More than two years in the making, the CFPB’s Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (Regulation X) and the Truth-in-Lending Act (Regulation Z) were published on Nov. 20, 2013. Effective Aug. 1, 2015, the final rule replaces the familiar Truth-in-Lending Disclosure Statement, Good Faith Estimate (GFE), and HUD-1 Settlement Statement with two new disclosures.
The final rule provides detailed rules and guidance regarding the use of the new disclosures:
►The Loan Estimate will be provided to consumers within three business days of application. The Loan Estimate, which replaces the initial Truth-in-Lending Disclosure Statement and GFE, summarizes the terms of the transaction and provides an estimate of loan and closing costs.
►The Closing Disclosure will be provided to consumers three business days before loan closing. It replaces the final Truth-in-Lending Disclosure Statement and the HUD-1 Settlement Statement, and provides a detailed accounting of the transaction.
The final rule also restricts circumstances in which consumers can be required to pay more for settlement services than the amount stated on the Loan Estimate and limits the amount of such increases.
Also significant is a provision that isn’t included in the final rule. The proposed rule, published in August of 2012, would have re-defined the way the Annual Percentage Rate (APR) is calculated by including almost all upfront costs of the loan in the definition of finance charge. However, based on public comments it received, the CFPB has determined not to finalize these provisions in this final rule.
Laurie Spira is chief compliance officer with Torrance, Calif.-based DocMagic Inc. She may be reached by phone at (800) 649-1362, ext. 6446 or e-mail [email protected]