-year period to uncover ad valorem tax delinquencies.

The trial court granted Ms. Johnson’s motion on Mr. Alexander’s liability. On appeal, the Court of Appeals reversed and remanded, holding the lower court incorrectly focused its inquiry on whether an attorney conducting a title examination should have discovered delinquent taxes from 2003 and 2004 and the tax sale from 2005. Instead, the appellate court held the proper question was whether Mr. Alexander acted reasonably in relying on the title work and reversed and remanded the case for trial.

The Supreme Court reversed and remanded for a determination of damages. Ms. Johnson argued that the Court of Appeals erred in holding the correct inquiry is whether an attorney reasonably relied on another attorney’s work where that work is outsourced. She contended that an attorney should be liable for negligence arising from tasks he delegates unless he has expressly limited the scope of the representation. The Supreme Court agreed.

The Supreme Court said the Court of Appeals erroneously equated delegation of a task with delegation of liability. The opinion, written by Justice Hearn, stated that while Feeley’s negligence was the issue, that does not displace Alexander’s ultimate liability.

The opinion states, “while an attorney may delegate certain tasks to other attorneys or staff, it does not follow that the attorney’s professional decision to do so can change his liability to his client absent that client’s clear, counseled consent.”

The Court cited Rule 1.8(h) of the Rules of Professional Responsibility which indicates a lawyer shall not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless the client is independently represented in making the agreement.

Notice that the Court makes no distinction between delegating a task to staff and delegating it to another attorney. Mr. Alexander had argued that because Ms. Johnson knew he did not personally examine the title, its accuracy was not within the scope of his representation to her. The Court clearly held that the scope of representation can only be limited through the clear, counseled consent of the client.

Many residential closings are handled in South Carolina by attorneys who have nothing to do with the title examination. This case clearly states that those attorneys should limit the scope of their representation and obtain their clients’ clear, counseled consent. Otherwise, the title work is the ultimate responsibility of the closing attorney regardless of who performs it.

And on a related topic, it is my opinion that any title examination that covers less than a full-search period or is based on a prior title insurance policy should be used only after consultation with the client and obtaining the client’s informed consent. Many residential and commercial closing attorneys rely heavily on prior title policies for back title, and they may want to tweak their practices after they read this opinion.

Closing attorneys’ files should be papered with those informed consents confirmed in writing!

Small Bank Wins CFPB Challenge at the Appellate Level

Eleven states, including SC, lose in the same case.

The U.S. Court of Appeals for the District of Columbia ruled on July 24 in favor of a small Texas bank in its constitutionality challenge of the Consumer Financial Protection Bureau (CFPB).

In State Bank of Big Spring v. Lew, the Court of Appeals reversed the District Court’s holding that the bank’s claims failed for lack of standing and ripeness. Eleven states, including South Carolina, had joined the lawsuit, but the states’ claims were held to fail on the issues of standing and ripeness.

The bank first challenged the constitutionality of the CFPB on the grounds that all independent agencies must be headed by multiple members, while the CFPB is headed by a single Director.

The Court held that the Bank had standing to raise this challenge because the Supreme Court holds that there is ordinarily little question that a regulated individual or entity has standing to challenge an allegedly illegal statute or rule under which it is regulated. Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992).

On the issue of when the bank may bring its claim, the ripeness issue, the Court of Appeals again cited a Supreme Court case, Abbott Laboratories v. Gardner, 387 U.S. 136 (1967) for the proposition that regulated parties generally need not violate a law in order to challenge the law.

The bank then questioned the legality of President Obama’s recess appointment of CFPB Director, Richard Cordray. Mr. Cordray was nominated on July 18, 2011. When the Senate had not acted on the nomination by January 4, 2012, President Obama used his recess power to appoint Mr. Cordray during a three-day intra-session Senate recess. On July 16, 2013, after Mr. Cordray had been serving for 18 months, the Senate confirmed his nomination.

The bank alleges that the recess appointment and all the actions Cordray took before he was confirmed were unlawful because the appointment occurred during an intra-session recess of insufficient length. The Court held that the bank had standing on this issue, and that the issue is ripe.

The bank then argued that the Financial Stability Oversight Council created by the Dodd-Frank Act is unconstitutional. This council has authority to designate financial institutions as “too big to fail” and subject to additional regulation. The bank has not been designated as “too big to fail”, but its competitor, GE Capital Corporation, has. The bank argued that GE Capital receives a reputational subsidy as a result of its designation which allows it to raise capital at lower costs that it otherwise could, impacting the bank’s ability to compete for the same funds. The Court held that the bank does not have standing to assert this claim because the link between the enhanced regulation and any harm to the bank is too attenuated and speculative to support standing.

Eleven states challenged Dodd-Frank’s “orderly liquidation authority” which gives the Government broad power to liquidate failing financial institutions that pose a significant risk to the stability of the U.S. financial system. The states’ theory for standing and ripeness deals with the fact that the states and their pensions funds have invested in financial companies and their current investments may be worth less because of this authority.

The Court held that it is premature for a court to consider the legality of how the government might wield the orderly liquidation authority in a potential future proceeding. The states’ theory was held not to satisfy standing or ripeness requirements.

The case was remanded to the District Court on the bank’s challenges to the constitutionality of the CFPB and Director Cordray’s recess appointment.

It’s getting interesting out there!

FHA Settlement Certification Will Require Tweaking After October 3

FHA answers a FAQ; it doesn’t officially change the certification

The Federal Housing Administration (FHA) released a new settlement certification this summer in anticipation of the implementation of the TRID rules on October 3. The new certification is intended to replace FHA’s current addendum to the HUD-1 Settlement Statement and will be used for the new Closing Disclosures once the TRID rules become effective.

The new certification reads:

“To the best of my knowledge, the Closing Disclosure which I have prepared is a true and accurate account of the funds which were (i) received, or (ii) paid outside closing, and the funds received have been or will be disbursed by the undersigned as part of the settlement of this transaction. I further certify that I have obtained the above certifications which were executed by the borrower(s) and seller(s) as indicated.”

Please note that the new certification contains the language “which I have prepared”. As we have all heard by now, many of the large lenders have indicated that settlement agents will not prepare the Closing Disclosures to be delivered to borrowers. Because of the perceived liability, several of the larger lenders have announced that they will prepare the deliver borrowers’ Closing Disclosures.

Settlement agents (closing attorneys in South Carolina) will prepare and deliver sellers’ Closing Disclosures in all cases and will prepare the borrowers’ forms for the smaller lenders who are not taking the responsibility internally.

American Land Title Association reached out to FHA, the Mortgage Bankers Association and individual lenders to inform them that the new certification would be inaccurate in the cases where the lender prepares the Closing Disclosure. FHA did not revise its certification, but, in connection with issuing an additional 120 new FAQs to its Single-Family Handbook Frequently Asked Questions, it answered the following question this month:

FAQ 347:

Q: “The Model Settlement Certification requires the Settlement Agent certifying that he or she has prepared the Closing Disclosure but the CFPB’s requirements for issuing the new TRID Closing Disclosure will make this unlikely to be the case. Should the Settlement Agent sign the form anyway?”

A: “FHA does not wish for anyone to make a false certification. Because this is a model component, FHA will accept the tailoring of this phrase to the actual circumstances. This if the Settlement Agent does not prepare the closing disclosure, he or she should remove or strike through the statement ‘which I have prepared’ before executing the Settlement Certification.

FHA is only providing this guidance through the FAQ. It is neither revising the certification nor clarifying the instructions on the certification itself. As a result, closing attorneys will be required to educate their staff members about the necessity to revise the certification for FHA closings after the new rules take effect.

Waters Of The United States Redefined

South Carolina is among the states suing the Feds

The Environmental Protection Agency and the Army Corps of Engineers published a Final Clean Water Act Rule defining “waters of the United States” on June 29. The effective date of the rule, which greatly expands the scope of jurisdictional waters, is August 28. The full text of the rule can be read here.

The Clean Water Act’s jurisdiction relates to “navigable waters” which was previously defined simply as “waters of the United States or the territorial seas”. This vague definition led to numerous lawsuits and much regulatory interpretation, but confusion persisted. For this reason, the EPA and the Army Corps of Engineers decided to resolve the uncertainty by promulgating a new definition by federal rule. Supporters say the true motivation for the rule is to protect the safety of drinking water and stream health.

The new rule will affect several industries, two of which are of particular importance to real estate practitioners: construction and housing. The rule will undoubtedly lead to considerable additional costly federal permitting and is likely to slow development.

The rule deems all tributaries to traditional navigable waters with beds, banks and ordinary high water marks, as jurisdictional, regardless of size. The definition of “wetlands” has been expanded to include “neighboring” wetlands which incorporates all waters within the floodplain or within specified distances from the ordinary high water mark of traditional navigable waters, their tributaries and impoundments.

Of local significance, the rule extends protections to “Carolina Bays”, on a case-by-case basis, depending on the significance of their nexus to navigable waters. Carolina bays are defined as ponded depressional wetlands that occur along the Atlantic coastal plains.

Two lawsuits were filed by 22 states on the day after the rule was published. South Carolina is a plaintiff in Georgia v. McCarthy, which claims the rule infringes on state sovereignty by eliminating the states’ primary authority to regulate and protect water under state standards. The lawsuit also alleges that the rule imposes significant new federal burdens on the states, homeowners, business owners and farmers by forcing them to obtain costly federal permits to continue to conduct activities on their property that have no significant impact on navigable, interstate waters.

The second lawsuit, North Dakota v. McCarthy, alleges that the rule harms states in their capacity as owners and regulators of waters and lands within their respective jurisdictions.

It is likely that other challenges to the new rule will follow. In addition to the challenges by the states, the housing, construction, farming and oil industries are opposed to the implementation of this far reaching rule.

Hilton Head Timeshare Project Entangled In Consumer Litigation

Lawsuits involve tales of fraudulent sales tactics

Hilton Head’s Island Packet newspaper continues to report on approximately sixty state and federal lawsuits pitting disgruntled consumer purchaser plaintiffs against The Coral Sands Resort timeshare project on Pope Avenue in Hilton Head. The cases have been weaving their way through the court systems for three years.

The lawsuits involve tales of fraudulent tactics by timeshare salesmen, such as promises of extra weeks in related projects that never materialize, promises of waived maintenance fees that never materialize, a pattern of baiting-and-switching units, promises that the developer will purchase timeshare units owned by the consumers in other projects as a sort of trade in, and sales of weeks that are available only every other year or every third year as if they were available every year. In short, the purchasers claim they were misled by sales pitches, and the documents they received did not reflect what had been told.

Most recently, Dan Burley reported on July 1 that two out-of-state couples received full refunds through arbitration. These two decisions are the first rulings in the various cases.

According to the July 1 article, separate arbitrators voided the couples’ contracts and ordered refunds because the contracts were determined to have violated aspects of the South Carolina Timeshare Act.

But the relief the consumers had requested went far beyond the refund of several thousand dollars. One of the cases was arbitrated by Hilton Head lawyer Curtis Coltrane. His twelve-page Award was attached to the news report and discussed allegations of common law fraud, negligent misrepresentation, civil conspiracy and Unfair Trade Practices, among others. All of those claims were dismissed for lack of evidence. The arbitrator stated that the plaintiffs were intelligent individuals who should have been able to ascertain the contents of the documents by reading them.

The second suit was arbitrated by Florence lawyer Richard L. Hinson with a similar result. As in the first case, all claims were dismissed except for the causes of action for Violation of the South Carolina Timeshare Act, in Mr. Hinson’s two-page award.

Representatives of the project are quoted as saying that thousands of customers are pleased with their Coral Resorts experience, and that owners who suffer from buyers’ remorse can ask for a refund within five days of signing the contract.

Mr. Burley’s previous articles in The Island Packet provide additional detail. I recommend the previous …and future articles on this litigation for interesting reading!

Be Vigilant to Prevent “Business E-mail Compromise” Scams

Wire fraud is on the rise! Train your staff!

United States business e-mail accounts are under attack by sophisticated fraudsters.

The FBI, Financial Services Information Sharing and Analysis Center (FS-ISAC) and the United States Secret Service issued a financial services bulletin on June 19 warning against increasing wire transfer fraud against U.S. businesses referred to as “Business E-mail Compromise” (BEC) scams.

The bulletin warned that BEC is a type of payment fraud that involves the compromise of legitimate business e-mail accounts for the purpose of conducting unauthorized wire transfers. Many compromised accounts belong to business CEOs or CFOs. The funds are primarily sent to Asia, but funds involved in these schemes have been diverted to locations around the globe.

BEC fraud compromises e-mail accounts through phishing, social engineering or malware used to obtain the user’s password. Once an e-mail account is compromised, fraudsters begin accessing and reviewing e-mails, including meeting and calendar information, contacts lists, and information concerning business partners, vendors and customers.

This activity enables the fraudsters to interject themselves into normal business communications masquerading as the person whose account was compromised. This reconnaissance stage lasts until the actor feel comfortable enough to send wire transfer instructions using either the victim’s e-mail or a spoofed e-mail account. E-mails are typically sent to an employee with the ability to wire funds. A common tactic is to wait until the victim is away on legitimate business travel to send new wire instructions, making it more likely that individual would use e-mail to conduct business and making it more difficult to verify the transaction as fraudulent while the victim is in transit. The requests will sometimes state that the wire transfer is related to urgent or confidential business matters and must not be discussed with other company personnel.

Other incidents involve the compromise of a vendor or supplier’s e-mail account with the intention of modifying the bank account associated with that business. This scheme may also be labeled “vendor fraud” and often involves last minute changes of the bank and account number for future payments.

There is a relatively easy fix: all wire information received via e-mail should be verbally verified using established business telephone numbers.

Other suggestions to guard against this fraud are:

Limit the number of employees with authority to handle wire transfers.
Have a second employee designated as an approver for any wire transfer requests.
Be careful opening attachments and clicking on links even if the e-mail appears to be from a legitimate source if you believe wire instructions may be included in the communication.
Look out for e-mails that contain significant changes in grammar, sentence structure and spelling compared to previous communications.
Look out for suspicious communications particularly toward the end of the week or the end of a business day. The fraudsters will have more time to access and divert funds.
Maintain a file, preferably in non-electronic form, of vendor contact information, including telephone numbers.
Look out for “spoofed” e-mail addresses that are made to look like the real addresses. Fraudsters use tactics like character substitution, addition and omission to make e-mails addresses appear legitimate. Here are some examples using a Chicago Title address, richard.roe@chicagotitle.com

roe@chicag0title.com
roe@chicagotit1e.com
roe@chicagotitlee.com
roe@chicagottle.com
roe.chicagotitle@gmail.com
roa@chicagotitle.com

Be wary of wire transfers to countries outside of normal trading patterns.

Incidents should be reported to local offices of the FBI or Secret Service or to:

Dirt lawyers, protect your businesses and your clients’ funds by following these critical guidelines!

ALTA Approves “Model” Settlement Statements

paperwork The more we delve into the intricacies of the new Closing Disclosure (“CD”), the more we recognize that we will not be able to disburse directly from this form when the new rules take effect later this year. A separate document will be needed to prove that receipts and disbursements match in each closing file.

Many commercial closing attorneys have developed their own buyer’s and seller’s closing statement and matching disbursement analysis forms, but many residential closing attorneys have relied primarily on the HUD-1 closing statement. In addition, some closing attorneys have voiced concern that the required treatment of title insurance premiums on the CD (showing the full cost of the loan policy despite the fact that we have a simultaneous issue rate) creates the need for a separate form that will accurately reveal the cost of title insurance.

To answer the need for new forms, the American Land Title Association (ALTA) board adopted four new model settlement statements in May:

ALTA Settlement Statement Combined;
ALTA Settlement Statement Seller;
ALTA Settlement Statement Borrower/Buyer; and
ALTA Settlement Statement Cash.

The documents may be downloaded from ALTA in Excel, Word and PDF formats. The closing software companies should also have versions in their systems.

At least one bank has addressed the use of the ALTA model settlement statements. Bank of America was asked whether it would require the use of the ALTA model forms, and it stated in a June 9 memo that it prefers the ALTA model if a closing attorney chooses to use a settlement statement to supplement the CD, but specified that the settlement statement figures must reconcile to the CD and a copy of the settlement statement must be provided to the bank. The bank also stated that all revisions to fees and costs will require bank approval and an amended CD. In other words, closing attorneys will not be allowed to revise fees and costs by simply supplementing the CD with a settlement statement.

We expect other banks may make similar statements as implementation approaches.

Another Lender Communication to Settlement Agents…

… And a denial from the CFPB.

news Bank of America answered several frequently asked questions from settlement agents by memo dated June 9.

Significantly, BofA indicated that agents will not be allowed to accept its title or closing orders if they are not registered with Closing Insight™. Because BofA and several other lenders will require Closing Insight™, South Carolina closing attorneys who have not yet registered should follow this link to do so.

Asked whether BofA will require the use of ALTA model settlement statements, the bank responded that it prefers the ALTA model form if a closing attorney chooses to use a settlement statement to supplement the Closing Disclosure (“CD”), but specified that the settlement statement figures must reconcile to the CD and a copy of the settlement statement must be provided to BofA. The memo also stated that all revised fees and costs will require both bank approval and an amended CD. In other words, fees and costs cannot be revised by simply supplementing the CD with a settlement statement.

ALTA’s settlement statements are available for review and use at this link.

The memo confirmed our thinking that separate CDs will be provided to the buyer and the seller. BofA added that the buyer and seller will not sign the same form nor see the contents of the other party’s CD. Further, BofA will instruct the closing attorney to prepare and deliver the seller’s CD and to provide copies of CDs to the real estate agents.

Finally, the bank clarified its process for making post-disbursement fee modifications. If the closing attorney identifies the need for a change in the numbers reflected on the CD, the attorney must request that the “collaboration session” be reopened in Closing Insight™, and the bank will review the update made by the attorney to determine whether a revised CD is necessary. The party in possession of any excess funds will be responsible for sending the funds to the buyer/borrower, while BofA will prepare and send the revised CD to the buyer/borrower. The closing attorney will be responsible for revising and delivering the seller’s revised CD, if necessary.

In related news, on June 3, the CFPB released a fact sheet in response to “much information and mistaken commentary” surrounding perceived closing delays that will be caused by the implementation of the new rules. The CFPB denied that the new CDs will delay closings “for just about everybody.” In response to the belief that any change in the CD will cause a new 3-day review period, the CFPB clearly stated that only the following matters will trigger an additional 3- day wait:

The new APR (annual percentage rate) increases by more than 1/8 of a percent for fixed-rate loans or ¼ of a percent for adjustable loans. A decrease in the APR will not require a new 3-day review if it is based on changes to interest rate or other fees.
A prepayment penalty is added, making it expensive to refinance or sell.
The basic loan product changes, such as a switch from fixed rate to adjustable interest rate or to a loan with interest-only payments.

The following circumstances will not require a new 3-day review, according to the fact sheet:

Unexpected discoveries on a walk-through such as a broken refrigerator or a missing stove, even if they require seller credits to the buyer.
Most changes to payments made at closing, including the amount of the real estate commission, taxes and utilities proration, and the amount paid into escrow.
Typos found at the closing table.

The CFBP’s denial notwithstanding, we are all naturally concerned about other matters that will cause delays during the transition period, particularly the steep learning curve that must be overcome by everyone involved in closings. But we will all work hard to get through the transition period together! We’re predicting that closings will be much smoother by the beginning of 2016.

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