A long-awaited form that combines disclosures required under the Truth-in-Lending Act and the Real Estate Settlement Procedures Act has been released for public comment. In addition, a new closing disclosure has been unveiled.
The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that TILA and RESPA disclosures be combined.
The responsibility of implementing the combined disclosure fell to the Consumer Financial Protection Bureau, the powerful regulator created as required by Dodd-Frank.
The CFPB proposed two forms in May 2011 and asked for feedback on which of the two forms was better.
On Monday, the agency issued a proposed rule that will modify Regulation Z and Regulation X. Comments on two parts of the proposed rule are being accepted until Sept. 7, while comments on the rest of the proposed rule can be submitted until Nov. 6.
The new disclosures apply to most closed-end residential transactions. Excluded from the rule are home-equity lines of credit, reverse mortgages and mobile home loans.
Only lenders that close more than five mortgages a year are subject to the rule.
Among disclosure requirements that have changed are the way Annual Percentage Rates are calculated.
One of two new forms required by the proposed rule is the Loan Estimate, which replaces the Good Faith Estimate and the early TILA disclosure. This disclosure must be provided to prospective borrowers within three business days of submitting a loan application. It is designed to help applicants understand the key features, costs and risks of the mortgage for which they are applying.
While mortgage brokers can provide the Loan Estimate, the wholesale lender is responsible for its accuracy. No fees, except credit report fees, can be charged until the disclosure is provided.
The second form is the Closing Disclosure, which replaces the HUD-1. It is designed to help consumers understand all the costs involved in the loan transaction and needs to be provided at least three days prior to closing with some exceptions. A new form is required when costs increase at least $100, and another three days must elapse.
- view Proposed Rule
- view Loan Estimate
- view Closing Disclosure
Comments should be submitted to www.regulations.gov/#!documentDetail;D=CFPB-2012-0028-0001.
