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Additional Clarification On Integrated Disclosures

In a recent webinar, Consumer Financial Protection Bureau officials provided more clarity on integrated disclosures that become effective next year.

On Aug. 26, the CFPB and Federal Reserve Bank of Philadelphia held one of several online events about the integrated Truth-in-Lending Act and Real Estate Settlement Procedures Act disclosures .

Lenders will be required to implement the new disclosures, which are part of the CFPB’s Know Before You Owe initiative, in August 2015.

One of the new disclosures, the Loan Estimate, is required within three business days of taking an application.

The CFPB considers applications to have occurred when the lender has obtained the prospective borrower’s name, income, social security number for a credit report, property address, estimated property value and loan amount sought.

However, if an application was completed online that included all six pieces of information, but the customer only stored the application without submitting it — an application is not deemed to have occurred and no Loan Estimate needs to be provided.

If a consumer inquires about refinancing and a lender already has the six pieces of information on file from the existing loan, the lender does not need provide a disclosure unless updated information is obtained.

Evidence of disclosure compliance needs to be retained for at least three years after the later of the loan closing, the date disclosures were required or the date the action was required to be taken.

Retention of closing disclosures is required for five years.

Creditors will be required to obtain copies of separate seller closing disclosures but not the supporting documents.

Closing costs cannot exceed the amount originally disclosed on the loan estimate. Two exceptions include a category of charges that allow a 10 percent cumulative tolerance and another category that is not subject to the tolerance.

Owners title insurance that is not required by the lender is not subject to tolerance limitations.

The seven-day waiting period before consummation that applies to Loan Estimates does not apply to revised disclosures.

A revised Loan Estimate is not necessarily required on the same business day that a consumer or loan officer requests a rate lock. If a revised disclosure is provided, it must be provided either on the same business day the rate is locked or the day it was requested.

Lenders are allowed to provide the Closing Disclosure early, as long as it is received by the customer at least three business days prior to closing.

In situations where the APR decreased by more than 1/4 or 1/8 percentage points due to over-disclosed finance charges, a new three-day waiting period is not required.

An alternative Loan Estimate can be utilized for purchase money second mortgages and for first mortgage transactions involving no sellers.

When more than one person is applying for the loan, both consumers and their addresses need to be included on the Loan Estimate. However, the disclosure only needs to be delivered to one of the applicants.

But the Closing Disclosure must be provided to each borrower who can rescind the loan.

The full one-hour webinar can be viewed online at www.philadelphiafed.org.

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