The regulatory environment continues to evolve in 2015 with new disclosure requirements taking effect Oct. 3, 2015. Like in January 2010 when we learned how to complete a new Good Faith Estimate and HUD Settlement Statement, we are embarking on similar challenges in 2015. This time it’s the new integration of the Good Faith Estimate with the initial Truth in Lending disclosure, and the HUD Settlement Statement with the final Truth in Lending disclosure. There are new fields and new timing requirements as well.
The new integration disclosure requirements impact all entities that originate consumer mortgages and apply to all closed-end mortgages. It does not apply to HELOCs, reverse mortgages or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land). The final rule also does not apply to loans made by persons who are not considered “creditors” because they make five or fewer mortgages in a year.
The Consumer Financial Protection Bureau (CFPB) has stated the purpose of the integrated disclosure is to facilitate compliance with the disclosure requirements of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), and to help the consumer understand the transaction by using readily understandable language to simplify the technical nature of the disclosures.1
In November 2013, pursuant to Sections 1098 and 1100A of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the Bureau issued the Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) (2013 TILA-RESPA Final Rule)2, combining certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan.
The Integrated Mortgage Disclosures (IMDs) will include the Loan Estimate and the Closing Disclosure. The Loan Estimate disclosure combines two existing forms, the Good Faith Estimate (GFE) and the initial Truth in Lending disclosure (initial TIL) into one form. The Closing Disclosure combines the Settlement Statement (HUD-1) and the Truth in Lending disclosures (final TIL) into one form.
The Loan Estimate must be provided to consumers no later than the third business day after they submit a loan application. A loan application will be considered an application if it has six of the seven elements the RESPA established in 2010. The six elements are consumer’s name, consumer’s income, consumer’s social security number to obtain a credit report, property address, estimate of the value of the property and the mortgage loan amount requested. Please note the seventh element originally included in RESPA is not included in the requirements for an application under the IMD rules.
The Closing Disclosure must be provided to consumers at least three business days before consummation of the loan.
The CFPB has published a readiness guide for implementation of these new disclosures on its website (see link in margin). The guide includes a “Readiness Questionnaire” which will assist the institution in the implementation process. Considerations include evaluation of the current products or services being offered to determine applicability, determination of the regulatory amendments impacting the product or service, and development of an implementation plan.
Hopefully, the information provided within this article and on the CFPB website will assist you in coordinating a successful implementation of the IMDs. As always, the KraftCPAs banking team is available to help if you have questions or concerns about the process.