The Consumer Financial Protection Bureau (CFPB) said Tuesday it is in the final stage of reviewing a proposal to adjust existing mortgage disclosures to facilitate loans that finance both a construction phase and the permanent purchase of a new home.
The review is part of an initiative the CFPB announced last year that allows members of the public to submit petitions for rulemaking directly to the agency. The petitions are posted on public dockets for review and comment.
The proposal to adjust mortgage disclosures for the construction phase and permanent purchase of a home was submitted by the Independent Community Bankers of America (ICBA), which said it is not uncommon in rural communities for first-time homebuyers to build their first home, since there are a limited number of existing affordable “starter” homes available.
According to the CFPB, the ICBA application seeks to adjust existing mortgage disclosures to facilitate the offering of these products, believing that consumer understanding of construction loans would be improved by disclosures that are specifically tailored to such loans.
In its application for the changes, the ICBA states that it is seeking a Trial Disclosure Program waiver template that would “provide a foundation for individual lenders to test improvements to the [TILA-RESPA Information Disclosures] used for consumer construction and construction-to-permanent loans.”
The application continues, “The current disclosure regime was designed primarily for standard home purchase or refinance mortgage transactions and in their current form do not adequately disclose all of the various components of a construction or construction-to-permanent loan. We are proposing to modify/expand the current Loan Estimate and Closing Disclosure to include improved construction phase detail, construction cost breakdown, and improved disclosure regarding the consumer's permanent loan financing.”
The ICBA also states that the improvements “will enhance a consumer's understanding of the construction process and costs, by providing clarity around all fees and charges, allowing the consumer to better compare options such as a one-time close or two-close construction to permanent loan. The consumer will be able to fully understand the total cost to build and finance their home.”
If the template application is approved, individual lenders could then apply to enroll in an in-market testing pilot, the CFPB said.
In addition to making the application available to the public, the CFPB is also seeking input from consumers, lenders, and other stakeholders who have experience with construction loans.
Anyone may submit relevant information or comments on Docket No. CFPB-2023-0016 by any of the following methods:
- The Federal eRulemaking Portal,
- By email to [email protected], or
- By mail/hand delivery/courier: Address to Comment Intake-ICBA Trial Disclosure Application, Consumer Financial Protection Bureau, 1700 G Street NW, Washington, D.C. 20552.
Submissions will be accepted until March 29, 2023.
