Six Compliance Topics from Lenders about TRID

Over time TRID has settled in to a routine set of policies and procedures. Even so, some questions persist, and we are in a good position to know about these topics because we get inquiries from our many clients. Because of our clients’ inquiries, we are able often to know what regulatory compliance issues are most important in the loan origination and servicing processes. Our experts respond case-by-case, but the overall research is shared, as needed, with our clientele. Our collection of research is huge and we offer our knowledge, experience, and expertise to our clients in order to ensure that they receive the very best guidance – a commitment that Lenders Compliance Group is recognized for keeping!

In this outline, we provide six topics that have been raised several times over the last few years.

1. The Basics: Loans Subject to 12 CFR 1026.19(e) and (f)

The TRID rule consolidates four previous disclosures required under TILA and RESPA for closed-end credit transactions secured by real property into two forms:

-a Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and

-a Closing Disclosure that must be provided to the consumer at least three business days prior to consummation.

The new disclosures apply to most closed-end consumer credit transactions secured by real property.

Credit extended to certain trusts for tax or estate planning purposes is not exempt from the TILA-RESPA rule.

However, some specific categories of loans are excluded from the rule. Specifically, the rule does not apply to home equity lines of credit (HELOCs), reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land).

You may not use the new disclosures on applications received before August 1, 2015, and you may not use them after August 1, 2015, on loans listed above that are exempt. Therefore, you cannot use them on reverse mortgages or on loans for mobile homes not attached to real property.

You must use existing forms and follow the rules in 12 CFR 1026.18.

2. Timing for Delivery of the Loan Estimate

Generally, the creditor is responsible for ensuring that it delivers or places in the mail the Loan Estimate form no later than the third business day after receiving the consumer’s application and seven business days before the consummation of the loan.

If a mortgage broker receives a consumer’s application, the mortgage broker may provide the Loan Estimate to the consumer on the creditor’s behalf. [12 CFR 1026.19(e)(1)(ii)]

If the broker provides the Loan Estimate, it satisfies your obligation; however, you are still responsible for any errors or defects, and so third-party provider management is crucial.

Loan Estimate: Deep Dive

Download White Paper

Jonathan Foxx

President & Managing Director

This third article of a four-part series beckons us to a deep dive into the Loan Estimate.

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] Each of the foregoing articles were accompanied by detailed tables to be used for certain itemized categories and action requirements.

The final and fourth article will provide an extensive analysis of the Closing Disclosure.

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).

One of the reasons I have written this series is to cut through the information noise. My concern stems from the nearly profiteering stance of the flourishing punditry to opine on TRID. This approach to learning seems to have become the norm recently at conferences, conventions, webinars, seminars, lectures, and pricey city-to-city forums. Indeed, also, people with no real experience in directing regulatory compliance, though having some training background, seem to hang out their TRID webinar shingle. I view the latter as but shills for generating leads for their affiliated pundits.

Attendees sometimes leave these convocations and ad hoc caboodles more confused than beforehand. Occasionally, they call my firm and want to know who has the correct view, Mr. Pundit A or Ms. Pundit B. I have noticed recently that certain pundits that previously, freely offered advice on TRID are now charging fees for their webinars or offering their guidance, for a fee, via well-known webinar purveyors and online audio/visual enablers. I offer these reflections not as exculpation, rather as expiation, since I have been on panels, and given lectures and webinars, alongside many members of the conscientious punditocracy.

But I happen to think that TRID is too important, being a generational change in disclosure, to hog the helpful information about TRID by charging a fee just so somebody could attend and possibly learn something about it. With that in mind, my firm recently did two proactive things: (1) we established the TEAM TRID™ task force,[iii] a relatively inexpensive, cost-effective way to get TRID integration implementation done efficiently; and importantly (2) we established TRIDHotline.com,[iv] 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!

In my view, these two foregoing measures help to address the challenge we face as we head toward the compliance effective date of August 1, 2015. I want to do what I can to ensure that we all are ready! “Ready” means ready for everybody, since the stability of the residential mortgage loan originations industry and the financial protection of the consumer depend on understanding and implementing the many features of the TRID rule.

Hopefully, you will have read the previous two articles (i.e., Part I and Part II). Now we will embark on a detailed review of the new disclosures, beginning in this third article with the Loan Estimate.

Let’s get real close to the Loan Estimate. In this article I will not discuss pre-application estimates and worksheets in detail, except to mention that a creditor or other person may choose to provide a consumer with a written preliminary estimate of terms or costs specific to that consumer before providing the Loan Estimate. If it does so, the creditor or other person must clearly and conspicuously state at the top of the front of the first page of the estimate in a font size no smaller than 12-point: “Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan.”[v] Furthermore, the estimate may not be made with headings, content, and format substantially similar to the Loan Estimate or Closing Disclosure.[vi]

So let’s focus on the Loan Estimate, since I plan to take you solely through the Loan Estimate in considerable detail. I will discuss salient highlights of the Loan Estimate, though I caution you to realize that this review is not exhaustive or comprehensive, given that the TRID rule contains very complex disclosure requirements, far more involved, byzantine, elaborate, incisive, and potentially enigmatic than the compendiary features of it discussed herein.

Please follow my analysis carefully. Allow at least two hours to consider this elucidation. Make notes, raise questions, seek answers from competent compliance professionals!

HIGHLIGHTS

Loan Estimate Form

For any federally related mortgage loan,[vii] the Loan Estimate must be made using the model form set forth in Exhibit H - Form H-24 in the CFPB’s Federal Register issuance.[viii] TRID does not require the use of the model form for non-RESPA transactions; that is, those subject to the integrated disclosures because they are subject to TILA and secured by real property but are not subject to RESPA.[ix] There are numerous text, structure, and field descriptions associated with the LE disclosure. Thus, it would be wise not to deviate from the model provided.

For those non-RESPA loans, the disclosures must be made with headings, content and format substantially similar to form H-24. Use of model form H-24, properly completed with accurate content, would constitute compliance for those loans.[x]

According to the CFPB, the Loan Estimate integrates at least seven pages of disclosures, including:

·       Three pages of the RESPA Good Faith Estimate;

·       Two pages typically used for early TILA disclosures;

·       One page typically used for the appraisal notice under the Equal Credit Opportunity Act;

·       One page typically used for the servicing disclosure.

The Loan Estimate also incorporates disclosures of:

·       The total interest percentage (TIP);[xi]

·       The aggregate amount of loan charges and closing costs the consumer must pay at consummation;[xii]

·       For refinances, the anti-deficiency protection notice;[xiii]

·       The homeowner’s insurance disclosure.[xiv]

TRID imposes strict specifications for the Loan Estimate. For instance, unless otherwise specifically provided, a disclosure that does not apply to a transaction should be left blank, not marked “not applicable” or “N/A,” and, as a general rule, may not be deleted.[xv]

There are special rules for certain disclosures. For example, the Adjustable Payment and Adjustable Interest Rate tables may be included only when applicable to the transaction and otherwise must be excluded.[xvi]

The importance of complying with the specialized requirements cannot be overstated: failure to comply with the precise and detailed rules may lead to significant liability and litigation risk, under both TILA and RESPA, as well as other statutes, such as the Equal Credit Opportunity Act, State and federal unfair, deceptive or abusive acts or practices (UDAAP) statutes, and State mini-TILA and mini-RESPA statutes.

Given the rigid features of the LE, I suggest that a creditor should use Form H-24 for all loans covered by the TRID rule, even if the loan is not a RESPA loan. TRID permits providing a cover letter so long as the Loan Estimate is provided separately from the cover letter.[xvii] Creditors may not add pages in between the pages of the Loan Estimate, or at the end of the Loan Estimate, except as permitted by Regulation Z.[xviii] Creditors may not add information not required by TILA Regulation Z. If the creditor devises its own form for loans not subject to RESPA, it must be very careful to compare that form to Form H-24 and ensure that each difference is carefully examined and justified. TRID does not permit any deviations from form H-24 for forms optimized to be shown on a computer screen or tablet.

Timing and Receipt

The creditor or mortgage broker must provide (either give or mail) the Loan Estimate to the consumer no later than 3 business days after receiving the consumer’s application for a mortgage loan. The standard definition of “business day” applies (i.e., a day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions).[xix] A mortgage broker that gives a Loan Estimate must comply with all the Loan Estimate requirements as if it were the creditor.[xx]

If the LE is not delivered in person, “receipt” occurs three business days after the Loan Estimate has been delivered or placed in the mail. Alternatively, the creditor may rely on evidence (i.e., a signed receipt for overnight delivery) that the consumer received the disclosures earlier than the end of the three business days.[xxi]

One question that comes up often is how to manage the timing with respect to electronic delivery. The 3-business-day period applies to methods of electronic delivery, such as email. Thus, if a creditor sends a Loan Estimate by email on a Monday, the consumer is considered to have received the disclosures on a Thursday, unless the creditor relies on evidence that the consumer received the emailed disclosures earlier (such as an acknowledgment of email receipt). Creditors relying on electronic delivery methods must comply with the consumer consent and other applicable provisions of the E-Sign Act.[xxii]

Irrespective of E-Sign consent provisions, we advise our clients to consider:

·       Whether procedures are needed to deal with electronic disclosures returned undelivered;

·       Whether electronic disclosures are provided in a form that can be retained;

·       The duration of electronic notices or disclosures available to consumers through the financial institution’s systems;

·       Establishing a process to appropriately respond to consumer requests for paper copies of electronic notices and disclosures;

·       Dealing with changes in hardware or software that may create a risk that consumers will no longer be able to access or retain electronic disclosures; and

·       Ensuring their electronic disclosures comply with the timing, format, content, and recordkeeping requirements of the underlying substantive rule (i.e., Regulation Z).

RESPA/TILA INTEGRATION – PART II: CLOSING DISCLOSURE AND ACTION PLAN - INCLUDES CLOSING DISCLOSURE TABLE

WHITE PAPER

Jonathan Foxx [*]

This second White Paper of a four-part series will introduce and treat the numerous features of the Closing Disclosure. In the first part, I discussed the mission of the RESPA/TILA Integration and the Loan Estimate. The third part will be a detailed analysis of the Loan Estimate. The fourth part will provide an in depth scrutiny of the Closing Disclosure.

Accompanying this article is a Closing Disclosure Table that may be used for certain itemized categories and action requirements. The table outlines the types of areas of interest in many of the routine requirements of the Closing Disclosure process. Rather than a before-and-after, comparative analysis, the Closing Disclosure Table provides the requirements with the compliance effective date of August 1, 2015.

In the other articles of the two remaining White Papers, I will provide charts, tables, form specimens, and annotations for applicable categories and action requirements relating to the RESPA-TILA Integration. In the third part of this four-part series on RESPA-TILA Integration, I will provide a deep dive, line by line outline of the Loan Estimate. The fourth part will provide a thorough analysis of the Closing Disclosure.

The full series, and accompanying charts, tables, and form specimens, first appeared in the October 2014 edition of National Mortgage Professional Magazine.

As I indicated in Part I, brand new disclosures have a compliance effective date of August 1, 2015 – a combined set, as in a new disclosure at the commencement of the loan origination and a new disclosure at its closing: these are, respectively, the Loan Estimate and the Closing Disclosure.[i]

The new set has been dubbed “RESPA-TILA Integration,” since the consolidation requirements reflect the mandates of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which directed the Bureau to integrate the mortgage loan disclosures under TILA and RESPA Sections 4 and 5.[ii] For the balance of this article, I will refer to these provisions as the “RESPA-TILA Rule” or (“Rule”). The Bureau often refers to these provisions as the “TILA-RESPA Integrated Disclosure Rule.” Additionally, I will refer to the consolidated disclosures as “Integrated Disclosures.”

The Rule applies to most closed-end consumer mortgages. It does not apply to home equity lines of credit (HELOCs), reverse mortgages, or chattel-dwelling loans, such as mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land). The provisions also do not apply to loans made by persons who are not considered “creditors,” where such persons make five or fewer mortgages in a year. However, certain types of loans that are currently subject to TILA but not RESPA are subject to the Rule’s Integrated Disclosure requirements, including construction-only loans, loans secured by vacant land or by 25 or more acres, and credit extended to certain trusts for tax or estate planning purposes. So, creditors originating these types of mortgages must continue to use, as applicable, the Good Faith Estimate (“GFE”) GFE, Truth in Lending Disclosure (“TIL”), and HUD-1 Settlement Statement (“HUD-1”) disclosures required under current law.

There is also a partial exemption for certain transactions associated with housing assistance loan programs for low- and moderate-income consumers. These creditors are exempt from the requirement to provide the RESPA settlement cost booklet, GFE, HUD-1, and application servicing disclosure statement requirements, and, thus, exempt from the requirements to provide a Loan Estimate, Closing Disclosure, and Special Information Booklet for these loans.

I would also like to answer the question about whether or not creditors may use the Integrated Disclosure on loans not covered by the Rule but subject to RESPA and TILA. The answer is that using the Integrated Disclosures for such purposes is not prohibited on loans that are not covered by RESPA and TILA (i.e., mortgages associated with housing assistance loan programs for low- and moderate-income consumers). But a creditor cannot use the new Integrated Disclosure forms instead of the GFE, TIL and HUD-1 forms for transactions, such as reverse mortgages, that are covered by RESPA and TILA that require those disclosures.

Also, to repeat my statement from Part I, it should be emphasized that the Rule can be encapsulated, as follows:

The TILA-RESPA rule consolidates four existing disclosures required under TILA and RESPA for closed-end credit transactions secured by real property into two forms: a Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and a Closing Disclosure that must be provided to the consumer at least three business days prior to consummation.[iii] (Emphases in original.)

The new Integrated Disclosures must be provided by a creditor or mortgage broker that receives an application from a consumer for a closed-end credit transaction secured by real property on or after August 1, 2015. But creditors will still be required to use the GFE, TIL, and HUD-1 forms for applications received prior to August 1, 2015.

Operationally speaking, as the applications received prior to August 1, 2015 are consummated, withdrawn, or cancelled, the use of the GFE, TIL, and HUD-1 forms will no longer be used for most mortgage loans.[iv]

Four General Requirements

If the loan requires a Loan Estimate, creditors must also provide the Closing Disclosure, to be received by the consumer no later than three business days before consummation of the loan.[v] [vi]

A practical way to view the Closing Disclosure is as a consolidation of the HUD-1 and the final TIL disclosure, containing additional elements. There are four rudimentary requirements of the Closing Disclosure.

Requirement 1: The Closing Disclosure generally must contain the actual terms and costs of the transaction.[vii]

·       Creditors may estimate disclosures using the best information reasonably available when the actual term or cost is not reasonably available to the creditor at the time the disclosure is made.

·       Creditors must act in good faith and use due diligence in obtaining the information.  The creditor normally may rely on the representations of other parties in obtaining the information, including, for example, the settlement agent.

·       Creditors are required to provide corrected disclosures containing the actual terms of the transaction at or before consummation.[viii]

         

Requirement 2: The Closing Disclosure must be in writing and contain the information prescribed in § 1026.38, the section of Regulation Z that outlines the content of disclosures for certain mortgage transactions (i.e., Closing Disclosure). Creditors must disclose only the specific information set forth in § 1026.38(a)-(s), as shown in the Bureau’s form (viz., Appendix H-25, the “Mortgage Loan Transaction Closing Disclosure—Model Form”).[ix] The specific information referred to covers a section-by-section analysis of the Closing Disclosure’s content requirements.

Requirement 3: If the actual terms or costs of the transaction change prior to consummation, creditors must provide a corrected disclosure that contains the actual terms of the transaction and complies with other requirements[x], such as the timing requirements, as well as the requirements for providing corrected disclosures due to subsequent changes.[xi]

         

Requirement 4: There is a new three-day waiting period; that is, if a creditor provides a corrected disclosure, it may also be required to provide the consumer with an additional three-business-day waiting period prior to consummation.[xii] (I will elaborate further on this feature below. See also the Table that accompanies this article.)

Page by Page

The Closing Disclosure is an extensive, five-page document with numerous fields, containing information disclosed in the Loan Estimate form, as well as additional information.

It may be categorically organized, as follows:

RESPA/TILA Integration - Part I: Overview and Loan Estimate (Includes Loan Estimate Table)

RESPA/TILA Integration – Part I: Overview and Loan Estimate

   Jonathan Foxx [*]

 WHITE PAPER

This first of a four-part series will introduce the RESPA/TILA Integration and treat the numerous features of the Loan Estimate. In the second part of the series, I will detail the features of the Closing Disclosure. The third part will be a detailed analysis of the Loan Estimate. The fourth part will provide an in depth scrutiny of the Closing Disclosure.

Accompanying this article is a Loan Estimate Table that may be used for certain itemized categories and action requirements. The table outlines the types of areas of interest in many of the routine requirements of the Loan Estimate process. In reviewing the table, notice how many of these categories in some respects reflect the pre-August 2015 disclosure process. Rather than a before-and-after, comparative analysis, the Loan Estimate Table provides the requirements of the post-August 2015 Rule itself.

Two Download Locations

 White Paper and Loan Estimate Table. (One Download, Two Documents.)

White Paper and Loan Estimate Table. (Two Downloads, Two Documents.)

In the other articles of this four-part series, I will provide charts, tables, form specimens, and annotations for applicable categories and action requirements relating to the RESPA-TILA Integration. The full series, and accompanying charts, tables, and form specimens, will also appear in National Mortgage Professional Magazine, commencing October 2014. 

Discussion

Let’s admit at the outset that having to explain to loan applicants the fees and boxes and pages of the Good Faith Estimate (GFE) is not for the faint of heart. The Truth in Lending Disclosure (TIL) remains a conundrum without peer: difficult to explain to a consumer in just a few words; inscrutable even to loan officers; and, blisteringly enigmatic often even to lenders. Both disclosures are somewhat archaic, examples of good intentions gone to the shadowy realm of Unintended Consequences.

Notwithstanding the foregoing debacle, there is the infamous HUD-1 Settlement Statement (HUD-1), infamous for its myriad codes, infamous for codes that should correlate or sometimes seem not to correlate to the GFE itself, infamous for mapping challenges to the loan origination system, and infamous for irksome consternation about where, what, and how to show certain fees!

A consumer’s distrust of the lender seems to increase with the duration of the explanation provided by the mortgage loan originator. If it takes more than a sentence or two to explain a disclosure’s contents, many consumers are already hesitating, wondering if there’s something they’re not being told! So, is there a way to provide a new kind of consumer disclosure that replaces the overly-encrusted, superannuated, periodically reconditioned, creaky, decades’ old twosome and settlement documents that have dominated the origination of residential mortgage loans for an entire generation of mortgage loan originators?

Into this maelstrom of implacable confusion steps the Consumer Financial Protection Bureau (“CFPB” or “Bureau”). The debate as to whether we need to replace the GFE, TIL, and settlement disclosures, into an overall, encompassing disclosure, is over and done. Behind us now are the many analyses, heat maps, comment periods, public outreach, focus groups, committee reviews, Interagency evaluations, extensive consumer and industry research, association position papers, quantitative studies, speeches, public relations, announcements, and presentations. Before us unfolds on August 1, 2015 a brand new set of disclosures – a combined set, as in new disclosure at the commencement of the loan origination and new disclosure at its closing – the former to be called Loan Estimate and the latter to be called Closing Disclosure.[i]

The new set has been dubbed “RESPA-TILA Integration,” since the consolidation requirements reflect the mandates of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which directed the Bureau to integrate the mortgage loan disclosures under TILA and RESPA Sections 4 and 5.[ii] For the balance of this article, I will refer to these provisions as the “RESPA-TILA Rule” or (“Rule”). Additionally, I will refer to the consolidated disclosures as “Integrated Disclosures.”

The Rule applies to most closed-end consumer mortgages. It does not apply to home equity lines of credit (HELOCs), reverse mortgages, or chattel-dwelling loans, such as mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land). The provisions also do not apply to loans made by persons who are not considered “creditors,” where such persons make five or fewer mortgages in a year. However, certain types of loans that are currently subject to TILA but not RESPA are subject to the Rule’s Integrated Disclosure requirements, including construction-only loans, loans secured by vacant land or by 25 or more acres, and credit extended to certain trusts for tax or estate planning purposes. So, creditors originating these types of mortgages must continue to use, as applicable, the GFE, TIL, and HUD-1 disclosures required under current law.

There is also a partial exemption for certain transactions associated with housing assistance loan programs for low- and moderate-income consumers. These creditors are exempt from the requirement to provide the RESPA settlement cost booklet, GFE, HUD-1, and application servicing disclosure statement requirements, and, thus, exempt from the requirements to provide a Loan Estimate, Closing Disclosure, and Special Information Booklet for these loans.

The RESPA/TILA Rule

I am sure that the question will be asked whether creditors may use the Integrated Disclosure on loans not covered by the Rule but subject to RESPA and TILA. The short answer is that using the Integrated Disclosures for such purposes is not prohibited on loans that are not covered by RESPA and TILA (i.e., mortgages associated with housing assistance loan programs for low- and moderate-income consumers). A creditor cannot use the new Integrated Disclosure forms instead of the GFE, TIL and HUD-1 forms for transactions that are covered by RESPA and TILA that require those disclosures (i.e., reverse mortgages).

With its usual flair for brevity, the Bureau’s proposal in July 2012 is a mere 1,099 pages.[iii] In November 2013, the final rule was issued, reaching the gargantuan proportions of 1,888 pages.[iv] Some of the seemingly boundless verbiage has thankfully been distilled to a 91 page guide, entitled TILA-RESPA Integrated Disclosure Rule, Small Entity Compliance Guide (“Guide”).[v] The most recent update to the Guide was issued in September 2014. The Guide touches on many features of the Rule and the implementation of the new disclosures; however, a thorough reading of the final rule is needed in order to comprehend the scope, application, and breadth of the Rule in effectuating its provisions. [vi] [vii] [viii]

Much of the Rule can be encapsulated in a single sentence, leaving aside all the details, as set forth by the Bureau:

The TILA-RESPA rule consolidates four existing disclosures required under TILA and RESPA for closed-end credit transactions secured by real property into two forms: a Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and a Closing Disclosure that must be provided to the consumer at least three business days prior to consummation.[ix] (Emphases in original)

As in all consumer disclosure regulations, the compliance effective date and the operational recognition of that date are critical timing points. The new Integrated Disclosures must be provided by a creditor or mortgage broker that receives an application from a consumer for a closed-end credit transaction secured by real property on or after August 1, 2015. But creditors will still be required to use the GFE, TIL, and HUD-1 forms for applications received prior to August 1, 2015.

Operationally speaking, as the applications received prior to August 1, 2015 are consummated, withdrawn, or cancelled, the use of the GFE, TIL, and HUD-1 forms will no longer be used for most mortgage loans.[x]

But from a process perspective, this timing can get complicated quickly. Various restrictions take effect on the calendar date August 1, 2015, regardless of whether an application has been received on that date. For instance, take note of these restrictions:

Disclosure Integration, High Cost, and Counseling

On July 9, 2012, the CFPB issued its proposed integration of RESPA and TILA disclosures into the "integrated" forms, entitled "Loan Estimate" and "Closing Disclosure". These new forms are derived from the Good Faith Estimate (GFE), the Truth-in-Lending (TIL) Disclosure, and the HUD-1/1A Settlement Statement. This assemblage has been duly dubbed with the euphemism "integration".

Excluded from the forthcoming integration are reverse mortgages, home equity lines of credit (HELOCs), chattel dwelling loans, and de minimis originations consisting of loans made by creditors who make five or fewer otherwise covered loans per year.

I have covered the process of constructing these forms in several newsletters and articles, including HERE, and HERE.*

The CFPB is not expecting to finalize the integration before the end of this year. Comments are due November 6, 2012.

However, there is a comment deadline of September 7, 2012 - which will lead to rulemaking before January 2013 - regarding the extent to which the rule applies to loans previously exempted from RESPA or TILA and the further redefining of the term “finance charge” to include most costs associated with residential mortgage loans.

By its own admission, the CFPB has stated that the proposal to "broaden" the definition of a "finance charge" by adopting certain adjustments or accommodations in its HOEPA implementing regulations under Regulation Z, would "cause more loans to exceed the APR and points and fees triggers and be classified as high-cost mortgages under HOEPA."

The CFPB has also set forth proposed rules to implement Dodd-Frank amendments regarding high-cost mortgages and also to provide homeownership counseling provisions that would affect mortgage lending generally (with no exclusion for HELOCs).

The implications of these rules, taken together, are far reaching. I would suggest that you visit our Library for further information.

___________________________________________________

IN THIS ARTICLE

“Loan Estimate” and “Closing Disclosure”

Integration

High-Cost Mortgages

Homeownership Counseling

Library

___________________________________________________

“Loan Estimate” and “Closing Disclosure”

• The Loan Estimate replaces the GFE and early TIL, while the Closing Disclosure replaces the HUD-1/1A and final TIL.

• HUD's Special Information Booklet will still be required.

• The CFPB's proposal would combine five pages (seven if typical appraisal and servicing disclosures were to be counted) of TILA/RESPA data into a three-page Loan Estimate, not counting the written list of available providers that must be separately provided if the creditor allows a consumer to shop for a settlement service.

• The Closing Disclosure is five pages.

Integration

The integration not only provides an entirely new format but also reconciles certain existing differences between Regulation X, the implementing regulation of RESPA and Regulation Z, the implementing regulation of TILA.

Highlights

• Redefines the term “application” by deleting the 7th component from the definition adopted by HUD, as outlined in its New RESPA Rule FAQs, as “any other information deemed necessary by the loan originator.”

• Alters the coverage of the disclosure requirements so they would apply to home loans, except for the aforementioned exemptions.

• Changes the timing and responsibility rules for providing closing disclosures.