When Do I Need to Provide an Updated Closing Disclosure?
Q: The TILA-RESPA integrated disclosures regulation set forth instances when a corrected closing disclosure and a restart of the three-business-day waiting period are required. Is re-disclosure required when there is a change to the loan amount that does not change the loan product, add a prepayment penalty or cause the APR to become inaccurate? In such instances, are banks required to provide a revised CD? If so, does this restart the waiting period?
A: Yes—see 1026.19(f)(2)(i) & (ii). Banks are required to re-disclose, but under the circumstances you describe, a new waiting period would not be required. A change in loan amount that does not cause the APR to be inaccurate (as defined by the regulation) and occurs in the period after a closing disclosure has been provided to the consumer but prior to closing, requires a corrected closing disclosure. It does not require a new waiting period. This corrected closing disclosure may be provided to the consumer at or before closing. (Response provided Sept. 2016.)
Q: If a commercial loan or line of credit is secured by a first lien on a dwelling, do we need to send a valuation disclosure? For this same first lien, dwelling-secured loan, must we send a copy of the valuation to the customer? What if we’re relying on the existing appraisal? Would we have to provide a copy of that again?
A: Yes—the ABA/MBA frequently asked questions on delivery requirements for copies of appraisals addresses this question. One of the questions and answers is:
Are business purpose loans covered by the ECOA Appraisal Rule?
Yes, the final rule covers an application for business credit to be secured by a first lien on a dwelling. According to the rule’s preamble, the final rule “does not exclude business credit when it is secured by a first lien on a dwelling because business credit is covered by ECOA and Regulation B. … Section 702(d) of ECOA does not limit the term ‘credit’ to credit for personal, family, or household purposes, and Regulation B has long interpreted ‘credit’ to include personal and ‘business credit.’”
The Commentary to §1002.14(a)(1)-2 regarding renewals states:
Section 1002.14(a)(1) applies when an applicant requests the renewal of an existing extension of credit and the creditor develops a new appraisal or other written valuation. Section 1002.14(a)(1) does not apply to the extent a creditor uses the appraisals and other written valuations that were previously developed in connection with the prior extension of credit to evaluate the renewal request.”
Keep in mind, however, that under the Interagency Appraisal and Evaluation Guidelines an evaluation resulting from a prior appraisal may be considered a “new evaluation.” Therefore, if a new appraisal or “other written valuation” is obtained/prepared in relation to the request, a copy would need to be provided to the borrower/applicant. (Response provided Sept. 2016.)
Q: Currently, we suspend an equity line of credit when we know that all borrowers are deceased. We have been told that to comply with Regulation Z, we should send a letter to the deceased borrowers’ address within three days of taking the action to freeze the account. We believe a notice isn’t necessary as all borrowers are deceased. I cannot find anything in the regulation that would permit us to stop sending letters. Can you tell me where to look?
A: Yes. The commentary to §1026.40(f)(2)(iii)-2.i.E says that a creditor may terminate and accelerate a HELOC under the “impairment of security” provisions when “the sole consumer obligated on the plan dies.” This presumably would apply also to situations where “all borrowers are deceased” (if not all are deceased, then consult with legal counsel).
Also, the commentary at §1026.40(f)(2)-2 states: “If an event permitting termination and acceleration occurs, a creditor may instead take actions short of terminating and accelerating. For example, a creditor could temporarily or permanently suspend further advances, reduce the credit limit, change the payment terms, or require the consumer to pay a fee. A creditor also may provide in its agreement that a higher rate or higher fees will apply in circumstances under which it would otherwise be permitted to terminate the plan and accelerate the balance. A creditor that does not immediately terminate an account and accelerate payment or take another permitted action may take such action at a later time, provided one of the conditions permitting termination and acceleration exists at that time.”
Additionally, should the creditor simply suspend further advances, then per the commentary to §1026.9(c)(1)(iii)-2 in relation to a “notice to restrict credit,” “A creditor need not provide a notice under this paragraph if, pursuant to the commentary to §1026.40(f)(2), a creditor freezes a line or reduces a credit line rather than terminating a plan and accelerating the balance.” There may, however, be state law or similar provision requiring some type of notification be sent, yet from a regulatory perspective, a notice would not appear to be required. (Response provided Sept. 2016.)
Q: The Telephone Consumer Protection Act states that prior express written consent is required for all autodialed calls, pre-recorded calls or texts sent or made to a wireless number and pre-recorded calls made to wired numbers for advertising or telemarketing purposes. Is there any guidance within the TCPA that makes reference to obtaining prior written consent for manually dialed outbound calls to existing customers’ cellphones to solicit applications?
A: As you stated, the TCPA, with limited exceptions, requires prior express written consent for telephone calls using an autodialer or a prerecorded voice to deliver a telemarketing message to a wireless number, and prerecorded telemarketing calls to a residential line. The Federal Communications Commission has interpreted the meaning of the term autodialer broadly to encompass equipment that has the “potential ability” to store or produce and dial random or sequential numbers. Thus, how you make the call—whether you make the call manually or not—is not dispositive. The key is whether the equipment you are using has the potential ability to perform as an autodialer.
You may wish to review the section from the FCC’s July 2015 order that discusses autodialers (Section III. Petitions for Declaratory Ruling and Exemption). ABA members can also obtain ABA’s staff analysis of that order at aba.com/compliance, which discusses this issue in greater depth. (Response provided Sept. 2016.)
Answers are provided by Leslie Callaway, CRCM, CAFP, director of compliance outreach and development; Mark Kruhm, CRCM, CAFP, senior compliance analyst; and Rhonda Castaneda, CRCM, compliance analyst, ABA Center for Regulatory Compliance. Answers do not provide, nor are they intended to substitute for, professional legal advice. Answers were current as of the response date shown at the end of each item.
