The Consumer Financial Protection Bureau (CFPB) is considering changes to mortgage disclosure and rescission requirements that could alter closing timelines, tolerance rules and the funding of certain refinance transactions.
In a request for information published July 9, the CFPB asked lenders, brokers, and other market participants to comment on potential revisions to the TILA-RESPA Integrated Disclosure Rule (TRID), the Truth in Lending Act’s right of rescission, and disclosures for reverse mortgages.
The bureau said it is seeking information about whether the requirements impose unnecessary burdens on consumers and the mortgage industry or affect credit availability. Comments are due Aug. 10.
The request is an information-gathering step and does not change lenders’ current obligations. Any revisions would require further action by the CFPB.
CFPB Questions Closing Timelines
A central focus of the review is whether existing disclosure and rescission timelines delay mortgage closings or increase costs.
Under TRID, creditors generally must deliver or mail the Loan Estimate no later than three business days after receiving an application. The consumer must also receive the initial Closing Disclosure at least three business days before consummation.
The CFPB is asking whether those timing requirements materially affect access to mortgage credit, raise costs for lenders, brokers or borrowers, or complicate particular types of transactions.
It is also seeking feedback on whether initial Loan Estimates could be provided earlier in the origination process and whether changes could reduce the number of revised disclosures issued before closing.
The review follows a March 13 executive order directing the bureau to consider replacing TRID timing rules with a materiality-based standard intended to preserve consumer clarity while reducing closing delays.
Tolerance Rules Could Be Revised
The bureau is also examining the tolerance thresholds used to determine whether closing costs were disclosed in good faith.
Under the current framework, some charges generally cannot increase from the amount disclosed on the Loan Estimate, while other groups of charges may increase by no more than a cumulative 10%.
The CFPB is seeking input on whether those categories should be changed, including for charges that may be difficult to estimate accurately early in the mortgage process.
It is also asking whether lenders need additional guidance on changed circumstances and revised Loan Estimates.
Rescission Period Draws Scrutiny
The CFPB is separately reviewing the right of rescission that applies to certain consumer-credit transactions secured by a borrower’s principal dwelling.
The right generally gives a borrower three business days after consummation to cancel a covered transaction. It typically applies to certain refinances, home equity loans and home equity lines of credit, subject to statutory and regulatory exemptions.
The bureau is asking whether that post-consummation period creates unnecessary delays when combined with the pre-consummation Closing Disclosure waiting period.
The March executive order went further, directing the CFPB to consider exempting rate-and-term refinances, including cash-out refinances, from rescission rights. It also called on the bureau to consider modernizing rescission procedures through greater use of secure electronic and digital processes.
The CFPB has not proposed either change.
Smaller Banks May Receive Tailored Rules
Community banks, credit unions and other smaller institutions are another focus of the inquiry.
The CFPB is seeking feedback on whether smaller institutions should receive exemptions, alternative requirements or other tailored treatment under TRID.
Unlike some other mortgage regulations, the TRID Rule does not contain a broad exemption based on an institution’s asset size. It generally relies on existing transaction-volume thresholds to determine whether an entity regularly extends consumer credit and qualifies as a creditor under Regulation Z.
The executive order directed the CFPB to consider tailoring TILA, RESPA, TRID and ability-to-repay requirements for banks with less than $100 billion in assets. The administration argued that regulatory costs have contributed to a decline in bank participation in mortgage lending, particularly among community banks. Those assertions come from the executive order and are among the issues the CFPB is now seeking data to evaluate.
Reverse Mortgage Forms Under Review
The bureau is also considering whether reverse mortgages should receive integrated disclosures designed specifically for those loans.
Reverse mortgages are generally excluded from the standard Loan Estimate and Closing Disclosure requirements. Instead, borrowers receive other disclosures required under TILA and Regulation Z.
The CFPB is asking whether new forms could provide reverse mortgage borrowers with clearer information, including illustrations showing how the loan balance may grow over time.
It is also reviewing the total annual loan cost disclosure, which is designed to show the projected cost of a reverse mortgage under different assumptions.
The bureau asked commenters to provide data supporting both the potential benefits and drawbacks of any recommended changes.
For mortgage companies, the request signals that significant elements of the disclosure and closing process are under review. But until the CFPB issues a proposed or final rule, existing TILA, RESPA, TRID and rescission requirements remain in effect.
Editor's Note: This article was drafted with AI assistance and reviewed and edited by a human editor before publication.
