TRID 2.0 provides new guidance on how a principal reduction should be disclosed on the Closing Disclosure, which (primarily) includes the following:
“A principal reduction that occurs immediately or very soon after closing must be disclosed in the summaries of transactions table on the standard Closing Disclosure pursuant to § 1026.38(j)(1)(v) [Lines K.04 through K.07] or in the payoffs and payments table on the alternative Closing Disclosure pursuant to § 1026.38(t)(5)(vii)(B) [“K. Payoffs and Payments”]. The disclosure of a principal reduction under § 1026.38(j)(1)(v) or (t)(5)(vii)(B) includes the following elements: (1) The amount of the principal reduction; (2) the phrase ‘principal reduction’ or a similar phrase; (3) for a principal reduction disclosure under § 1026.38(t)(5)(vii)(B) only, the name of the payee; (4) if applicable to the transaction, the phrase ‘Paid Outside of Closing’ or ‘P.O.C.’ and the name of the party making the payment; and (5) if the principal reduction is used to satisfy the requirements of § 1026.19(f)(2)(v) [tolerance cure], a statement that the principal reduction is being provided to offset charges that exceed the legal limits, using any language that meets the clear and conspicuous standard under § 1026.38(t)(1)(i).
[¶] If a creditor is required to disclose the name of the party making the payment or that the principal reduction is being provided to offset charges that exceed the legal limits, and there is insufficient space under the § 1026.38(j)(1)(v) or (t)(5)(vii)(B) disclosure for these elements of the principal reduction disclosure, the creditor may omit these elements from the § 1026.38(j)(1)(v) or (t)(5)(vii)(B) disclosure. If the creditor omits these elements from the § 1026.38(j)(1)(v) or (t)(5)(vii)(B) disclosure, the creditor must provide a complete principal reduction disclosure under an appropriate heading on an additional page, in accordance with § 1026.38(j) and (t)(5)(ix), as applicable, with a reference to the abbreviated principal reduction disclosure under § 1026.38(j)(1)(v) or (t)(5)(vii)(B).” (12 CFR Pt. 1026, Supp. I, Paragraph 38 – 4; 82 FR 37785 [2017])
We are modifying our generic copies of the CD to support the formats of the principal reduction disclosures outlined in this Principal Reduction Formats document.
We have based these formats on the examples provided in 12 CFR Pt. 1026, Supp. I, Paragraph 38 – 4.i & ii. The amount of the principal reduction will be disclosed before the description “Principal Reduction” if the amount is paid outside of closing (on both the standard- and alternative-tables of the CD), per the examples, as well as to prevent the amount from being included in the total Section K calculations. If a description of the principal reduction appears on the addendum to the CD, the amount of the reduction will appear before the description.
We are modifying the following series of fields to support these formats:
- “Payoff/Payment [X] Item Type” series;
- “Section K Item Type [X]” series, for all Section K lines that are permitted to disclose a principal reduction.
All of these fields now include the Type options of “Principal Reduction” and “Principal Reduction Cure” to distinguish between the types of reductions, which is necessary to disclose the proper principal reduction format. For TRID 2.0 loans only (Field 118689 “TRID 2.0 Indicator” = Yes), the proper principal reduction language will print when the previously mentioned field Types are set to “Principal Reduction” or “Principal Reduction Cure”. Note that the corresponding “Description” fields do not need to be populated for principal reductions, since the proper verbiage is hard-coded on the Closing Disclosure per the CFPB examples.
These changes will be in effect on August 29, 2018. These changes are currently available on ConformX Stage for testing. Please note that client-specific customizations may be impacted by these generic modifications. As always, we encourage clients to test these changes. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
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Update: Although unrelated to the principal reduction changes, certain TRID 2.0 regulation changes also mean that Trust information no longer needs to print under the “Applicant” (for the LE) or the “Borrower” (for the CD) designations. Since a normal Inter Vivos Revocable Trust is not “applying for the credit” [12 CFR § 1026.37(a)(5)] and is not the person “to whom the credit is offered or extended” [Official Interpretation to 38(a)(4)-4], the Trust fields will no longer print under the “Applicant” or “Borrower” headings on the Loan Estimate or Closing Disclosure, respectively. For Trusts that are applying for the credit or are the person to whom the credit is offered or extended, the corresponding indicator should be set:
- Borrower 1 is Trust (FI 118154)
- Borrower 2 is Trust (FI 118214)
- Borrower 3 is Trust (FI 118274)
- Borrower 4 is Trust (FI 118334)
This change will impact the English and Spanish Loan Estimate and Closing Disclosure, Cx18565, Cx18566, Cx18990, and Cx18991.
This change will also be in effect on August 29, 2018 for TRID 2.0 loans only (Field 118689 “TRID 2.0 Indicator” = Yes). If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.
DR 270425