The mortgage industry has seen substantial change over the past few years. The Consumer Financial Protection Bureau (CFPB) introduced new Integrated Disclosure rules that amend existing requirements for mortgage disclosures:
Effective with RESPA applications received August 1, 2015, The Good Faith Estimate and Initial Truth in Lending Disclosure will be replaced with the “Loan Estimate” Disclosure. The HUD-1 Settlement Statement and Final Truth in Lending Disclosure will be replaced with the “Closing Disclosure”. PrimeLending is working diligently to prepare for the implementation date (currently planned for October 3, 2015) and in an effort to keep our business partners informed, we compiled a brief FAQ on the new forms.
We will continue to enhance our procedures and share relevant information related to the implementation of the new rule as we get closer to the implementation date.
What is the Integrated Disclosure Rule?
- The CFPB was tasked with simplifying the loan process for consumers. In an effort to simplify the loan process the CFPB is combining the Good Faith Estimate (GFE) and initial Truth In Lending (TIL) disclosure into one document which is called the “Loan Estimate”. In addition to combining the initial disclosures; the Final TIL, Itemization of Amount Financed, and HUD Settlement Statement are also being combined into a single document titled the “Closing Disclosure”
When does the Integrated Disclosure rule take effect?
- The new disclosures are required for loans with a RESPA application date of August 1, 2015. If a loan is disclosed with the current GFE/TIL, the loan must close with the current GFE/TIL/HUD. Lenders are not permitted to begin using the forms before August 1st, 2015.
Which transactions are covered under the new TILA-RESPA Integrated Disclosures rule?
- The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property. Specifically, the TILA-RESPA rule does not apply to HELOCs, reverse mortgages or mortgages secured by a mobile home that is not permanently attached to real property (i.e., land).
Does the definition of a loan application change under the new rules?
- The PrimeLending definition of an Application under RESPA is NOT changing with these new rules. An LO has an application when the following information is collected:
• The property Address
• The mortgage Loan amount sought
• The consumer’s Income
• An Estimate of the value of the property
• The consumer’s Name
• The consumer’s Social security number to obtain a credit report
How does PrimeLending define “Consummation”?
- TILA defines consummation to be: “The time that a consumer become contractually obligated on a credit transaction.” PrimeLending defines this as the day the Note is executed.
How does PrimeLending define a business day?
- A business day includes Saturday but excludes Sundays and all Federal Holidays.
Are borrowers required to provide an affirmative Intent to Proceed for loan applications?
- Imposing fees on a consumer before the consumer has indicated intent to proceed is prohibited. A consumer may indicate an intent to proceed with the loan transaction in any manner the consumer chooses, unless the creditor imposes addition requirements. Verbal communication is permitted. The creditor must document this communication to satisfy the record retention requirements.
May a creditor provide a revised Loan Estimate if the initial Loan Estimate was provided more than 10 business days before?
- Creditors are permitted to provide to the consumer a revised Loan Estimate if the consumer indicates an intent to proceed more than 10 business days after the Loan Estimate was originally provided. No justification is required for the change to the original estimate of a change other than the lapse of 10 business days.
May the creditor provide a revised Loan Estimate after the Closing Disclosure is issued?
- The creditor may <b>not</b> provide a revised Loan Estimate on or after the date the creditor provides the consumer with the Closing Disclosure. <b>Because the Closing Disclosure must be provided to the consumer no later than <u>3 business days</u> prior to consummation, this means the consumer must receive a revised Loan Estimate no later than <u>4 business days</u> prior to consummation</b>.
How long after a change in circumstance will the creditor have to re-disclose to the borrower?
- A Loan Estimate must be re-disclosed to the borrower within three business days of the change in circumstance.
What is a valid change in circumstance?
- Valid changed circumstances remain relatively the same in comparison to the current rule. Examples include:
•Change circumstances that affect the consumer’s eligibility for the terms for which the
consumer applied or the value of the security for the loan
•Revisions to the credit terms are requested by the consumer
•The interest rate was not locked when the Loan Estimated was provided
•The consumer indicated intent to proceed more than 10 business days after the Loan
Estimate was originally provided
•The loan is a new construction and settlement is delayed by more than 60 calendar days
Will PrimeLending prepare the borrower’s portion of the Closing Disclosure?
- Yes, PrimeLending will prepare the borrower’s portion of the Closing Disclosure.
Who will deliver the Closing Disclosure to the borrower?
- PrimeLending will deliver the Closing Disclosure to the borrower. Since the lender is accountable for the compliance of the Closing Disclosure, PrimeLending will provide the Closing Disclosure to the borrower at least 3 business days before closing and retain evidence of receipt.
Is there a separate borrower disclosure and seller disclosure?
- Yes, there are separate disclosures for the borrower and the seller.
Will PrimeLending prepare the seller’s portion of the Closing Disclosure?
- No, PrimeLending will not prepare the seller’s portion of the Closing Disclosure. PrimeLending will continue to depend on the settlement agent to prepare and deliver the seller’s Closing Disclosure. PrimeLending will require a copy of the sellers Closing Disclosure for the loan file.
How should seller credits be reflected on the Closing Disclosure?
- If the seller’s agreement is attributable to a charge listed on Closing Disclosure page 2, then the amount should be listed with the item and designated as Seller-Paid at Closing or Seller-Paid before Closing on Closing Disclosure page 2. Any general credit to the borrower from the seller may be listed as a lump sum under Summaries of Transactions.
Who is responsible for conducting the closing and disbursement of loan proceeds?
- The settlement agent is responsible for conducting the closing and disbursement of loan proceeds.
When does the Closing Disclosure have to be delivered to the borrower?
- The Closing Disclosure must be delivered to the borrower at least 3 business days prior to closing.
What triggers another 3 day waiting period when a revised Closing Disclosure is issued?
- The APR increases by more than .125%
- The loan product changes
- A prepayment penalty is added
Note: A change in cash to close does not trigger a new waiting period but all changes should be communicated to the Closing Department.
What is the process if circumstances change on the transaction that will impact the Closing Disclosure?
- All parties must notify PrimeLending’s Closing Department immediately so it can be determined if the changes require a new 3 day waiting period or if the revised Closing Disclosure can be delivered at closing.
Who is responsible for scheduling the closing?
- Scheduling the closing will require collaboration between all parties involved in the transaction.