CFPB Tweaks Forward Mortgage Disclosure Rules

The Consumer Financial Protection Bureau (CFPB) has finalized new forward mortgage disclosure rules under its “Know Before You Owe” initiative, which will take effect August 1, 2015.

The two changes, which were proposed in October 2014, address when consumers will receive updated disclosures after locking in an interest rate, and how consumers receive information regarding certain construction loans.

“The new ‘Know Before You Owe’ mortgage forms improve consumer understanding, aid comparison shopping, and help prevent closing table surprises for consumers,” said CFPB Director Richard Cordray, in a statement on Tuesday. “Today’s minor changes will make it easier for creditors to comply with the disclosure rules while maintaining these important new consumer protections.”

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Under the rule finalized today, creditors are required to provide a revised loan estimate within three business days after a consumer locks in a floating interest rate. The original rule required creditors to provide the revised loan estimate on the date the rate is locked.

After hearing feedback from stakeholders, the CFPB says it determined the short turnaround could pose challenges for creditors that currently allow consumers to lock interest rates late in the day or after business hours.

The second change being finalized today is a minor addition on the loan estimate form for loans that involve new home construction. These construction loans often take longer to settle than other loans, and the estimated charges can change.

The update creates a space on the loan estimate form where creditors can include language informing consumers that they may receive a revised loan estimate for a construction loan that is expected to take more than 60 days to settle.

The “Know Before You Owe” mortgage disclosure rule, including the changes finalized today, is effective August 1, 2015. The CFPB says it does not anticipate the modifications to affect the industry’s ability to comply with the rules within the 20-month implementation period.

Written by Emily Study

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