What are the common causes and consequences of closing disclosure errors?

1 Human errors

One of the most common causes of closing disclosure errors is human errors. These can include typos, miscalculations, incorrect information, missing signatures, or miscommunication between the lender, the title company, the real estate agent, and the borrower. Human errors can lead to discrepancies, confusion, and disputes over the loan terms and costs. To prevent human errors, you should review the closing disclosure carefully, compare it with your loan estimate, and ask questions if you notice any errors or changes.

2 Regulatory changes

Another cause of closing disclosure errors is regulatory changes. The closing disclosure is governed by the Consumer Financial Protection Bureau (CFPB), which sets rules and standards for the content and timing of the document. The CFPB can change these rules and standards from time to time, which can affect how the closing disclosure is prepared and delivered. For example, in 2015, the CFPB implemented the TILA-RESPA Integrated Disclosure (TRID) rule, which changed the format and deadlines of the closing disclosure. Regulatory changes can result in compliance issues, penalties, or delays if the lender or the title company fails to follow them. To avoid regulatory changes, you should stay updated on the latest rules and requirements, and work with a reputable lender and title company that are familiar with them.

3 Market fluctuations

A third cause of closing disclosure errors is market fluctuations. The closing disclosure reflects the current market conditions at the time of closing, which can change from the time of your loan application or estimate. These changes can include interest rates, property taxes, insurance premiums, appraisal fees, or other costs that affect your loan amount and monthly payments. Market fluctuations can cause unexpected increases or decreases in your loan costs, which can affect your budget and affordability. To cope with market fluctuations, you should lock in your interest rate as soon as possible, and be prepared to adjust your finances or negotiate with the lender or the seller if necessary.

4 Technical glitches

A fourth cause of closing disclosure errors is technical glitches. The closing disclosure is usually generated by a software program that integrates data from various sources, such as the lender, the title company, the real estate agent, and the borrower. Technical glitches can occur in the software program or the data sources, which can cause errors, omissions, or inconsistencies in the closing disclosure. Technical glitches can also affect the delivery of the closing disclosure, which must be done at least three business days before closing. Technical glitches can lead to inaccurate or incomplete information, missed deadlines, or lost documents. To prevent technical glitches, you should verify the accuracy and completeness of the data sources, and confirm the receipt and review of the closing disclosure.

5 Fraudulent activities

A fifth cause of closing disclosure errors is fraudulent activities. The closing disclosure is a valuable document that contains sensitive information about your loan and your personal finances. Fraudulent activities can include identity theft, phishing, hacking, or forgery, which can compromise the security and integrity of the closing disclosure. Fraudulent activities can cause financial losses, legal troubles, or identity theft for you or the lender. To protect yourself from fraudulent activities, you should use secure methods of communication and delivery, and check the authenticity and validity of the closing disclosure and the parties involved.

6 Closing delays or cancellations

The consequences of closing disclosure errors can vary depending on the type, severity, and timing of the errors. However, one of the most common and serious consequences is closing delays or cancellations. Closing delays or cancellations can occur if the errors are not detected or corrected in time, or if they trigger a new three-day waiting period under the TRID rule. Closing delays or cancellations can cause financial losses, legal liabilities, or emotional stress for you or the seller. To avoid closing delays or cancellations, you should report and resolve any errors as soon as possible, and cooperate with the lender and the title company to meet the deadlines and requirements.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?