Written by JiJi Bahhur, Director of Regulatory Compliance
As many of you already know (we’ve blogged about it here, here, and here), the Consumer Financial Protection Bureau (CFPB) finalized the Truth in Lending Act/ Real Estate Settlement Procedures Act (TILA/RESPA) Integrated Mortgage Disclosures rule in November of last year. The final rule is a biggie – nearly 2,000 pages in length – and because of that, I’d like to start a series of blogs on the subject (which will post intermittently between other hot credit union topics). These blogs will not fully cover any particular part of the TILA/RESPA rule but rather will serve to point out certain aspects of the rule or to put something on your credit union’s radar.
Today, I’d like to focus on the scope and applicability of the TILA/RESPA rule.
Which Credit Unions are Covered?
The TILA/RESPA Integrated Mortgage Disclosures rule applies to most closed-end mortgage loans, regardless of the credit union’s asset size or pricing of the mortgage (i.e., Higher Priced Mortgage Loans). Because there is no small creditor exemption under this rule, all credit unions who originate closed-end mortgage loans must comply with these new mortgage disclosure regulations.
What Mortgage Loans are Covered?
Closed-end mortgage loans are consumer credit transactions secured by real property, including transactions such as: purchases, refinances and loans for second homes or vacation homes. Of note, the disclosures are also required for construction-only loans, for loans secured by vacant land and for loans secured by 25 acres or more. Currently, those three types of loans are not within the scope of RESPA, but are subject to the new TILA/RESPA rule.
While the final mortgage disclosures rule applies to most mortgage loans that credit unions make, it does not apply to the following:
- Home-equity lines of credit (HELOCs);
- Reverse mortgages;
- Mortgages secured by a mobile home or dwelling that is not attached to real property; and
- Mortgage loans made by persons that are not “creditors” under Regulation Z.
The new Integrated Disclosures must be provided by a credit union that receives an application from a consumer on or after August 1, 2015. The credit union may not use the new disclosures for applications received prior to August 1, 2015 because TILA/RESPA did not provide a provision for early compliance. Early use of the new disclosures would result in violation of the current TILA and RESPA rules.
If you’d like to track other / future TILA/RESPA blogs in the series, click here. Also, check out NAFCU’s Mortgage Resources Page. We’ve updated it to include a section of resources on TILA/RESPA including NAFCU’s Scope and Applicability Chart (NAFCU log-in required).