© Allen D. Emmel
The Consumer Financial Protection Bureau’s (the “CFPB”) final rule – “Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (Regulation X) and the Truth-in-Lending Act (Regulation Z)” (the “Integrated Disclosure Rule”) (78 FR 7973, Dec. 31, 2013) – integrates existing mortgage disclosures currently required under the Truth in Lending Act (“TILA”) implemented by Regulation Z and the Real Estate Settlement Procedures Act of 1974 (“RESPA”) implemented by Regulation X. Lenders have been required by TILA and RESPA to provide two different disclosure forms to consumers at the time of applying for a mortgage, the RESPA Good Faith Estimate (“GFE”) and the TILA Initial Truth-in-Lending disclosure (“Initial TIL”); as well as two different disclosures at or shortly before closing, the RESPA HUD-1 and the TILA Final Truth-in-Lending disclosure (“Final TIL”). These forms were developed separately under TILA and RESPA resulting in the information on the forms being duplicative and inconsistent. The new integrated forms are designed to be easier for consumers to understand and locate key information about the mortgage loan. The Integrated Disclosure Rule becomes effective August 15, 2015.
The Integrated Disclosure Rule consolidates the GFE and Initial TIL into one new form, the “Loan Estimate,” which must provide consumers with a good faith estimate of credit costs and transaction terms. The Integrated Disclosure Rule also consolidates the HUD-1 and Final TIL into one new form, the “Closing Disclosure,” which must generally contain the actual terms and costs of the transaction. The Loan Estimate must be delivered or placed in the mail no later than the third business day after receiving the consumer’s mortgage application. The Closing Disclosure must be provided to the consumer at least three business days prior to closing of the loan. For purposes of the Loan Estimate, “business day” means a day on which the creditor’s offices are open to the public for carrying out substantially all of its business. For purposes of the Closing Disclosure, “business day” means all calendar days except Sundays and legal public holidays.
The Integrated Disclosure Rule applies only to closed-end consumer credit transactions secured by real property (which includes most consumer mortgages) but does not apply to HELOCs, reverse mortgages or mortgages secured by a dwelling not attached to real property. Creditors originating HELOCs, reverse mortgages, or other transactions not covered by the Integrated Disclosure Rule must continue to use the GFE, HUD-1, and Truth-in-Lending disclosures required under current law. The new integrated disclosures must be provided by a creditor or mortgage broker that receives a consumer application on or after August 15, 2015. For applications received prior to August 1, 2015, creditors must follow the current disclosure requirements under Regulations X and Z.
The Integrated Disclosure Rule can be found at the CFPB’s website at: http://www.consumerfinance.gov/regulations/integrated-mortgage-disclosures-under-the-real-estate-settlement-procedures-act-regulation-x-and-the-truth-in-lending-act-regulation-z/