Curing Defects on Closing Disclosures
Mistakes happen. Things change. Life is unpredictable.
Sometimes after closing things happen that make the CD the borrower received to be no longer accurate, or you’ll notice a mistake was made and the borrower paid a higher fee than he or she should have.
Here’s how to fix those mistakes.
Change Due to Events Occurring after Consummation
This is probably the more well-known rule. If an event occurs in connection with a settlement within 30-days after closing, and the event causes the consumer to actually pay a different amount than what is disclosed on the CD, then the creditor needs to place in the mail corrected CDs no later than 30-days after discovering the event occurred.
But if the event causes the consumer to pay an amount above tolerance, then see the 60-day refund rule.
Changes Due to Clerical Errors
Non-numeric clerical errors can be cured by placing corrected CDs in the mail no later than 60 days after closing.
60-Day Refund Rule
If, within 60 days after closing, it is discovered that the consumer actually paid more than what was disclosed on the LE, or more than what was allowed under the tolerance rules, then the creditor must refund the excess amount with a revised closing disclosure.
So, for example, if the consumer pays an extra $30, $25, $25, and $10 over the disclosed LE fees on four itemized services subject to 0% tolerance, then the excess $90 must be refunded within 60 days of the closing. If the consumer also pays $1,190 on a service the LE estimated at $1,000 subject to 10% tolerance,* then the creditor must refund the excess $90 there as well (for a total of $180) no later than 60 days after the closing.
Don’t forget to take advantage of these rules to fix any mistakes discovered. The costs of fixing and refunding will be much less than if you are forced to do it by a regulator.
* The 10% tolerance means the consumer can pay up to $1,100 on a fee estimated at $1,000 on the LE. Thus, the extra $90.