In November 2013, the Consumer Financial Protection Bureau (CFPB) issued a final rule consolidating the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).
Because this rule goes into effect Aug. 1, 2015, credit unions should already be working with their core processors and forms suppliers to be in compliance with the rule.
Unlike prior rule changes, creditors aren’t permitted to provide the Loan Estimate or Closing Disclosure forms before the effective date.
Instead, for mortgage applications received prior to the effective date, the creditor and the settlement agent must provide the disclosures required under the existing TILARESPA rules even if the loan is consummated aft er the Aug. 1 effective date.
In addition, loans that aren’t subject to the TILA-RESPA rule—such as reverse mortgages, home equity lines of credit, mobile home loans, and loans secured by a dwelling that isn’t attached to real property—must not use the new Loan Estimate form or the Closing Disclosure form. Instead, they must continue to receive the current disclosures (the GFE, early TIL, HUD-1, final TIL disclosures) even aft er the Aug. 1, 2015, effective date.
So, credit unions that make loans covered by TILA-RESPA, as well as loans that aren’t subject to the TILA-RESPA rule, must have a processing system (or a dual system) that can accommodate both the current and new forms on an ongoing basis.
Escrow cancellation disclosures
Creditors and servicers must provide escrow cancellation disclosures when consumers cancel their mortgage escrow accounts and provide written notice of that decision to the creditor or servicer.
But creditors and servicers aren’t required to provide the borrower with the post-consummation escrow cancellation disclosure when the mortgage for which an escrow account was established is terminated by, for example, loan repayment or refinancing, rescission, or foreclosure.
If the creditor or servicer cancels the escrow account at the borrower’s request, the creditor or servicer must ensure that the borrower receives the disclosure no later than three business days before closure of the escrow account.
If a creditor or servicer cancels the escrow account and the cancellation isn’t at the borrower’s request, the creditor or servicer must ensure that the borrower receives the escrow cancellation disclosure no later than 30 business days before the closure of the escrow account.
If the disclosures aren’t provided to the borrower in person, the borrower is considered to have received the disclosures three business days aft er they are delivered or placed in the mail.
Amendments to TILA-RESPA
In early October, the CFPB issued a proposed rule amending two minor issues in the TILA-RESPA integrated final rule. These changes were finalized in late January.
The final rule amended the timing requirements for revised disclosures when the consumer locks a rate or extends a rate lock aft er the initial disclosures have been provided.
Under the final rule, creditors are required to provide a revised Loan Estimate within three business days aft er a consumer locks in a floating interest rate.
The original rule required creditors to provide the revised disclosure on the date the rate is locked, whereas the proposed rule would have permitted the disclosures to be provided by the next business day.
The second proposed change permits language related to new construction loans to be included on the Loan Estimate form. Creditors that make new-construction loans and reasonably expect settlement to occur more than 60 calendar days aft er providing the initial loan estimate may state on the Loan Estimate that the creditor may issue revised disclosures.
Since the comment period ended Nov. 10, 2014, we will likely see the final rule late in the first quarter or early in second quarter of 2015.
MICHAEL McLAIN is CUNA’s assistant general counsel for compliance. Contact him at 608-231-4185.