CPFB Proposes Additional Changes to TILA-RESPA Rule

The Consumer Financial ProtectionrnBureau (CFPB) has proposed further changes to the new consolidated LoanrnEstimate and Closing Disclosure Mortgage forms that are scheduled to go intorneffect on August 15, 2015. The proposed forms were unveiled by CFPB last Novemberrnas part of the TILA-RESPA Integrated Disclosure Rule combining certainrndisclosure forms that consumers receive in connection with applying for andrnclosing on a mortgage loan.   CFPB hasrnnicknamed this the “Know Before You Owe Rule.”</p

The Bureau called the proposedrnchanges “technical amendments” to the rule and said it was proposing them nowrnso there is plenty of time to consider them while implementation decisions arernbeing made.  A statement released by CFPBrnsaid they do not think the changes will affect the industry’s ability tornimplement the rules on time.</p

Therernare two issues addressed by the proposed amendments.  The first is an attempt to give creditorsrnsome extra time to prepare and provide mortgage applicants with revised LoanrnEstimates after the consumer locks in a floating loan rate.  Under the current rule that revision must bernprovided on the same day as the consumer does the lock.  Industry response indicates this could be arnchallenge, particularly where creditors now allow consumers to lock in late inrnthe day or even outside of business hours. rnRather than force lenders to limit the flexibility they currently allowrnconsumers, CFPB is proposing to require the disclosures be provided by the endrnof the following business day.  </p

Thernsecond change is a minor addition to the Loan Estimate form itself and relates onlyrnto construction loans.  As these loansrnoften take longer to settle than other loans the estimated charges reflected inrnthe original disclosures may change over time. rnToday’s proposed amendment would allow creditors to insert into thernoriginal disclosure form language informing the borrower(s) that they mayrnreceive a revised Loan Estimate in the event a construction loan takes morernthan 60 days to settle.</p

ThernBureau is also proposing several corrections, updates, and wording changes bothrnto the TILA-RESPA Final rule and to the 2013 Loan Originator Final Rule for clarificationrnpurposes.  These changes, CFPA says, arernnon-substantive in nature.</p

ThernBureau will said it believes these proposed changes are relativelyrnstraightforward and mostly technical in nature and it expects to be able tornfinalize the proposal in sufficient time to allow creditors and otherrnstakeholders to implement the final changes prior to the August 1, 2015rneffective date.  Comments on the proposedrnchanges will be accepted until November 10, 2014.   Thernproposal in its entirety will be published in the Federal Register.</p

Thernlaw firm of Ballard and Spahr, which closely tracks CFPB activity saidrnyesterday that the changes in the disclosure requirement were in response to significantrnfeedback from the industry, specifically regarding consumer protection andrnoperational concerns. </p

Amongrnthose concerns was that the same day requirement was likely to result in some creditorsrnlimiting the ability to make rate locks to early in the business day due to therncosts of turning around a revision in the disclosures for a rate lock done atrnother times.  An article in the law firm’srnCFPB focused blog says that although the proposal is a welcome change thernindustry may still be concerned about the timing of the revision requirementrnand may still tighten rate lock practices.  “The industry may well support the ability tornissue a revised Loan Estimate to reflect a locked rate in the standardrntimeframe for other changes, which is three business days after learning of thernchange.”

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