On November 20, 2013, the CFPB issued its final rule for its two new Integrated Mortgage Disclosures, which is effective August 1, 2015. The new rule applies to most closed-end consumer mortgages. The new disclosures will not be required for home equity lines of credit, reverse mortgages, or mortgages secured by a mobile or other dwelling not attached to real property. Furthermore, creditors who make five or fewer mortgages a year will not be subject to this rule.
The new integrated initial disclosure is the Loan Estimate, which combines the Good Faith Estimate from RESPA and the initial Truth-in-Lending disclosure from TILA, as well as some disclosures required under Dodd-Frank. Either a creditor or a broker can provide the form, but the creditor is responsible for providing the form in the event of the broker’s failure. The form must be provided to the consumer no later than three days after a consumer applies for a mortgage loan. Under the final rule, the following constitute an application: (1) consumer’s name; (2) consumer’s income; (3) consumer’s social security number to obtain a credit report; (4) the property address; (5) the estimated value of the property; and (6) the mortgage loan amount sought. Lenders cannot charge consumers fees until after the Loan Estimate has been provided, with the exception of fees to obtain consumers’ credit reports.
The new integrated closing disclosure is called the Closing Disclosure, which combines the HUD-1 from RESPA and the final Truth-in-Lending disclosure from TILA, as well as some disclosures required under Dodd-Frank. Either the creditor or a settlement agent can provide the form, but the creditor is responsible for delivering the Closing Disclosure and ensuring compliance with the disclosure’s requirements. Consumers must receive the Closing Disclosure at least three days before the loan closes. If “significant” changes are made between when the Closing Disclosure is provided to the consumer and closing, the creditor must provide a new disclosure, and a new three-day waiting period before closing beings. Significant changes include: (1) changes to the APR above 1/8 of a percent; (2) changes to the APR above 1/4 of a percent for loans with irregular payment periods; (3) changes to the loan product; or (4) addition of a prepayment penalty. “Less significant” changes can be disclosed on a revised Closing Disclosure without triggering a new three-day waiting period.
The final rule limits cost increases from what was disclosed on the Loan Estimate to what is disclosed on the Closing Disclosure. Charges that cannot increase include: (1) the creditor or mortgage broker’s charges for its own services; (2) charges for services provided by the creditor or mortgage broker’s affiliates; and (3) charges the consumer is not permitted to shop for. Charges for other services can increase, but not more than 10 percent unless an exception applies. Exceptions include: (1) changes requested by the consumer; (2) when the consumer chooses a service provider not identified by the creditor; (3) when the information provided at application is or becomes inaccurate; or (4) when the Loan Estimate expires.
Per the CFPB, the final rule is effective on August 1, 2015 and will apply to transactions in which a creditor or broker receives applications on or after that date. The CFPB’s final rule can be found here: http://files.consumerfinance.gov/f/201311_cfpb_final-rule-amendments-to-regulations_integrated-mortgage-disclosures.pdf