TRID and Disclosing Projected Taxes
Issue/Inquiry
In reviewing closing documents, the Bank discovered that $0 had been entered in the projected payments box of the Closing Disclosure for estimated taxes and insurance because the Bank was not escrowing for taxes and insurance. Should the amount of taxes and insurance have been entered in the projected payments box? Should a corrected disclosure be sent to the borrower?
Response Summary
There is no requirement to provide corrected Closing Disclosures, since the failure to disclose the estimated taxes and insurance was not a clerical error and did not increase the amount of closing costs paid by the borrower. However, the Bank may wish to provide a corrected Closing Disclosure nonetheless in order to demonstrate good faith and complete the record of the loan.
Response Detail
Under the TRID rules of Regulation Z, the Projected Payments box in the Loan Estimate and Closing Disclosure must list the sum of mortgage-related taxes, insurance, and assessments, expressed as a monthly payment, whether or not it is included in the disclosed escrow. 12 CFR 1026.37(c)(4); 38(c)(1).
This means that, while the question of whether the taxes and insurance will be escrowed for must be addressed, the estimated taxes and insurance must be disclosed whether or not they are escrowed for.
With respect to corrections, the TRID rules provide that, if during the 30-day period following consummation, an event occurs in connection with the settlement of the transaction that causes the Closing Disclosures to become inaccurate, and such inaccuracy results in a change to an amount of closing costs actually paid by the consumer from that amount disclosed, the creditor must deliver or place in the mail corrected disclosures no later than 30 days after receiving information sufficient to establish that such event has occurred. 12 CFR 1026.19(f)(2)(iii).
In this case, the terms will have been made inaccurate by the failure to list the estimated taxes and insurance in the Projected Payments box, but the inaccuracy will not result in a change in the closing costs paid by the borrower.
The TRID rules also address so-called “clerical errors,” which are non-numerical errors affecting the timing, delivery other requirements pertaining to the Loan Estimate and Closing Disclosure. If there are clerical errors, the creditor must deliver or place in the mail corrected disclosures no later than 60 days after consummation. 12 CFR 1026.19(f)(2)(iv); Official Interpretations, 1026.19(f)(iv) – 1.
Since the disclosure of the estimated taxes and insurance is numerical, the failure to make the disclosure is not a clerical error.
While there is no requirement to correct the Closing Disclosure, and a corrected disclosure will not likely remedy the failure to provide the required disclosures, the Bank may wish to do so in order to demonstrate good faith and complete the record of the loan.