Property taxes and good faith

NAFCU’s first Virtual Regulatory Compliance School runs from July 28th through August 6th, so for today’s blog we will look at one of the topics covered at school: the TILA-RESPA Integrated Disclosures rule (TRID). Interest rates for mortgage loans have been at historic lows this summer, and so I decided to investigate refinancing my mortgage loan. I received the loan estimate within three business days of submitting the loan application as required by section 1026.19(e)(1)(iii) of Regulation Z. I then received the closing disclosure more than three business days before the closing and consummation of the loan as required by section 1026.19(f)(1)(ii)(A). But something looked amiss. The closing disclosure indicated that I needed to bring an additional $2,000 cash to close the loan. After reviewing both documents, it became evident that the discrepancy was because the lender did not disclose anything on the loan estimate for property taxes but then included $2,000 for property taxes on the closing disclosure. Upon seeing the difference, my first question was whether this was permissible under TRID.

TRID Tolerances

The NAFCU Compliance Blog has previously addressed the issue of tolerances for settlement costs under TRID. Section 1026.19(e)(1)(i) requires credit unions to provide good faith estimates in the loan estimate, and section 1026.19(e)(3) explains what constitutes good faith with respect to estimate closing costs. The general rule under section 1026.19(e)(3)(i) is that a closing cost disclosed in the loan estimate is in good faith if the charge ultimately imposed upon the borrower is not greater than what was disclosed in the loan estimate. The rule permits three exceptions to this general rule:

• The total amount of recording fees and closing costs imposed upon the borrower for third-party settlement services a borrower can shop for can be greater than what was disclosed on the loan estimate up to a 10% threshold;

 

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