Written by Brandy Bruyere, Regulatory Compliance Counsel
On Monday, the CFPB released its newest Small Entity Compliance Guide for the TILA/RESPA integrated disclosures rule. The guide is 89 pages long and intended to provide a plain English explanation of the rules. While this may seem long, the guide is substantially more manageable than the nearly 2,000 page final rule the CFPB issued in November, 2013. The guide is a good starting point for credit unions to use for determining what is necessary to be compliant by the rule’s August 1, 2015 effective date.
The guide is organized similarly to the CFPB’s other compliance guides. There are several main sections including an introduction, an overview, and the scope of the rule followed by the various requirements for the disclosures themselves. Generally, the rule requires two main disclosures—the Loan Estimate and the Closing Disclosure. The CFPB explains the Loan Estimate as follows:
“For closed-end credit transactions secured by real property (other than reverse mortgages), the creditor is required to provide the consumer with good-faith estimates of credit costs and transaction terms on a new form called the Loan Estimate. This form integrates and replaces the existing RESPA GFE and the initial TIL for these transactions. The creditor is generally required to provide the Loan Estimate within three-business days of the receipt of the consumer’s loan application (see section 6.1 below on the timing requirements of the Loan Estimate). (§ 1026.19(e)(1)).”
The CFPB gives the following summary of the Closing Disclosure:
“For loans that require a Loan Estimate and that proceed to closing, creditors must provide a new final disclosure reflecting the actual terms of the transaction called the Closing Disclosure. The form integrates and replaces the existing HUD-1 and the final TIL disclosure for these transactions. The creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan. (§ 1026.19(f)(1)(ii)).”
The guide goes on to discuss the specific content requirements for the disclosures, the tolerances for estimates, and the rules for revising or correcting the disclosures. There is also an overview of the delivery and timing requirements for providing members with these documents.
In terms of the compliance deadline, the guide answers a key question—can credit unions use the integrated disclosures to comply with TILA/RESPA before August 1, 2015. Unfortunately, the answer to this question is no:
“…For transactions where the application is received prior to August 1, 2015, creditors will still need to follow the current disclosure requirements under Regulations X and Z, and use the existing forms (Truth-in-Lending disclosures, GFE, HUD-1).”
In other words, the effective date of the rule operates like a switch, requiring credit unions to change from one compliance system to another overnight. This will present difficulties, particularly for loans with closing dates that are at or near the compliance deadline.
As compliance professionals tackle these challenges, besides the guide the CFPB created an implementation page on its website for the rule. On this webpage, you will find links to the final rule and several sample Loan Estimates and Closing Disclosures which may be helpful. The CFPB also listed an email address for sending questions or feedback to the bureau: CFPB_MortgageRulesImplementation@cfpb.gov.
April Compliance Monitor and New Scope and Applicability Chart. NAFCU will have ongoing efforts to help members prepare to implement the TILA/RESPA integrated disclosures rule. Our Compliance Monitor will feature an ongoing series of articles discussing the rules, starting with our April issue which we released yesterday. This month’s Compliance Monitor discusses the scope of the rule and the basic requirements for the Loan Estimate and Closing Disclosures. Additionally, NAFCU’s compliance team created a new Scope and Applicability Chart for the rule which is now available in the CFPB mortgage rules resources section of our website.
Giant Treat for a Giant Dog! We aren’t the only ones who spoil our dog. A friend recently attended a pet expo, and couldn’t resist the impulse to buy our dog a two-foot long cow femur. He likes when treats come in his size!