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FOS Blog

01 Jun

TRID: Black Hole Amendment

TRID: Black Hole Amendment

The Consumer Financial Protection Bureau (CFPB) finalized an amendment in April 2018 regarding its “Know Before You Owe” rule known as the “black hole.”  The “black hole” refers to the conflicting timing requirement for the Loan Estimate and Closing Disclosures to be provided to borrowers    which could cause creditors to absorb any increases in costs prior to consummation.   Prior to this amendment creditors were unable to provide revised Closing Disclosures within four or more days of consummation.

Following the amendment, creditors can now reset tolerances using a revised Closing Disclosure with no regard for the four business days before consummation if the initial Closing Disclosure was provided to borrowers within four business days of consummation.   Also noted in the amendment are the following six reasons that the bureau allows lenders to issue a revised Closing Disclosure within the four day period:

  1. A set of changed circumstances that caused estimated charges to increase or an aggregate amount of charges to increase more than 10%.
  2. The borrower is ineligible for a charge that was previously disclosed because of circumstances that affects the borrower’s creditworthiness or the value of the property.
  3. A change in credit terms was requested by the borrower.
  4. The interest rate was not locked when the Loan Estimate was provided which caused changes within points and lender credit charges.
  5. Borrower acknowledges an intent to proceed more than 10 business days after the Loan Estimate was provided.
  6. The creditor clearly and conspicuously states a revised Closing Disclosure may be issued in the event the loan is a construction loan that is not expected to close within 60 days of the Loan Estimate being provided.

Once one or more of the preceding triggering event has occurred, the creditor has 3 business days to provide the borrower with a revised Closing Disclosure.

Although the amendment to the “Know Before You Own” Rule is finalized, the rule is not currently in affect.  This rule will be in affect within 30 days of being published in the Federal Register.

For additional information contact