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Wednesday, November 20, 2013

CFPB Publishes Final Rule on New Mortgage Disclosures

Today the Consumer Financial Protection Bureau issued their Final Rule on integrating disclosures that are currently required by Regulation X (RESPA) and Regulation Z (TILA).  It was back on May 23, 2011 that I wrote an article about the CFPB's effort to remake the mortgage disclosures.  Their name for the campaign was "Know Before You Owe," and it was the first time in my career that I had seen a regulator reach out to the public and industry in such an expansive manor to obtain feedback.

The results of that campaign are in the rule which is available on the CFPB website.  There are some very readable summaries for those of us whose brain begins to ache when reading legal documents.  The CFPB's materials and communication on this issue are commendable. 

There are two new documents which will replace four existing documents.  First is the Loan Disclosure.  The Loan Disclosure will replace the Good Faith Estimate and the initial Truth in Lending Disclosure.  Like the current upfront disclosures, this document must be provided to an applicant within three business days of the loan application.

The other new document is the Closing Disclosure.  This document replaces the HUD-1 Settlement Statement and the Final Truth in Lending disclosure.  The Closing Disclosure must be provided to the applicant no less than three days prior to the loan closing.  There are some additional restrictions about what fees can change prior to closing.  None of the lender's fees, or fees for servicers that the borrower may not shop for can change.  Any increase in APR greater than .125% requires an new Closing Disclosure and another three day waiting period. 

Lenders will need have have a strong process for accurately disclosing in order to make sure that disclosure issues don't arise and cause delays for closing.  They will have plenty of time to prepare as the new rule doesn't go into effect until August 1, 2015.