MADISON, Wis. (10/17/14)--Attendees of CUNA Mutual Group's fifth annual Discovery Conference were advised that the Consumer Financial Protection Bureau's (CFPB) TILA-RESPA Integrated Disclosure Rule will take a toll on the resources that support their lending functions.
"Overall, TILA-RESPA will directly affect the people, processes and technology credit unions use to support their lending operations because the regulations require loan disclosures to change dynamically to reflect each borrower's unique loan features," said Theresa Reinke, LOANLINER compliance consultant for CUNA Mutual Group. "Specifically, the rule will impact credit unions' relationships with their system providers and, most importantly, their members and their own staff."
The CFPB issued the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) rule in November 2013 to simplify and improve disclosures consumers receive when applying for and closing mortgage loans.
"Don't underestimate the amount of staff education and training that will be needed," Reinke added. "The TILA-RESPA Integrated Disclosure Rule will completely overhaul the way credit unions go about mortgage lending and will likely impact the types of mortgage lending credit unions engage in because it redefines disclosures for first mortgages and closed-end home equity loans."
The TILA-RESPA rule becomes effective and must be complied with by Aug. 1, 2015.
"No one can be early or late to comply," said Reinke. "There is no grandfather clause to the Integrated Disclosure rule. Any application taken on or before July 31, 2015, must use the old disclosures, and continue with the old disclosures through the closing of the loan while any application taken on or after Aug. 1, 2015, must use the new disclosures. Thus, credit unions will be running dual systems for a while."
The new Loan Estimate replaces the Initial TILA Disclosure and the RESPA Good Faith Estimate, which is provided three business days after the lender receives an application. Then, the Closing Disclosure replaces the Final TILA Disclosure and HUD-1 Settlement Statement, which is provided three business days before closing.
Reinke reminded audience members that the new disclosures are not merely replacing or combining the existing disclosures. The new documents will have new data elements, calculations and restrictions, and incorporate dynamic elements based on loan type, loan feature and loan purpose.
To be fully prepared, credit unions must start making and documenting business decisions regarding the type of lending programs offered, and fees and services charged.
"Systems will need to be updated with new data fields and calculations, so it is critical that credit unions work with their system and form providers to make sure they are on track," Reinke said. "Procedures should be established to guarantee service providers and settlement agents are walking in step with the credit union to address restrictions and timing limitations."