On February 26, the Consumer Financial Protection Bureau added ten FAQs concerning lender credits to its TILA-RESPA Integrated Disclosures (“TRID”) FAQs resource.
The new lender credit FAQs appear to be consistent with the industry’s current practices for managing and disclosing lender credits. They address topics such as:
- How to define a lender credit for the purposes of TRID;
- The differences between specific and general lender credits;
- When are lenders required to disclose lender credit and closing costs on the Loan Estimates and Closing Disclosures;
- How are lender credits disclosed on the Loan Estimates and Closing Disclosures; and
- When lenders can change lender credits.
The last topic is potentially the most helpful, as some lenders have questioned when they could reduce previously disclosed lender credits. The FAQ states, “[l]ender credits may decrease only if there is an accompanying changed circumstance or other triggering event under 12 CFR § 1026.19(e)(3)(iv)” and disclosures are timely issued to the consumer. See TILA-RESPA Integrated Disclosure FAQs, Lender Credits, No. 10. On its face, this indicates that a lender can reduce disclosed lender credits in connection with a changed circumstance event.
Despite this, TRID regulations and commentaries only discuss reduction of a lender credit in the context of interest rate dependent charges (i.e., charges that change because the loan’s interest rate changed from floating to lock). See 12 CFR 1026.19(e)(3)(iv)(D) and official comments 1. Furthermore, TRID regulations and commentaries do not provide an example of a valid reduction of lender credits. See 12 CFR 1026.19(e)(3)(i) and official comment 5. Consequently, many lenders may continue the practice of reducing lender credits during a changed circumstance event only if they relate to interest rate dependent charges. To adequately address any such reservation among lenders, the CFPB may need to consider amending TRID regulations and commentaries to expressly match the language presented in the new FAQ.
Despite potential reservations, lenders should welcome this additional guidance on lender credits from the CFPB as it seeks ways to address uncertainties in the industry.