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From Banking and Finance Law Daily, April 26, 2018

Know Before You Owe revised disclosure timing requirement amended

By Richard A. Roth, J.D.

The Consumer Financial Protection Bureau has amended Reg. Z—Truth In Lending (12 CFR Part 1026) to adjust the rule on when a mortgage lender may pass on increased closing costs to a mortgage loan borrower and disclose the higher costs on the Closing Disclosure. The amendment changes one aspect of the Bureau’s Know Before You Owe mortgage disclosure rule that took effect Oct. 3, 2015.

According to the Bureau, the rule as originally adopted could prevent a lender from disclosing an increased closing cost on the Closing Disclosure even when there was a valid reason for the increase, and even when the increase resulted from a change requested by the borrower. The effect of the amendment is to allow a lender to establish that an estimated closing cost was disclosed in good faith by comparing the cost to the Closing Disclosure rather than to the Loan Estimate.

The original rule created a "four-business day limit" on when increased costs could be disclosed using a revised Closing Disclosure. This limit applied if there were fewer than four days between when Reg. Z would require revised disclosures and the loan closing. The amendment removes this four-day restriction. Instead, the lender must provide the revised disclosures within three business days of learning that one of the permissible reasons for the revision applies.

The amendment will take effect 30 days after it is published in the Federal Register.

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