The Consumer Financial Protection Bureau (CFPB) issued the Truth in Lending Act/Real Estate Settlement Procedures Act (TILA-RESPA) integrated disclosure final rule in November 2013.
The bureau provided nearly 21 months until the effective date of Aug. 1, 2015. By the time you read this article, there will be about three months until the rule becomes effective.
The final rule requires the use of two new forms: the three-page “Loan Estimate” (which replaces the Good Faith Estimate [GFE] and the initial Truth in Lending disclosure) and the five-page “Closing Disclosure” (which replaces the HUD-1 [or HUD-1A] and final Truth in Lending disclosure).
The rule requires credit unions to provide the Loan Estimate within three days from receipt of a mortgage application, and the Closing Disclosure at least three business days before loan closing.
Scope of the TILA-RESPA rule
The rule applies to most closed-end consumer mortgages. But the rule does not apply to:
Reverse mortgage disclosures will continue to be governed by Regulation X (the existing GFE and the HUD settlement statement) until the bureau addresses them in a separate future rulemaking.
Under the new rule, the existing RESPA exemption on property of 25 acres or more is eliminated to make Reg X (RESPA) more consistent with Reg Z (TILA).
CFPB believes that most of these loans will be exempt under other exempted categories, such as loans for business, commercial, or agricultural purposes. If a loan on property of 25 acres or more is not exempt by one of these other categories, CFPB believes the new integrated disclosures will be useful to consumers.
Use of correct forms
The Loan Estimate, Closing Disclosures, and the Special Information Booklet required under the new TILA-RESPA integrated disclosure final rule must not be used for any loans whose applications are received on or before July 31, 2015.
Instead, disclosures required under the existing TILA-RESPA rules—such as the GFE and early TIL disclosures, HUD-1 form, and final TIL disclosures—must be provided for loans whose applications are received on or before July 31, 2015, even if the loan is consummated after the effective date of Aug. 1, 2015.
The Loan Estimate, Closing Disclosures, and the Special Information Booklet required under the new TILA-RESPA integrated disclosure final rule must only be used for loans whose applications are received on or after Aug. 1, 2015.
In addition, loans that are not subject to the TILA-RESPA rule must not use the new Loan Estimate form or the Closing Disclosure form. Instead, they must continue to receive the GFE, early TIL disclosures, and the HUD-1 and final TIL disclosures regardless of whether the application is received on or before July 31, 2015, or received on or after August 1, 2015.
Therefore, credit unions that make loans covered by TILARESPA, as well as loans that are not subject to the TILA-RESPA rule, must have a processing system (or a dual system) that can accommodate both the new and existing forms on an ongoing basis.
The Dodd-Frank Act amended TILA to establish requirements for escrow accounts for first-lien closed-end mortgages secured by the borrower’s principal dwelling. These amendments would have required creditors to provide three distinct escrow notices depending on circumstances:
CFPB decided, however, to combine information from the first two escrow notices in the subheading “Escrow Account” in the TILARESPA integrated final rule’s Closing Disclosure pursuant to Reg Z section 1026.38(l)(7).
Requirements for the “Post- Consummation Escrow Cancellation Notice” are contained in Reg Z Section 1026.20(e).
Post-consummation escrow cancellation notice
The rule amended Reg Z section 1026.20(e) to require a creditor or servicer to provide “post-consummation escrow cancellation notices” when a borrower provides written notice of his or her decision to close his or her mortgage-related escrow account.
However, creditors and servicers are not required to provide the borrower with this disclosure when the mortgage for which an escrow account was established is terminated by, for example, repayment of the loan, 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 is not 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 after they’re delivered or placed in the mail.
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