The Wednesday Closing Disclosure and the Late Seller Credit
Pat, a licensed MLO at a nonbank lender, has a purchase loan scheduled to close Friday at 10:00 a.m. The title company emails the Closing Disclosure Wednesday at 4:00 p.m., and the borrowers open and e-sign it at 4:12 p.m. the same day. No federal holiday falls in the period. Thursday morning the seller's agent calls: the seller has agreed to a $2,400 repair credit that does not appear on the CD (the seller-credit line reads $0), and the buyers want it applied to their cash to close. Pat's processor says, 'A seller credit only helps the borrower, so we can reprint the CD Thursday night and still close Friday.' Separately, the file shows the lender's $995 underwriting fee was quoted on the Loan Estimate but the actual charge is $1,350.
1. Does the Friday consummation satisfy the Closing Disclosure waiting period? Show the day count and state whether the borrowers can waive the wait.
Read the worked answer
No - Friday is one day too early.
- For the CD waiting period, a business day is every calendar day except Sundays and federal legal public holidays. Saturdays count.
- Receipt is measured when the document is delivered, not when it is signed. Because the borrowers e-signed at 4:12 p.m. Wednesday under valid e-delivery consent, receipt is Wednesday.
- Count the three business days that must pass before consummation:
- Thursday = day 1
- Friday = day 2
- Saturday = day 3
- Consummation may occur only after the third business day, so the earliest permissible closing is Monday.
The wait cannot be shortened by borrower consent, by the processor's convenience, or by the fact that the change helps the borrower. There is no waiver mechanism for this timing rule. Pat's options are to move closing to Monday or to accept that the closing must be rescheduled.
2. Assume closing moves to Monday. How must the $2,400 seller credit be handled, and does it restart the three-business-day clock?
Read the worked answer
A corrected CD is required, but the clock does not restart.
- Whenever the terms reflected on the CD delivered to the borrower change before consummation, a corrected CD must be delivered no later than consummation - unless the change is one of the three triggering events, which are: the APR becomes inaccurate beyond tolerance (1/8 of 1% for a regular transaction, 1/4 of 1% for an irregular one), the loan product changes, or a prepayment penalty is added.
- A seller credit applied to cash to close generally does not move the APR, does not change the loan product, and adds no prepayment penalty. So this is a corrected-CD-at-consummation situation, not a new three-day wait.
- Practically, Pat must update the seller-credit line, the Calculating Cash to Close table, and the cash-to-close figures, and confirm the title company reissues before Monday's signing.
- Watch the excess-credit rule: a seller credit cannot exceed the borrower's actual closing costs, prepaids, and escrow deposits. Any excess must be applied to reduce the sales price (or another allowable charge) - it cannot be used to boost the down payment or reserves.
3. What is the tolerance category for the underwriting fee, and what must the lender do about the $355 overage?
Read the worked answer
Zero-percent tolerance.
- A fee charged by the creditor and retained by the creditor (or by an affiliate) is a 0% tolerance item. It may not increase over the Loan Estimate amount absent a valid changed circumstance, and there is no valid changed circumstance here - the lender simply quoted one number and charged another.
- Remedy: the lender must refund the $355 excess to the borrower within 60 days of consummation and deliver a corrected CD reflecting the refund within the same 60-day window.
- Because the Cure and the corrected CD are separate from the timing question in Task 1, Pat should not treat the refund as permission to close Friday.
- If the fee increase had pushed the APR past 1/8 of 1% (or 1/4 of 1% for an irregular transaction), a revised CD plus a new three-business-day waiting period would also be required before consummation - the cure does not substitute for correct disclosure timing.