Fed backs away from finalizing mortgage TILA reform, leaves to CFPB

The Federal Reserve Board said it does not plan on moving forward with three mortgage proposals under Regulation Z prior to the transfer of authority for such rulemakings to the Consumer Financial Protection Bureau (CFPB) on Tuesday.

The proposals would’ve reformed several areas of mortgage lender, including changing consumer disclosures under Truth in Lending Act (TILA) for closed end mortgage loans and home equity lines of credit.  In addition, one of the proposals would have made changes to the disclosures consumers receive to explain their right to rescind certain loans, as well as new disclosures for reverse mortgages and restrictions on certain advertising and sales practices.

After receiving more than 5,000 comments expressing divergent views on many substantive and technical issues, the Fed said it will leave the issue for the new Consumer Financial Protection Bureau.

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When the general rulemaking authority for TILA transfers to the  CFPB in July, it’s required to issue a proposal within 18 months after the designated transfer date to combine, in a single form, the mortgage disclosures required by TILA and the disclosures required by the Real Estate Settlement Procedures Act (RESPA).

While the Board said there are specific provisions of the proposals that would not be affected by the CFPB’s development of joint TILA-RESPA disclosures, moving forward is not in the public interest.

“Adopting those portions of the Board’s proposals in a piecemeal fashion would be of limited benefit, and the issuance of multiple rules with different implementation periods would create compliance difficulties,” said the Fed.

View a copy of the statement here.

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  • The Fed has done the right thing as to RMs. This way the Fed is not adding their disclosures and then CFPB its own. If the CFPB disclosures look too onerous, the Fed disclosures can be pointed to as a better alternative in discussions between the industry and CFPB staff.

  • The Fed has done the right thing as to RMs. This way the Fed is not adding their disclosures and then CFPB its own. If the CFPB disclosures look too onerous, the Fed disclosures can be pointed to as a better alternative in discussions between the industry and CFPB staff.

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