CFPB Releases Final Regulation

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The Consumer Financial Protection Bureau (CFPB) finally released its final rule on the replacement of the current consumer disclosure forms required under RESPA and the Truth-in-Lending Act (TILA). Although implementation is not until August 1 of 2015 the integrated Loan Estimate Form and Closing Disclosure Form much talked about changes are going into effect.

CFPB Director Richard Cordray announced the final rule, referred to as “Know Before You Owe.”

Initial Review of Final Rule

• The loan estimate and closing disclosure forms are largely unchanged from those released with the proposed rule in July 2012.
• The creditor/bank is responsible for the delivery of the Closing Disclosure, but may use settlement agents to provide it. Statement from the CFPB: “Final rule acknowledges settlement agents’ longstanding involvement in the closing of real estate and mortgage loan transactions, as well as their preparation and delivery of the HUD-1…”
• The Closing Disclosure must be received by the borrower at least three business days before closing the loan.
• Changes to the Closing Disclosure at closing are permitted without another three-business-day waiting period, EXCEPT if the creditor changes the APR above one-eighth of 1% for most loans, changes the loan product, or adds a prepayment penalty to the loan.
• The initially proposed All-In APR, which would have included title insurance, escrow and other settlement charges in the calculation, was not adopted, and the approximate cost of funds was also removed from the final rule.
• Both the Loan Estimate and Closing Disclosure include the word “optional” after Owner’s Title Policy.
• The final rule will apply to most closed-end consumer mortgage loans; it will not apply to home equity lines of credit (HELOCs), reverse mortgages, or mortgages secured by mobile home.
• The final rule will be effective for all mortgage applications received by the creditor on or after August 1, 2015.

The American Land Title Association (ALTA) will host

We have crossed a major threshold with the final rule and effective date being announced. As we begin to evaluate the impact on our processes and technology, we also turn to continuing to expand our services to you to maintain CFPB compliance.

We will continue to provide you updated information on the final rule, including the impact of the changes on the real estate transaction process.