The WBA filed the following comment letter on behalf of the industry. Below is the text of the comment letter which WBA members are welcome to use for their own letters.

October 14, 2016


Legislative and Regulatory Activities Division
Office of the Comptroller of the Currency
400 7th Street SW., Suite 3E-218, Mail Stop 9W-11
Washington, DC 20219
Attention: 1557-0081, FFIEC 031, 041, and 051

Robert DeV. Frierson, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW.,
Washington DC, 20551
Attention FFIEC 031, FFIEC 041, and FFIEC 051

Manuel E. Cabeza, Counsel
Federal Deposit Insurance Corporation
550 17th Street NW.,
Washington, DC 20429
Attention: FFIEC 031, FFIEC 041, and FFIEC 051

Re:    Consolidated Reports of Condition and Income for Eligible Small Institutions; FFIEC 031, FFIEC 041, FFIEC 051.

Dear Agencies,

The Wisconsin Bankers Association (WBA) is the largest financial trade association in Wisconsin, representing approximately 270 state and nationally chartered banks, savings and loan associations, and savings banks. WBA appreciates the opportunity to comment on the Office of the Comptroller of the Currency, Treasury Department, Board of Governors of the Federal Reserve System, and Federal Deposit Insurance Corporation's (Agencies) proposal for a new Consolidated Reports of Condition and Income for Eligible Small Institutions (FFIEC 051).

WBA appreciates the agencies’ efforts to create a streamlined version of the existing Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only by proposing to remove certain existing schedules and data items replaced by a limited number of data items to be collected in a new supplemental schedule, eliminating certain other existing data items, and reducing the reporting frequency of certain data items. However, we would like to take this opportunity to request that the Agencies consider additional changes that we believe would further alleviate the significant call reporting burdens our member financial institutions face. We hope the Agencies will evaluate and address these burdens in subsequent rulemaking. 
WBA believes that the proposal for a new call report represents a logical change in the reduction of the FFIEC 051’s size. However, we are concerned that the reduction of burden will not be as significant as the Agencies predict. WBA understands that the proposed revisions that will result in a smaller report, while desirable, will realistically only save our members 5-10 minutes. The changes proposed will only remove portions of the call report have become largely obsolete. The items and schedules to be removed are not currently completed and thus while pages will be removed; the removal will not result in the reduction of any work actually performed. Thus, realistically, the only practical change is a reduction in size rather than a true reduction in burden.

While WBA appreciates the items that have been revised within the proposed rule we request that the Agencies consider additional revisions. Specifically, we would like to see a re-evaluation of requirements for sections RC-C, RC-E, RC-L and RC-R. WBA does not object to the collection of such loan, deposit, and capital data and understands the Agencies’ need for such, however, we believe that in order to provide practical relief to our members, those sections would require a reduction or change in reporting frequency, where limited reports are required during a given period. If a reporting financial institution does not present compliance risk, or a safety and soundness concern, WBA believes that there should be no need to complete certain areas. For example, we believe that well-capitalized banks should be required to complete RC-R only semi-annually. WBA also requests that line items not required be marked N/A or removed entirely as this is one of the more time consuming schedules for most of our members.

WBA again thanks the Agencies’ for their efforts to streamline call reporting. However, we believe that the proposed rule represents more of a psychological benefit in the reduction of size but not a practical one. In order to significantly reduce the burden financial institutions face in reporting requirements the Agencies should consider simplifying and shortening sections, specifically schedule RC-C and RC-R, reporting frequency, and permit N/A be entered where line items not required are, or remove such lines entirely. 

By, Eric Skrum

The WBA filed the following comment letter on behalf of the industry. Below is the text of the comment letter which WBA members are welcome to use for their own letters.

August 8, 2016


Ms. Monica Jackson, Executive Secretary
Bureau of Consumer Financial Protection
1700 G Street NW.,
Washington, DC 20552
Docket Number: CFPB–2016– 0032

Re:    Annual Privacy Notice Requirement Under the Gramm-Leach-Bliley Act (Regulation P); Docket Number: CFPB–2016–0032

Dear Ms. Jackson,

The Wisconsin Bankers Association (WBA) is the largest financial trade association in Wisconsin, representing approximately 270 state and nationally chartered banks, savings and loan associations, and savings banks. WBA appreciates the opportunity to comment on the Bureau of Consumer Financial Protection's (Bureau's) proposal to amend Regulation P.

WBA recognizes that the Bureau's proposed amendment would implement the exemption from the annual privacy notice requirements to the Gramm-Leech-Bliley Act (GLBA) made by the Fixing America's Surface Transportation Act as implemented through Regulation P. WBA appreciates the proposed amendment's clarification of timing requirements when the exemption is lost and the elimination of the alternative method for delivery of the annual privacy notice, as doing so removes any confusion of having both an exemption from the annual privacy notice and an alternative to the delivery requirement. 

While WBA acknowledges the benefit of the proposed amendment, we would also like to take this opportunity to respond to the Bureau's request for comment in two areas. Specifically, WBA appreciates the opportunity to comment regarding disclosures of information to affiliates and potential harm to consumers.

In order to meet the exemption to the annual privacy notice, information provided under 1016.5(e)(1)(ii) may not change. The Bureau seeks comment on whether this information should include the disclosures of information to affiliates required by 1016.6(a)(7) and the Fair Credit Reporting Act (FCRA). The Bureau also asks whether changes to disclosures that are not required to be included in privacy notices by the GLBA or 1016.6 should cause an institution not to satisfy proposed 1016.5(e)(1)(ii). WBA believes such changes should not deem the institution to be non-compliant. When Congress eliminated the requirement for an annual privacy notice for financial institutions that meet the required two conditions the intention was to eliminate unnecessary disclosures. WBA believes that it would be costly and burdensome upon financial institutions to add additional, unnecessary disclosures which in turn would result in additional fees passed on to consumers.

To avoid additional costs and burden, WBA requests that financial institutions be afforded flexibility in choosing to include those disclosures outside of the scope of 1016.5(e)(1)(ii), such as FCRA affiliate notices, in their privacy notices or provide them separately. The privacy notice is intended for consumers to receive disclosures related to bank practices with regard to the disclosure of nonpublic personal information. Financial institutions provide disclosures unrelated to the disclosure of nonpublic personal information as required by separate regulatory requirements, and through customer service. WBA believes that the exemption requirements should remain within the scope of the disclosure of nonpublic personal information in order for financial institutions to benefit from the exemption, rather than face doubled disclosure requirements which may confuse consumers by providing redundant information.

Additionally, the Bureau analyzed potential benefits and costs to consumers and observed that any potential impact would depend on whether a given consumer prefers or would otherwise benefit from receiving an annual privacy notice that does not offer an opt-out and is largely unchanged from previous notices. The Bureau anticipates that many institutions would decide not to provide notices when meeting the exemption included in the proposed amendment. WBA believes that many financial institutions will appreciate and take advantage of the exemption, but it will not create additional costs or harm to consumers. 

Respectfully, we believe that while the Bureau regulates many large institutions, the Bureau may not be familiar with the practices of smaller financial institutions. Our financial institutions and bankers do not operate in a vacuum, and bankers are happy to discuss and answer any question for consumers, including practices related to the disclosure of nonpublic personal information. For consumers who would prefer or otherwise benefit from receiving the annual notices, it would be no more difficult to contact their banker or visit their local branch to obtain such information. The Bureau expresses concern that financial institutions may use less effective methods to convey opt-out rights under section 624 of the FCRA when deciding not to provide annual notices. WBA does not believe that the proposed amendment will result in less effective disclosures required under the FCRA if they are not incorporated into annual privacy notices. For example, if FCRA section 624 notice requirements are not covered by the exception under 1016.5(e), it does not automatically mean financial institutions will fail to follow the disclosure requirements of the FCRA itself or provide relevant information to consumers through customer service.

WBA appreciates the implementation of the GLBA amendment providing an exemption to the annual privacy notice requirement, clarification regarding timing for annual notices when the exemption is lost, and clarification with respect to removal of the alternative delivery posting. We believe that the Bureau's amendment will help financial institutions by relieving them of additional regulatory burden. Furthermore, WBA believes that if adopted, the proposal will provide clarity and save financial institutions time and money. Regarding the Bureau's request for comment with respect to affiliate notice requirements in relation to meeting the exemption to the annual privacy notice, WBA requests that financial institutions be afforded flexibility in providing such notices in order to continue to meet the exemption. Additionally, WBA does not believe that the exemption to the annual privacy notice would negatively impact consumers as bankers are more than willing to discuss questions and concerns with customers as they arise. 

By, Eric Skrum

The WBA filed the following comment letter on behalf of the industry. Below is the text of the comment letter which WBA members are welcome to use for their own letters.

October 4, 2016


Ms. Monica Jackson, Office of the Executive Secretary
Consumer Financial Protection Bureau
1700 G Street NW.,
Washington, DC 20552
Docket No. CFPB-2016- 0025

RE:     Payday, Vehicle Title, and Certain High-Cost Installment Loans: Docket No. CFPB-2016- 0025

Dear Ms. Jackson,

The Wisconsin Bankers Association (WBA) is the largest financial trade association in Wisconsin, representing approximately 270 state and nationally chartered banks, savings and loan associations, and savings banks. All of our members are insured depository institutions. WBA appreciates the opportunity to comment on the Bureau of Consumer Financial Protection's (CFPB's) proposed rule on payday, vehicle title, and certain high-cost installment loans.

WBA recognizes that the CFPB's intent is to provide consumer protections by regulating payday, vehicle title, and certain high-cost installment loans, but fears that the proposed rule's complex and burdensome underwriting and record retention requirements will result in unintended consequences, more specifically discussed below, that will cause many of our member institutions to exit the market entirely and cease to provide covered loans. We believe those financial institutions that do continue to make short-term loans under the proposed rule will face increased costs due to such factors as software and systems upgrades and training of personnel. These costs will, in turn, increase the cost of credit to consumers.

Unintended Consequences

Our members make short-term loans as an aspect of service to their community. Short-term loans covered by the proposed rule are not products created and offered by our member institutions as a means of profit; they are primarily provided for their customers to deal with financial emergencies. They are offered to customers with poor credit or limited means, who live on social security or disability, and others who truly need this funding. For example, financial institutions provide covered loans for customers with sudden car and home repairs and unexpected medical bills. Our member institutions firmly believe that this service is part of being a responsible and engaged member of the communities in which they operate and serve.

Under the proposed rule, financial institutions will be required to follow very rigid requirements to document, verify, and project the borrower's income, majority of financial obligations, housing costs, and basic living expenses prior to making the loan. WBA is concerned that this, combined with significant compliance risk, will require a complete overhaul of our members' processes and render short-term loans costly and impractical. We believe that imposition of such a significant regulatory burden upon insured depository institutions, which are all regularly examined, is unnecessary when they already follow self-imposed underwriting standards. These underwriting standards have been tested and reports from our members indicate low-to-nonexistent charge-off rates. Furthermore, these products have been tested by customers who understand the loan structure and are able to repay them consistently. WBA believes that the underwriting standards currently set by insured depository institutions are more than adequate, as evidenced by the extremely low charge-off rates for covered loans they already provide.

The CFPB estimates that the required ability-to-repay determination will take essentially no time for a fully automated electronic system and between 15 and 20 minutes for a fully manual system. WBA is concerned that while the CFPB's assessment may be accurate for larger institutions, it overlooks the burdens smaller community institutions will face. For example, it is not uncommon to find a community bank with a staff of five. If such a financial institution is required to follow the standards set forth under the proposed rule, WBA is concerned that the result will be a significant increase in costs that will increase the cost of credit to consumers. Even more likely, we fear that these financial institutions will simply stop offering short-term loans entirely because the burden of compliance will be too great for a smaller staff to absorb into an already complex and challenging compliance environment.

Many of our member institutions serve small communities where they are one of the few, and sometimes only, nearby options available for consumers in need of short-term loans. WBA fears that the proposed rule's unintended consequences will mean consumers living in those communities might be unable to obtain short-term loans altogether, or without significant inconvenience or additional cost. If the institution exits the market, we are very concerned that consumers in these small communities could be forced to seek credit from alternative lenders that are not regularly examined and perhaps less focused on consumer protection. The result of this situation will not only be inconvenient and more costly to consumers, but could also be harmful to consumers.

In addition, WBA understands that consumers of short-term loans come to our member institutions expecting to receive funds immediately, particularly in the case of an emergency. A customer is unlikely to bring the documentation required by the proposed rule during an emergency. Thus, if a financial institution offers covered loans at all, the customer would be sent home to retrieve documentation, further burdening and inconveniencing them and potentially delaying the process by which they are able to obtain funds that they need to avert or remedy an emergency.

While WBA appreciates the CFPB's efforts to create an exemption for accommodation loans, we do not find it to be a useful means to continue to make short-term loans covered by the proposed rule. Imposing a weighted annual default rate of 5% or less for short-term loans made under this exemption renders them inviable due to the potential costs resulting from the prohibition against set-off and potential refund of all origination fees. Furthermore, we do not believe that customers who repay a loan on schedule should be ineligible for a new loan. The proposed rule's restrictions on re-borrowing will harm customers who have demonstrated that these types of loans work for them.

WBA believes that in order for short-term loans to remain a viable option for our members while still meeting the CFPB's goal of consumer protection through regulation, the proposed rule will need to exempt insured depository institutions from the coverage of the proposed rule. Alternatively, we will request a de minimis threshold providing an exemption from the rule, for example, for insured depository institutions that make fewer than 100 covered loans per year. Such a threshold will make it possible for smaller community banks such as those discussed above to continue making covered loans as a service to their communities, using their already well established, tried and tested underwriting standards, and without causing unintended consequences that will be adverse to consumers. If the CFPB is unwilling to implement one of these alternatives, WBA requests that, at a minimum, the CFPB provide a more streamlined, less burdensome underwriting process for insured depository institutions.


WBA believes that the CFPB's proposed rule will force many of our member institutions to discontinue making short-term loans, or cause undue costs and burden that will then be passed on to their customers. Our members provide short-term loans as a service to their communities. Being insured depository institutions subject to regular examinations, and following underwriting standards set by their own policies and procedures which have resulted in very few defaults, we do not believe that such harsh restrictions on short-term lending are necessary for our members. Thus, as outlined above, we request that the CFPB include an exemption for insured depository institutions. To do otherwise will result in a curtailment in credit to consumers when they need it most.

By, Eric Skrum

Last week, WBA filed its comment letter on CFPB’s TRID amendments. Among its comments, WBA supported the elimination of the “black hole” problem and offered solutions on how to eliminate confusion regarding the cash to close table in TRID disclosures. WBA vehemently opposed requirements to update values for “non-tolerance” items on “informational” Loan Estimates and to provide disclosures for permanent financing of a construction loan when the consumer has only applied for a construction-only loan.

Below is the text of the comment letter which WBA members are welcome to use for their own letters.

October 18, 2016

Ms. Monica Jackson,
Office of the Executive Secretary,
Consumer Financial Protection Bureau
1700 G Street NW
Washington, DC 20552

RE: Docket No. CFPB—2016-0038; RIN 3170-AA61

Dear Madam:

The Wisconsin Bankers Association (WBA) is the largest financial trade association in Wisconsin, representing approximately 270 state and nationally chartered banks, savings and loan associations, and savings banks located in communities throughout the state. In addition, WBA has a wholly-owned subsidiary, Financial Institution Products Corporation (FIPCO), which provides Loan Origination Software (LOS) solutions not only to lenders in this state but to lenders in the Midwest region. 

WBA is pleased that the Consumer Financial Protection Bureau (CFPB) recognizes there are several areas in the TILA-RESPA Integrated Disclosure rule (TRID) which will benefit from amendment or clarification. WBA appreciates the opportunity to comment on the proposed amendments to TRID. As a matter of convenience for all interested parties, WBA submits these comments today from the perspective of a financial institution trade association and an LOS vendor, as applicable.

Eliminating the “Black Hole” Problem

WBA appreciates the CFPB’s attention and care to resolving the so-called “Black Hole” problem, where technicalities of the new regulations force unnecessary, but often consequential, delays and postponements in settlements. The existing rule and commentary are very ambiguous with regard to the ability to update fee revisions, for tolerance re-set purposes, after delivery of a Closing Disclosure (CD). WBA’s concerns about this provision are focused on ensuring maximum consumer benefit and flexibility, and eliminating substantial and unwarranted liability for financial institutions. 

The simple and uncomplicated solution set forth by the CFPB is indeed welcome. It allows a creditor to use a corrected CD to re-set applicable good faith tolerances when there are fewer than four business days remaining before consummation or when the CD has already been issued, provided that the creditor also complies with the other requirements of § 1026.19(e)(4). 
The proposed comment in 19(e)(4)(ii)-2, which clarifies the issue states—

“If there are fewer than four business days between the time the revised version of the disclosures is required to be provided under § 1026.19(e)(4)(i) and consummation or the Closing Disclosure required by § 1026.19(f)(1) has already been provided to the consumer, creditors comply with the requirements of § 1026.19(e)(4) (to provide a revised estimate under § 1026.19(e)(3)(iv) for the purpose of determining good faith under § 1026.19(e)(3)(i) and (ii)) if the revised disclosures are reflected in the corrected disclosures provided under § 1026.19(f)(2)(i) or (2)(ii), subject to the other requirements of § 1026.19(e)(4)(i).”

We believe this language means that whenever a CD has been provided to the consumer and there is a subsequent valid changed circumstance (or customer requested change), the creditor would be allowed to provide the customer with a revised CD that would re-set the tolerances. The only stipulation to the creditor’s ability to re-set tolerance is that the revised CD must be delivered to the consumer within three business days of receiving information sufficient to establish a valid changed circumstance. The use of corrected CDs as a vehicle for correcting and “re-baselining” fee disclosures is the most straightforward approach to returning regulatory order and compliance clarity on this provision. WBA certainly supports this change, if the interpretation noted above is accurate.

Revised Disclosures for Informational Purposes 

The discussion of “re-baselining” of fees brings us to another proposed amendment about which WBA is very concerned. The proposal would add a new comment .19(e)(3)(iv)-5 to clarify that all cost disclosures included in a Loan Estimate (LE) whether provided for either tolerance re-set or for informational purposes, must be based on the best information reasonably available to the creditor at the time the disclosure is provided to the consumer. Currently, lenders are not required to update costs on the LE other than those that are to be re-set for tolerance purposes. 

Many LOS systems cannot hold values for fees and charges beyond the most recent fees and charges input to the system for the LE. Users that wish to issue informational LEs are aware that the most current values input into the LOS are the values retained by the system and the values used to calculate tolerance violations and refunds. LOS users are advised that if values used for informational purposes are entered after the original “set” values, the LOS cannot calculate tolerance violations because the “informational” value will over-ride the values previously entered (and on which the tolerance is “set”). As programmed, users are notified that if they enter informational only value changes, they will be required to perform manual tolerance comparison calculations. In most cases, users have neither the time nor the desire to engage in manual comparisons and so, do not issue informational only LEs. 

Further, when users re-set values as permitted by TRID, the tolerance calculations are made using the LOS. The LOS calculates the tolerance violation, and if a cure is necessary, is able to print the refund amount in the lender credit. Again, this won’t work if values that are not “re-set” are also updated. By limiting changes to those charges to be “re-set”, the LOS retains the “set” values for purposes of comparing the charges entered in the Loan Estimate against final charges entered for the Closing Disclosure. 

Proposed comment .19(e)(3)(iv)-5 would require changes to the LOS that would be extremely expensive and time consuming, if not impossible to create in any kind of timely or cost effective manner. Indeed, the technology required by the proposal is not currently a part of most LOS systems. The value to consumers to receive disclosures that are updated for all fees/charges, even when changes don’t reach tolerance violation levels, does not offer much of a trade-off for the extreme cost to the industry necessitated by this regulation change. The change also increases the risk that if the LOS cannot accommodate this change, which is likely, lenders will be required to do all of the refund calculations manually, resulting in greater numbers of errors in refund calculations. In addition, we are concerned that manual workarounds will negatively affect the secondary market’s willingness to accept loans for fear of errors and noncompliance. Thus, we urge the CFPB to continue to allow informational disclosures to be made, at the option of the lender, and not to require an update of all charges on a disclosure that is provided to “re-set” particular charges and not others. Said another way, the CFPB should clarify that non-tolerance items on re-disclosures remain absolutely optional.

Closing Cost Expiration Date and Rate Lock

The proposal addresses whether a creditor can re-set tolerances where the consumer indicates an intent to proceed after the 10-business-day period, but within a longer period for which the creditor promised to honor the estimated charges originally disclosed on the Loan Estimate. WBA supports the CFPB’s proposed solution, to be set forth in a new comment that where a creditor voluntarily extends the consumer acceptance period to a period greater than 10 business days, that longer time period becomes the relevant time period for purposes of using and delivering the revised estimates. 

The proposal would also require a blank expiration date on any LE issued after the consumer has indicated intent to proceed. An alternative proposal is to delete the expiration date sentence from the form following indication of intent to proceed. From an LOS perspective, either alternative will also require significant time and expense to program. We urge the CFPB to permit LOS providers to have the option to use either of the alternatives. In addition to these alternatives, we urge the CFPB to include an option where the notation “n/a” can be used to complete the sentence, which we believe would be less confusing to consumers than a blank space. 

Disclosure of Costs of Improvements. 

Currently, TRID does not provide direction on how to incorporate construction costs withheld by the lender into the cash to close table. As a result, one reasonable method of handling construction costs so that they are included in Cash to Close, is to incorporate them into the down payment/cash from borrower or funds for borrower calculations. Where there is a seller, add the purchase price plus costs of improvements and subtract the loan amount reduced by closing costs financed. If there is no seller, add costs of improvements to borrower’s payments to third parties and subtract the loan amount reduced by closing costs financed. Likewise, when calculating closing costs financed the costs of improvements are subtracted from the loan amount together with the purchase price and other payments to third parties. The cost of improvements may be disclosed on the borrower’s Summary of Transactions under K., Due From Borrower at Closing.

Proposed comment App. D–7.vii.A would explain the amount of construction costs is disclosed under the subheading ‘‘Other’’ under § 1026.37(g)(4), consistent with informal guidance provided by the CFPB and the proposed changes to § 1026.37(g)(4). Although verbal Webinar guidance by the CFPB had allowed creditors an alternative option for disclosing construction costs in the Calculating Cash to Close table (not as “Other” costs), the CFPB is now proposing a more definitive rule where creditors would be required to disclose construction costs under “H. Other.”

From the perspective of an LOS, the proposed addition of a specific required method of disclosing construction costs would require significant re-programming to both the cash to close calculations, Loan Costs, and Summary of Transactions. 

In this case, as in many others where the Regulation was silent as to how to address particular issues, LOS vendors and lenders found reasonable methods of handling the issues, so that the deadline for TRID could be met. These parties should not be required to change programming that is reasonable and that works for consumers, and for which significant time and expense was spent, for an alternative means of disclosure, with no positive gain for consumers. 

We request that the CFPB permit alternative methods of disclosing construction costs, so long as the method discloses the costs, and the cash to close table and summaries of transactions table balance. We also request the CFPB to advise that construction costs that are withheld may be disclosed on the alternative form in the Payoffs and Payments. 

Construction Lending: Financing By Same Creditor

The proposed rule appears to set forth a new requirement in instances where a creditor receives a credit application for construction loans. The proposed comment 17(c)(6)-6 would appear to define “may be permanently financed by the same creditor” as used in § 1026.17(c)(6)(ii) to mean, “if the creditor generally makes both construction financing and permanent financing available to qualifying consumers, unless a consumer expressly states that the consumer will not obtain permanent financing from the creditor.”  The proposal would also add comment 19(e)(1)(iii)-5, which would attempt to clarify the timing requirement for the initial LE that applies to such transactions. This comment essentially states that a loan subject to § 1026.17(c)(6)(ii) requires an initial LE to be disclosed for both the construction and permanent phases upon application, even if it is for “construction financing only.” The proposed comment provides an example under comment 19(e)(1)(iii)-5.i that states if a creditor receives an application for “construction financing only,” it “must” provide the initial LE for both a construction and permanent loan within three business days of receipt of the application for “construction financing only.” The only exception to the dual disclosure provision would be obtaining an express statement that the consumer will not seek permanent financing from that creditor, as described under comment 17(c)(6)-6. 
The CFPB described in the preamble that it proposed comment 17(c)(6)-6 because, “at the early stages of an application when the Loan Estimate is delivered, creditors usually would not yet have made a determination as to whether they will provide permanent financing to any given consumer,” and a determination when they decide they will “could be complex.” Further, the CFPB stated that it “does not believe it is appropriate to determine whether a creditor ‘may’ provide permanent financing based on the creditor’s actual determination as to any individual consumer.” 

For various reasons, we strongly oppose this new requirement. Adding this dual disclosure requirement would confuse consumers, complicate compliance for lenders, create internal conflict with other portions of the rule, and quite possibly, be unauthorized under the TILA and RESPA statutes. We offer the following comments to expand on these concerns.

The CFPB’s Reasoning is Unfounded

WBA believes that the CFPB’s stated reasoning for these proposed provisions is unfounded. The CFPB stated that it is difficult for creditors to determine when a loan may be permanently financed under the current provisions, and that it is inappropriate to determine whether a creditor may provide permanent financing based on the creditor’s actual determination as to any individual consumer. But this is how Regulation Z currently works, and there does not appear to have been any particular confusion with respect to this issue. Specifically, for a “construction only” loan, the consumer has not yet applied for a permanent transaction (even if he or she has not expressly stated they would not obtain a permanent loan from the creditor), and thus, no determination about possibly permanently financing the construction loan needs to be made. Once the consumer actually decides to apply for permanent financing, the creditor would have a firm date on which to base its timing requirement for the initial LE. 

Consumer Confusion

As a threshold matter, we believe that giving consumers a disclosure for a financial product that they are neither seeking nor applied for will overwhelm the shopper and quite possibly confuse their comparison analysis. The receipt of two loan disclosure packets will baffle a consumer that only asked for construction-related financing, and will undoubtedly lead a shopper to misunderstand which packet applies to the particular type of loan on which they are focused. Consumers will not understand the rule enough, if at all, to expressly state that they do not want construction financing, to avoid the duplicative paperwork. This will likely lead to excessive paperwork being provided to consumers for a loan they did not apply for, as the majority of institutions will want to treat the construction phase separately in their software systems to be able to move forward with that transaction only, since that is the loan for which the consumer “actually” applied. As a result, the institution’s LOS would need to be reprogrammed to would provide a separate disclosure package for a loan for which the consumer did not apply, burying the consumer in unnecessary paperwork during a critical time in their decision-making process. A key goal of the KBYO initiative, as well as the CFPB’s efforts to simplify the closing process, is to reduce the bulk and to simplify credit disclosures; this proposal would achieve the exact opposite. 

Relatedly, we also think that this requirement will lead to customer distrust towards the institution. Why, they will ask, is my institution giving me disclosures for additional loans that I did not request? Without a doubt, the additional unrequested disclosure package will feel like a marketing and pressure tactic to induce the customer to purchase more products than what they asked for. Explaining to the consumer that government regulations require such additional disclosures rarely eases the apprehension and coercion that customers sense towards institutions that overwhelm them with institution-related products. In this sense, and from the perspective of consumer expectation, the CFPB’s provision gets this completely reversed—the only time a lender should be obligated to provide permanent financing disclosures is when the consumer expressly indicates they, in fact, want permanent financing from that lender.

In addition, institutions may attempt to shield their customers from the unnecessary paper using various methods. Some institutions may add an explanatory disclosure to the disclosure package for the permanent loan for which the consumer did not apply, to explain why the second package of disclosures is being provided. Other institutions may be forced to require that the consumer sign yet another document that affirms that the consumer does not want an additional financial product before they actually accept any application information, to avoid a potential violation of the timing requirements for the initial LE, which cannot be cured under the rule. These approaches do not appear optimal, and the additional disclosures will just add to the paperwork that consumers receive as they wade through the application and origination process, also adding to the risk of “information overload.”

Consumer Harm and Legal Complications from Inaccurate Loan Estimates for an Inchoate Permanent Loan

Consumers who have only applied for construction financing may be harmed because the disclosures for the permanent loan may be at such an early stage that institutions will not be able to provide accurate pricing disclosures for the permanent loan. At an early stage, consumers only interested in construction financing may not have provided sufficient information or documentation with respect to the permanent financing.  In addition, many of the third party vendors involved in the settlement process will not have been identified, such that the accuracy of the cost estimates will suffer. Consumers may make financial decisions based on this early disclosure for the permanent phase for which they did not apply, which may not be the most accurate information. 

Further, there are legal complications to offering a Loan Estimate that carries legal liabilities and price guarantees under the tolerance requirements. A consumer who has not applied for the permanent loan product may not have the information or documentation necessary to provide accurate pricing disclosures. Although there may be the ability to revise estimates under § 1026.19(e)(3)(iv), the estimates are still subject to the “good faith standard,” which requires creditors to conduct “due diligence” to obtain the best information reasonably available. See comment 19(e)(1)(i)-1. This burden is made more difficult and the legal risk that much greater at this early stage. In addition, the credit and underwriting decisions necessary for a one or two-year construction loan differ substantially from considerations required for a 30-year loan. The former is likely to be held in portfolio and managed by institution experts that understand how to manage its procedures. The latter is likely to be sold to secondary market investors and therefore require completely different staff, third party relationships and back office coordination. In fact, the form production, compliance and underwriting systems for each of these types of loans will likely be different, and they cannot necessarily be ignited in tandem to achieve simultaneous assembly and delivery to the customer. In fact, we note that the laws that apply to each type of loan differ widely. Suffice it to note that construction loans are not covered by the ability-to-repay rules that generate a full body of compliance procedures that do not apply to other residential transactions.

Legal Questions Regarding the Proposed Provisions

In addition, this proposal is too muddled and complex, and extremely confusing for purposes of compliance. The full scope of the requirement can only be ascertained by reading through four separate interlocking provisions and examples. We respectfully submit that there are inconsistencies with this proposal and existing regulatory provisions. We note, as a general matter, that commentary provisions cannot override the regulatory text or create regulatory requirements. Commentary provisions only provide safe harbors of compliance for following the regulatory text. See App. C of Reg. Z, and the introductory comment I—1. It is therefore important that the regulatory language be fully consistent.

Section 1026.17(c)(6)(ii) states that when a construction loan “may be permanently financed by the same creditor,” it can be treated as either one or more than one transaction.  Existing comment 17(c)(6)-2 addresses when this option is available, in that it describes such transactions that “may be permanently financed” as when, “unless the obligation is paid at that time, the loan then converts to permanent financing in which the loan amount is amortized just as in a standard mortgage transaction.” The  word “converts” appears to assume that this conversion is built into the terms of the legal obligation. Most legal experts have assumed that this terminology has always meant that it did not apply to true separate “construction only” loans that do not have some conversion built into the note or other terms of the legal obligation. Most legal experts have assumed that Regulation Z has treated “construction only” transactions as separate transactions, meaning a subsequent permanent transaction has to be treated separately under Regulation Z.  This is also apparent from the regulatory text of § 1026.17(c)(6)(ii) which allows the disclosure of the construction and permanent “phases” of one, singular “loan” to be disclosed as combined or separate transactions. The regulatory text does not describe disclosing a separate “permanent loan” combined with a “construction loan.” Based on this analysis, most legal experts interpret the regulatory text and existing comment 17(c)(6)-2, which the CFPB has not proposed to amend or delete, to mean that truly separate construction and permanent transactions should be treated under Regulation Z as separate transactions. 

The CFPB appears to have attempted to create a legal requirement that applies to applications for "construction financing only" in proposed comment 19(e)(1)(iii)-5.i by using the word “must” and requiring a disclosure for an application that has not been submitted by the consumer, which appears to conflict with § 1026.17(c)(6)(ii) and existing comment 17(c)(6)-2, as well as the general tenets of Regulation Z. As stated above, the commentary cannot create regulatory requirements, and therefore, we believe this proposed commentary will complicate compliance, rather than provide greater clarity and certainty. 
Further, we note that the RESPA and TILA statutes do not support the new requirement set forth in this proposal. The definition of “application” under TILA and RESPA describe a process that intends to provide immediate and precise information on options that the consumer specifically solicits. 

In summary, this precise requirement should be removed from any final rule. The CFPB specifically sought comments on an alternative approach that would allow a creditor to provide the Loan Estimate only for the financing for which the consumer applied. We would support this option. Under the approach described by the proposal, if a consumer applied for construction financing only, a creditor would be required to provide the Loan Estimate for only the construction financing. If the construction financing may be permanently financed by the same creditor, the creditor would be permitted to provide the Loan Estimate for the permanent financing at the same time as the Loan Estimate was provided for the construction financing, but would not be required to do so. If the consumer applied for construction and permanent financing at the same time, the creditor would be required to provide the Loan Estimates for both phases within three days of receiving the application. If the consumer applied for construction and permanent financing separately, the creditor would be required to provide Loan Estimates within three days of receipt for each application. However, a Loan Estimate for the separately-applied-for permanent phase would not be required if the Loan Estimate for the permanent phase had already been provided because the transaction met the condition that the construction phase may be permanently financed by the same creditor. 

Loan Term for Permanent Phase when Separate Disclosures Provided for Construction/Permanent Loan Application

Continuing on in the construction loan realm, the proposal includes two new comments addressing the loan term for permanent financing when the permanent financing is disclosed separately from the construction loan. App. D Comment 7i.B. and .37(a)(8)-3. 

Under these comments, the Loan Term for the permanent phase is counted from the date that interest for the first scheduled periodic payment for the permanent phase begins to accrue. We point out that neither the Regulation nor Commentary addresses how to calculate the loan term for a standard 30 year conventional mortgage loan (a loan that is not a permanent loan taking out a construction loan). 

We encourage CFPB to clarify that comment .37(a)(8)-3 is consistent with the way in which the Loan Term for any conventional loan is calculated—that is from the date that interest begins to accrue for the first scheduled periodic payment. The comment could apply to the Loan Term disclosure, in general. It need not be limited to the loan term of a permanent loan that is disclosed separately from the construction phase in a construction/permanent loan.

Cash to Close Table – In General

We appreciate that the CFPB realizes the “calculating cash to close” table has been a source of confusion for the industry and consumers alike, and for that reason has specifically solicited comments on how to change or improve the table. The table is intended to maximize consumer understanding and offer a “reasonably reliable estimate of the cash due from or to the consumer at consummation.” However, we feel the table has fallen short of that goal.

First, the disclosed values in the cash to close table are determined by complicated formulas, all of which must be calculated by software because they are too complicated to be performed manually; thus, lenders and closers are unable to explain how the calculation is made to consumers, especially in a manner that is understandable to consumers. The best a lender or closer can do is to tell consumers that the calculations use the same figures that are included in the Summaries of Transactions, but puts them in different categories. Nothing is intuitive or transparent about the Cash to Close table. 

Second, consumers do not understand the categories or calculations used in the cash to close table. Consumers attempting to confirm totals in the cash to close table have no way of doing so other than by asking questions as to what is included and how the result was reached. The answers are not satisfying to consumers. This may not be overly significant when a consumer is collecting estimates relating to a loan, but the CD is now the settlement statement. A consumer must understand the details of the consumer’s settlement statement. This shortcoming in the Closing Disclosure is frustrating to all involved in the transaction.

As demonstrated by the number of proposals in these proposed rules addressing changes or additions to the formulas used for calculating cash to close, settlement agents, lenders and LOS systems have had to calculate cash to close totals by adjusting the original CFPB categories in order to make the table work and balance with the Summaries. Even if one lender can explain the formula for any particular cash to close category, the next lender, using a different LOS, may calculate the categories differently, though in a reasonable way, given the items that were not included in the formulas provided in the original TRID rule.

On the contrary, to the extent actual values are used in the Summaries of Transactions (which is the case, but for the disclosures for title insurance premiums), borrowers can look at the form and understand how money is coming into and going out of the transaction. The Summaries are the real settlement statement. Two different tables showing cash to close are not necessary, especially when one table is clear (the Summaries), and one is not (Cash To Close).

The CFPB’s stated purpose for including the cash to close table in the CD is to permit consumers to compare changes in applicable values from the Loan Estimate to the Closing Disclosure. However, the current proposal requires that the Estimate Column disclose amounts from the most recent Loan Estimate provided, which may include informational values rather than set values. .38(i)-5. If the comparisons between the Estimated and Final column disclosures are not the values that are used to calculate tolerance violations, but may instead be based on informational values, even the value of the comparison aspect of the table is negated.

We strongly encourage the CFPB to remove the cash to close table from the CD. The rule could require a direct disclosure of loan costs and lender credits, as set using the LE (or CD), and compare those values to the final loan costs and lender credits. The table could show applicable costs in sections specific to each tolerance category. The consumer would be able to see whether a tolerance is applicable, the amount of the tolerance and whether the difference between the values resulted in a violation by looking at the “set” costs and the final costs. This could be done by direct comparison of actual numbers that are understandable to consumers. 

In the alternative, the cash to close table could be expanded (like the Summaries of Transactions) to identify the formula used for each item, and to identify each value that is a part of each category in the table.

From the perspective of an LOS, any changes adopted, whether the changes are suggested by the CFPB or us, will require a significant amount of time for reprogramming and will impose considerable expense. Having said that, we urge the CFPB to amend the rule such that it actually achieves the desired effect—to maximize consumer understanding.

Cash to Close – Changes to Categories

The CFPB also proposes to specify the categories that Loans Assumed or Taken Subject To and the Sale Price of Personal Property are to be added to for the cash to close calculations. In the absence of guidance in TRID on how to disclose Loans Assumed or Taken Subject To, or the Sale Price of Personal Property, some LOS systems have included these items in Adjustments and Other Credits, as applicable, to balance cash to close calculations. This works. The proposed changes for these items will cause significant programming changes costing significant time and expense. Consistent with our other comments, moving these items to other categories will not matter to consumers because consumers are not given information to know where any particular item is considered in the Cash to Close table. We repeat our request that the CFPB remove the table from the CD. If however, it is not removed, we request that the CFPB add a provision providing that for any item not specifically required to be included in a particular category, the rule provides flexibility, and, that as long as the cash to close balances, items may be added in any category that reasonably reflects the item. 

Total of Payments – Tolerance

As stated by the CFPB, prior to TRID, the only error that would likely be made in the Total of Payments would be an error in the finance charge that would have flowed from the Finance Charge disclosure. Post-TRID, with the inclusion of Loan Costs in the disclosure, the creditor is open to the possibility of an inaccurate Total of Payments for reasons beyond the finance charge. 

As proposed, if the finance charge is accurate, the proposal will permit applying the tolerance to other Loan Costs. The proposal recognizes that a tolerance is appropriate for Loan Costs, but only to the extent that the finance charge is accurate. However, if the finance charge is inaccurate, there is no additional tolerance for Loan Costs. If the CFPB believes it is appropriate to provide a tolerance for Total of Payments when the finance charge is correct, we believe the CFPB should extend an additional tolerance to the Total of Payments for errors in Loan Costs when the finance charge is not correct.

We request the CFPB consider an additional tolerance for the total of payments, above the proposal to apply the existing tolerances (adopted prior to TRID) to the new TRID Total of Payments. An additional tolerance would recognize that additional errors can be made in the Total of Payments because of the addition of all Loan Costs in the total of payments calculation.

Total of Payments – Loan Costs but no General Credit Reflected

The CFPB acknowledges in the proposed amendment to comment .38(o)(1)-1, that general lender credits are not taken into account in the Total of Payments. We suggest that the CFPB change the calculation of the total of payments on the CD so that the total of payments takes into account general lender credits. Currently, the total of payments is absolutely inaccurate if lender credits apply to the transaction, because lender credits are not taken into account in disclosing the total of payments. 

If general lender credits continue to be excluded from the total of payments, a consumer cannot use the TRIDs to compare loan packages among lenders. A loan that provides a general lender credit to offset costs discloses the same total of payments as a loan that does not provide a general lender credit. The purpose of allowing consumers to compare the costs of varying loan products is negated.

We acknowledge that this request would cause additional programming for LOS operators. However, this change would have the added benefit of creating a level playing field among financial institutions in their total of payments disclosures. We think this benefit is significant and, therefore, repeat the request to provide sufficient time for any programming changes, if adopted. 

Estimated Taxes, Insurance and Assessments 

The CFPB proposes to permit the word “Some” to be included in the disclosure for property taxes and homeowner’s insurance under proposed comment .37(c)(4)(iv)-2. We agree that this is a good change that will be helpful to consumers. However, the CFPB should bear in mind that the change will add to the time LOS vendors need for programming.

Prepaid Interest Disclosure on the Closing Disclosure

The CFPB proposes to revise comment .38(g)(2)-3 to require placement of $0.00 in the line if no per diem interest is collected. Why is this line treated differently than other prepaid items that are left blank if the line is not applicable? See .38(g)(1)-1 and .37(g)(1)-4. This differentiation creates lender and consumer confusion. We believe a consistent format for all the disclosures in this section of the form better serves lender and consumer understanding; therefore, we do not support this proposed change.

Alternative Form -Payoffs and Payments Table 

We commend the CFPB for permitting credits to be disclosed in the payoff and payments table on the alternative form. Given the secondary market’s impending requirement to use the alternative form for all refinancing transactions, all aspects of a refinancing transaction must be accommodated by the alternative form, including all manner of credits and adjustments. However, given that this is a new provision, and that alternative forms are currently not programmed to permit credits as negative amounts, we again implore the CFPB to permit sufficient time before the effective date for all LOS users to take advantage of using the alternative form when the transaction involves credits and adjustments. 


Current section .37(o)(4)(i)(A) clearly provides that per diem interest and monthly escrows “are not rounded.” Current programming, based on the current rule, provides for these two items to be disclosed to two decimal places, dropping digits beyond the two required because partial cents are not disclosed. The proposal to round to the nearest cent and disclose to two decimal places is another change to the rule, again with no competing benefit to consumers. 

Escrow Accounts Disclosures

The CFPB proposes to change the escrow account tables to include mortgage insurance premiums in the escrow table. We disagree with this proposed revision. The escrow table currently matches, to some extent, the values on p. 1 of the CD disclosed for “Estimated Taxes, Insurance & Assessments”. Like the escrow account disclosure, the Estimated Taxes, Insurance & Assessments does not include mortgage insurance. If the lender indicates on p. 1, for example, that property taxes and homeowner’s insurance are $100 per month, and indicates that “YES” these amounts are in escrow, the $1200 (assuming 12 payments in the first year) or $1100 (assuming 11 payments in the first year) shown in the escrow table, is consistent with the Estimated Taxes, Insurance & Assessments table. We recommend retaining this consistency. 

If there is an escrow account, the proposal also changes the amounts to be disclosed for the one year time period, to be based on the escrow analysis required under Regulation X, rather than to require a 12 payment calculation for some loans and an 11 payment calculation for others, depending on the number of scheduled payments in the first year. This proposal makes sense and would be more intuitive for consumers and lenders. We have had many inquiries from lenders and consumers trying to understand why the disclosure includes less than 12 monthly escrow payments. 

If the escrow change is adopted for escrowed amounts, we recommend making a change for the calculation of property costs over one year where there is no escrow, to allow lenders to disclose the non-escrowed amounts shown in the “Estimated Taxes, Insurance & Assessments” by multiplying the monthly amount shown on p. 1 that is not in the escrow, by 12 (assuming these are monthly payments). Lenders and consumers assume, when the disclosure includes a reference to one year, that the reference is to a period equaling 12 payments (if monthly).

Recording Fees on the Closing Disclosure

The Regulation continues to provide under the heading “Taxes and Other Government Fees”, that there should be an “itemization of each amount that is expected to be paid to State and local governments for taxes and government fees . . . .” .38(g)(1).  However, the Regulation does not permit an itemization of each such item. All recording fees are added together, and the only recording fees that are itemized, are fees for deeds and security instruments. We suggest modifying the Regulation to reflect the stated requirement. The proposed clarifications are confusing given the “itemization of each amount” standard currently in the Regulation.

Rescindable Parties named as “Borrower” on Closing Disclosure

The proposed new comment .38((a)(4)-4 requires that rescindable parties, even if they are not obligors (“borrowers”), must be named as borrowers on the Closing Disclosure. This proposal is contrary to the ordinary use of the word “borrower.” If all parties to a transaction are to be named, the word “Borrower” on the CD should be changed to another term, such as interested persons or, even, consumer. A non-obligor rescindable party would be properly shocked and upset to find himself or herself named as a “Borrower” on a document that reflects loan terms, such as an LE or CD. The change required by this comment results in the misrepresentation of the parties and their roles in the transaction, and is one that could cause grave concern for the party whose role is so misrepresented, as well as for the actual borrowers. Again, this change would result in significant additional programming of both forms and/or software. 

Privacy and Delivery of Closing Disclosure

The CFPB proposed new comments .38(t)(5)(v)-2 and -3, providing examples of situations permitting the creditor to provide separate CDs to the consumer and seller. Under the current Rule, the obligation to provide the CD to the seller is solely that of settlement agent. But, the new comment addresses modifications that may be made “by the creditor”. Subsection (iii) of the new comment states that the creditor may “provide to the seller, or assist the settlement agent in providing to the seller, a modified version of the form H-25(I). 

We request clarification that these proposals do not impose any new obligation on financial institutions, and that the settlement agent remains the party responsible to provide the seller’s CD to the seller. 

Effective Date and Optional Compliance

The CFPB has proposed that the amendments be effective 120 days after publication in the Federal Register. Based upon our experience with designing and programming software in connection with past regulatory changes such as RESPA, MDIA, DFA Title XIV and, most recently, TRID, 120 days is woefully inadequate for LOS vendors to make the changes necessitated by the proposed changes, if finalized. While we all wish that programming changes in technology could be made with a proverbial “flip of a switch”, that simply is not the case. Programming code is extremely complex and interweaves the requirements of a multitude of legal and regulatory requirements rather than having separate code for each law or regulation that impacts a transaction. It takes an extremely high level of painstaking scrutiny and analysis to determine how code must change in order to implement the new regulatory requirements without disturbing preexisting code that must remain unchanged for regulatory requirements that likewise remain unchanged. This analysis, of course, cannot effectively be done until careful analysis of the regulatory changes has been thoroughly undertaken. We strongly believe that the proposed changes will require an implementation period of 18 months, at minimum. This period of time will give an LOS vendor the time necessary to design, develop and program software to implement the changes and will give lenders adequate time to receive training needed to understand the final regulatory changes and the resulting changes made to their LOS systems.

We also urge the CFPB to consider providing a period of optional compliance. In the past, Regulation Z and other federal regulations often included a compliance deadline, but in many cases, compliance was optional before the final effective date. The optional compliance period allowed an LOS to “roll–out” changes to systems prior to the final compliance deadline, without violating the rule for coming out before the final effective date. We request that the final regulation include an optional compliance period prior to the final effective date so that all LOS changes do not have to occur on one day. This will ease the transition process for not only an LOS but for the users of the LOS who must learn about and understand the changes being implemented.

Finally, we strongly urge the CFPB to take into consideration other recent rulemaking when finalizing an effective date and optional compliance date. The final rules on HMDA and Mortgage Servicing are two recent examples of significant rulemakings for which LOS vendors and lenders alike are making preparations. These two rules, in and of themselves, are currently requiring substantial resources and devotion of time. We are very concerned that a convergence of preparation and deadlines for these rules along with the TRID amendments will overwhelm all LOS vendors, lenders and other segments of the mortgage lending industry. Thus, we respectfully repeat our request for the CFPB to be mindful of these various rulemakings in setting an effective date and optional compliance date for the proposed rule we comment on today.


WBA commends the CFPB for acknowledging and addressing many areas of the TRID regulation that are in need of clarification or revision. As the largest financial institution trade association in the State of Wisconsin, representing over 270 banks, savings banks, and savings and loan associations, and an LOS vendor serving the Midwest region, we very much appreciate the opportunity to express our views on this very important proposed rulemaking.

By, Eric Skrum