The Consumer Financial Protection Bureau (CFPB) has updated its Dodd-Frank Mortgage Rules Readiness Guide to help lenders and bankers assess their preparedness in complying with disclosures under the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA).
Included in the updated guide is a summary of the mortgage rules and key amendments, a readiness questionnaire, a section on frequently asked questions, as well as additional tools and resources lenders and bankers can use in their efforts to comply with the new regulations.
New to the updated version is the TILA-Respa Integrated Disclosure rule, which contains new requirements and two disclosure forms that consumers will receive in the process of applying for and consummating a mortgage loan. The rule also explains in detail how to fill out and use the forms.
First, the Loan Estimate combines two existing forms, the Good Faith Estimate and the initial Truth in Lending disclosure into one form. This form, CFPB notes, must be provided to consumers no later than the third business day after they submit a loan application.
The Loan Estimate defines a loan application as having six of the seven elements that RESPA required: consumer’s name, income, social security number to obtain a credit report, property address, estimate of the value of the property and mortgage loan amount sought. The definition does not, however, include RESPA’s seventh, “catch-all term,” CFPB notes, which states “any other information deemed necessary by the loan originator.”
Second, the Closing Disclosure also combines two existing forms into one document: the Settlement Statement and Truth in Lending disclosures. CFPB urges that this document must be provided to consumers at least three business days before consummation of the loan.
“The forms use clear language and design to make it easier for consumers to locate key information, such as interest rate, monthly payments, and costs to close the loan,” CFPB states in the Readiness Guide. “The forms also provide more information to help consumers decide whether they can afford the loan and to facilitate comparison of the cost of different loan offers, including the cost of the loans over time.”
The TILA-RESPA rule applies to most closed-end consumer mortgages, but not to reverse mortgages, home equity lines of credit or mortgages secured by a mobile home or by a dwelling that is not attached to real property. Additionally, the rule also does not apply to loans made by individuals who are not considered “Creditors” under TILA because they make five or fewer mortgages in a year.
The amendments are effective for transactions for which the creditor receives an application on or after August 1, 2015.
CFPB will continue to provide updates to the rules when necessary, the agency said. Any updates will be posted, along with a summary of the changes, on the CFPB Regulatory Implementation webpage.
View the CFPB Readiness Guide.
Written by Jason Oliva