Monday, September 14, 2015

Closing Disclosure: Deep Dive – Pages Four and Five

Jonathan Foxx
President & Managing Director
Lenders Compliance Group

This is the sixth and final article of a six-part series devoted to TILA-RESPA Integration Disclosure. In this sixth part, I will discuss Page Four and Page Five. Through a review of important highlights, I invite you to join me in a deep dive into the intricate features of the Closing Disclosure.

In the first article, I discussed the mission of TILA-RESPA Integration and the Loan Estimate (LE).[i] The second article introduced and treated the numerous features of the Closing Disclosure (CD).[ii]  These two articles (viz., on the Loan Estimate and Closing Disclosure, respectively) were accompanied by separate, detailed tables to be used for certain itemized categories and action requirements. In the third article, I provided the salient features of the Loan Estimate, in considerable detail.[iii] In the fourth article, I took you through Page One and Page Two of the Closing Disclosure.[iv] The fifth article was devoted to Page Three, which outlined the sections for Calculating the Cash to Close and Summaries of Transactions.[v]

I would suggest that you read all the articles in this series in order to better understand the TILA-RESPA Integration Disclosure (TRID) rule promulgated by the Consumer Financial Protection Bureau (“CFPB” or “Bureau”).

This series on TILA-RESPA is meant to be informative, though it is not intended to be comprehensive. It is always prudent to research areas of particular interest with respect to the regulatory mandates. If assistance is needed, Lenders Compliance Group is a resource. Indeed, we recently established two proactive paths toward a TRID knowledgebase:

(1) We established the TEAM TRID™ task force,[vi] a relatively inexpensive, cost-effective way to get TRID integration implementation done efficiently (viz.,; and importantly

(2) We established,[vii] an entirely free online service, manned by our task force, to assist people with their questions about TRID. We want to listen to their compliance needs (viz.,

Please consider my analysis carefully. Follow along with a copy of the Closing Disclosure. I will provide, where helpful, some information as Suggested Guidance. Allow a few hours to consider this explication. And as I have admonished all along, make notes, raise questions, and seek answers from competent compliance professionals!

Hopefully, you will have read the previous five articles. Now we will continue a detailed review of Page Four and Page Five of the Closing Disclosure, a two-page set of tables set forth under the rubric Additional Information About This Loan. The fourth page of the Closing Disclosure, with the general heading, Additional Information About This Loan, includes the sections entitled Loan Disclosures, Adjustable Payments (AP) Table, and Adjustable Interest Rate (AIR) Table.

Page Four

Regulation Z[viii] requires Page Four of the Closing Disclosure to contain from one to three tables, depending on the type of product:
  • A “Loan Disclosure” table, which addresses various requirements in or arising from the legal obligation, including assumption, demand feature, late payment, negative amortization, partial payments, security interest, and escrow account information.
  • The Adjustable Payments (AP) table that also appears on Page Four of the Loan Estimate, as applicable.
  • The Adjustable Interest Rate (AIR) table that also appears on Page Four of the Loan Estimate, as applicable.

loan disclosures

Loan Disclosures Table
The Loan Disclosures table provides disclosures mandated by statute, including three disclosures added to TILA by the Dodd-Frank Act.[ix]

This is the first item in the Loan Disclosures table. It is labeled Assumption,[x] and mirrors the assumption disclosure on the Loan Estimate.[xi] The only difference is the replacement of “we” with “your lender.” Form H-25 offers this text for the disclosure:

If you sell or transfer this property to another person, your lender
□ will allow, under certain conditions, this person to assume this loan on the original terms.
□ will not allow assumption of this loan on the original terms.

Demand Feature
The second item in the Loan Disclosure table is labeled Demand Feature and is intended to satisfy TILA requirements.[xii] Regulation Z requires the creditor to disclose whether the legal obligation permits the creditor to demand early repayment of the loan and, if so, a statement that the consumer should review the loan document for more details.[xiii] Form H-25 offers this text for the disclosure:

Demand Feature       
Your loan
□ has a demand feature, which permits your lender to require early repayment of the loan. You should review your note for details.
□ does not have a demand feature.

Suggested Guidance
The type of demand feature triggering these disclosures includes only those demand features contemplated by the parties as part of the legal obligation.[xiv] For example, this provision does not apply to transactions that convert to a demand status as a result of the consumer’s default. A due-on-sale clause is not considered a demand feature.