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From Banking and Finance Law Daily, April 18, 2014

CFPB complements integrated disclosure guidance with instructions on forms

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau has developed a companion piece to its Small Entity Compliance Guide on the Truth in Lending Act/Real Estate Settlement Procedures Act integrated disclosure rule. The new guidance is a roadmap to completing the integrated Loan Estimate and Closing Document forms that the bureau believes will be of assistance to institutions as they strive to meet the rule’s effective date of Aug. 1, 2015.

Integrated disclosure rule. In August 2012, the CFPB published a proposed a rule that would combine the mortgage disclosure requirements of Reg. X—Real Estate Settlement Procedures (12 CFR 1024) and Reg. Z—Truth in Lending (12 CFR 1026). The bureau adopted the rule as final in November 2013.

The final rule implements a mandate in the Dodd-Frank Act that requires the bureau to publish rules and forms that combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under TILA and RESPA. The rule was a result of the CFPB’s “Know Before You Owe” program, begun in 2011, to implement the integrated TILA/RESPA disclosure requirement in the Dodd-Frank Act and creates two new disclosure forms—the Loan Estimate and the Closing Disclosure.

Under the rule, the Good Faith Estimate and the initial TILA disclosure were combined into a new form called the Loan Estimate. The new form is intended to provide disclosures that will assist consumers in understanding the key features, costs, and risks of the mortgage loan for which they are applying, and must be provided to consumers no later than the third business day after they submit a loan application.

The HUD-1 and final TILA forms have been combined into another new form, the Closing Disclosure, intended to provide disclosures that will help consumers understand all of the costs of the transaction. This form must be provided to consumers at least three business days before consummation of the loan.

The final rule applies to most closed-end consumer mortgage but does not apply to home equity lines of credit, reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property. The final rule also does not apply to loans made by persons who are not considered “creditors,” because they make five or fewer mortgages in a year.

Small Entity Compliance Guide. In March of this year, the CFPB published its TILA/RESPA Integrated Disclosure Rule Small Entity Compliance Guide which highlights issues that loan originators may want to consider when implementing the rule, but indicates that the guidance also may be helpful to settlement service providers, software providers, secondary market participants, and other firms that serve as business partners to creditors. At the time of the guide’s release, the bureau said that it intended to produce a companion guide with details about completing the new integrated disclosure forms.

Guide to forms. The guide provides instructions for completing the Loan Estimate and Closing Disclosure and also highlights common situations that may arise when completing the forms. The bureau says that the guide also may be helpful to settlement service providers, software providers, and other firms that serve as business partners to creditors.

In general, the Loan Estimate and Closing Disclosure require the disclosure of categories of information that will vary due to the type of loan, the payment schedule of the loan, the fees charged, the terms of the transaction, and state law provisions. The bureau cautions that the extent of these variations cannot be shown on a single, static example. The guide includes most of the requirements concerning completing the Loan Estimate and Closing Disclosure but may not illustrate all of the permutations of the information required or omitted from the Loan Estimate or Closing Disclosure for any particular transaction. Only the TILA-RESPA rule and its official interpretations can provide complete and definitive information regarding its requirements, the bureau stressed.

Feedback. The bureau is requesting feedback on the guidance. Specifically, the CFPB is interested in feedback on how useful the guide was for understanding the TILA/RESPA rule and for implementing the rule. The bureau also is asking for suggestions on improving the guidance.

MainStory: TopStory CFPB DoddFrankAct Loans Mortgages TruthInLending

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