5/19/2015
CFPB Integrated
Mortgage
Disclosures
Today’s Goal
To help you not only understand the rule
changes, but make sure you have the tools,
resources and support to take action to
implement in your credit union by
August 1, 2015.
2
1
5/19/2015
Agenda
 Truth in Lending/RESPA Rule Changes
– Simplified/Combined Disclosures
– Tolerances, permitted revisions, waiting periods
– Timing to provide
– Additional Requirements/Prohibitions
– Important steps towards compliance
 A look back at 2014 Rules
 Best practices for 2015 and beyond
3
The New Forms
 Loan Estimate
– Key features
– Costs
– Risks of the mortgage they are applying for
 Closing Disclosure
– Outlines all costs associated with the transaction
 Both contain clear language and easier to locate key
information like:
– Interest rate
– Monthly payments
– Costs to close the loan
4
2
5/19/2015
Applicable Loans
 New rule applies to most closed-end loans including:
– Construction-only loans
– Loans secured by vacant land or by 25 or more acres
– Credit extended to certain trusts for tax or estate planning
purposes
 Does not apply to:
–
–
–
–
–
HELOCs
Reverse Mortgages
Mortgages secured by a mobile home
Dwelling that is not attached to real property (land)
Lenders making less than five mortgages per year
5
Loan Estimate
 Replaces
– Good Faith Estimate
– Early Truth in Lending Disclosure
 Timing
– Within three days of receipt of application
– Not required to provide for time shares
 Contents
– Good faith estimate of costs and terms
– In writing in prescribed format
 Provided by
– Lender OR
– Mortgage broker
6
3
5/19/2015
Definition: Application
1.
2.
3.
4.
5.
Member’s name
Member’s income
SSN to obtain credit report
Property address
Estimate of the value of the
property
6. Mortgage loan amount
sought
The collection of this
information does not
prevent you from collecting
additional information
deemed necessary in
connection with the loan
request. This is to
determine when the Loan
Estimate must be delivered.
7
Withdrawals, Denials, Changes
 What if member
withdraws the
application within 3
business days?
 What if they are denied
within the 3 business
days?
 What if the member
changes the
application?
 Loan Estimate is not
required
 Loan Estimate is not
required
 Loan Estimate is
required
8
4
5/19/2015
Estimates
 Must act in good faith and exercise due
diligence in obtaining information.
 If information is unknown, may use estimates.
 Must designate as an estimate on the Loan
Estimate form.
 In some cases, may require new disclosures:
– If it affects the APR by more than 1/8% for fixed
and ¼% for a variable rate loan.
9
Good Faith Requirement
 Best information reasonably available to
creditor
 To calculate:
– Actual charges (Closing Disclosure) –
Estimated charged (Loan Estimate) =
 Higher at closing = NOT IN GOOD FAITH
 Less at closing = IN GOOD FAITH
10
5
5/19/2015
When charges can go up
 Certain variations expressly permitted by
TILA/RESPA
 Amount charged falls within tolerance
 Changed circumstances
11
Charges Not Subject to Tolerances
 Prepaid interest
 Property insurance premiums
 Amounts placed into an escrow, impound, reserve
or similar account
 For services required by the creditor if the creditor
permits the consumer to shop and the consumer
selects a third-party service provider not on the
creditor’s written list of service providers.
 Charges paid to third-party service providers for
services not required by the creditor (may be paid
to affiliates of the creditor).
12
6
5/19/2015
Subject to 10% Cumulative Tolerance
 Recording fees
 Charges for third party services where:
– Charge is not paid to creditor or affiliate
– The consumer is permitted to shop and they
select from written list of providers
13
Zero Tolerance Charges
 Fees paid to the creditor, mortgage broker,
or an affiliate of either
 Fees paid to an unaffiliated third party if
the creditor did not permit the consumer to
shop for a third party service provider for a
settlement service
 Transfer taxes
14
7
5/19/2015
Charges that Exceed the Tolerance
 If amounts paid by consumer exceed the
applicable tolerance the creditor must refund the
excess to the consumer no later than 60
calendar days after consummation.
– For charges subject to zero tolerance, any
amount charged beyond the amount
disclosed on the Loan Estimate
– For charges subject to a 10% cumulative
tolerance, the difference
15
Permitted Revisions to LE
 Changed circumstances that occur after
the Loan Estimate (LE) is provided to the
consumer that:
– Cause estimated settlement charges to
increase more than is permitted under the
TILA-RESPA rule
– Affect the consumer’s eligibility for the terms
for which the consumer applied or the value of
the security for the loan
16
8
5/19/2015
Examples - Changed Circumstance
 “An extraordinary event beyond the control of any
interested party or other unexpected event specific
to the consumer or transaction”…
– War or natural disaster
– Discovery of new information not originally relied
on when providing disclosure (value or property
dispute)
– Title company goes out of business
– Income amount changes, member becomes
unemployed
17
Permitted Revisions
 Revisions to the credit terms or the settlement are requested
by the consumer
 The interest rate was not locked when the Loan Estimate was
provided, and locking the rate causes the points or lender
credits disclosed on the Loan Estimate to change
 The consumer indicates an intent to proceed with the
transaction more than 10 business days after the Loan
Estimate was originally provided or
 The loan is a new construction loan, and settlement is
delayed by more than 60 calendar days, if the original Loan
Estimate states clearly and conspicuously that at any time
prior to 60 calendar days before consummation, the creditor
may issue revised disclosures.
18
9
5/19/2015
Timing for Revised LE
 No later than 3 business days after information
warrants a revised Loan Estimate
 No later than seven business days before loan
consummation – waiting period is required
 Business day is defined differently for seven business
day waiting period.
– Includes all calendar days except Sundays and legal
public holidays, such as New Year’s Day, MLK Day,
Washington’s Birthday, Memorial Day, etc.
 Waiting period begins the day the revised Loan
Estimate is placed in the mail (not the date received by
applicant.)
19
Waiver of Waiting Period
 Only if the consumer determines that the
mortgage loan is needed to meet a bona-fide
personal financial emergency.
 Same requirements as right to cancel
– Dated written statement by consumer stating
emergency
– Specifies modification or waiver of waiting period
– Signed by all applicants
– Cannot be a preprinted form
20
10
5/19/2015
Additional Requirements and Prohibitions
 Limits on fees charged prior to disclosure or
application. Cannot impose a fee as follows prior
to the consumer receiving the Loan Estimate and
indicating intent to proceed.
 This restriction includes limits on imposing:
–
–
–
–
Application fees
Appraisal fees
Underwriting fees; and
Other fees imposed on the consumer
 One exception is the bona fide fee for obtaining a
credit report
21
Intent to proceed…
 Can be provided in any manner once the Loan
Estimate is received:
– Oral communication if Loan Estimate is provided in person
– By phone, written communication, email, or signing a preprinted form after receiving Loan Estimate
– Consumer’s silence is not indicative of intent to
proceed
– Creditor must document this communication to satisfy the
record retention requirements
22
11
5/19/2015
Closing Disclosure
 Replaces
– HUD-1 Settlement Statement
– Final Truth in Lending Disclosure
 Timing
– No later than three days before consummation
– No timing requirement for time shares
 Contents
– Actual costs and terms
– In writing in prescribed format
23
Delivery Requirements
 Must ensure consumer receives the Closing Disclosure
form at least three business days before consummation.
 To ensure the consumer receives the Closing Disclosure
on time, creditors must arrange for delivery as follows:
– By providing it to the consumer in person.
– By mailing, or by other delivery methods, including email.
Creditors may use electronic delivery methods subject to
compliance with the consumer consent and other applicable
provisions of the Electronic Signatures in Global and National
Commerce Act.
 Settlement agent is responsible for providing Closing
Disclosure to Seller.
 In rescindable transactions, all consumers who has the
right to rescind must receive a separate copy.
24
12
5/19/2015
Revised Closing Disclosure
 Creditors must redisclose terms or costs on the
Closing Disclosure if certain changes occur to the
transaction after the Closing Disclosure was first
provided that cause the disclosures to become
inaccurate.
 There are three categories of changes that require a
corrected Closing Disclosure containing all changed
terms:
– Changes that occur before consummation that require a
new three-business-day waiting period.
– Changes that occur before consummation and do not
require a new three-business-day waiting period.
– Changes that occur after consummation.
25
Changes Before Consummation
 If one of the following occurs after delivery of original
Closing Disclosure, but before consummation a
revised Closing Disclosure must be provided with a 3
business day waiting period before consummation:
– The disclosed APR becomes inaccurate.
– The loan product changes.
– A prepayment penalty is added.
 For any other charge not listed above, the revised
Closing Disclosure may be provided at or before
consummation, unless requested by borrower (then
one business day before)
26
13
5/19/2015
Changes After Consummation
 Required in some circumstances
 If within 30 days after consummation and:
– Causes the Closing Disclosure to become inaccurate
and results in a change to an amount paid by the
consumer from what was previously disclosed.
 Must place a corrected Closing Disclosure in the
mail no later than 30 days after receiving
information that warrants a correction.
 To correct non-numerical clerical errors and
document refunds for tolerance violations no
later than 60 calendar days after consummation.
27
Timing - Revised Closing Disclosure
 The three-business-day waiting period
requirement applies to a corrected Closing
Disclosure that is provided when there are:
– Changes to the loan’s APR;
– Changes to the loan product; or
– The addition of a prepayment penalty.
 If other types of changes occur, creditors must
ensure that the consumer receives a corrected
Closing Disclosure at or before consummation.
28
14
5/19/2015
Waiver of Waiting Period
 Only if the consumer determines that the
mortgage loan is needed to meet a bona-fide
personal financial emergency.
 Same requirements as right to cancel
– Dated written statement by consumer stating
emergency
– Specifies modification or waiver of waiting period
– Signed by all applicants
– Cannot be a preprinted form
29
Special Information Booklet
 HELOCs – When Your Home is on the Line…
 Special Information Booklet for all other
consumer credit transaction secured by real
property
 Not required for:
– Refinance transactions
– Subordinate liens
– Reverse mortgage
30
15
5/19/2015
Other Required Disclosures
 Escrow Closing Notice
 Mortgage Servicing Transfer Notice
 Partial Payment Notices
31
Escrow Closing Notice
 To be provided 3 business days before escrow account is
canceled when creditor cancels upon customer request
 To be provided no later than 30 business days before closure
when creditor or servicer cancels not at customer request
 For any first lien loans (except reverse mortgage) with an
escrow account
 Two exceptions to provision of Notice:
– If escrow was established solely in connection with delinquency or
default
– If underlying debt is terminated
32
16
5/19/2015
Escrow Closing Notice
33
Partial Payment Disclosure
 If you are required by existing Regulation Z to
provide mortgage transfer notices when the
ownership of a mortgage loan is being transferred,
you must include in the notice information related to
the partial payment policy that will apply to the
mortgage loan.
 This post-consummation partial payment disclosure
is required for a closed-end consumer credit
transaction secured by a dwelling or real property,
other than a reverse mortgage.
34
17
5/19/2015
Partial Payment Disclosure
The heading “Partial Payment” over all of the following, additional information:
– If periodic payments that are less than the full amount due are
accepted, a statement that the covered person, using the term
“lender,” may accept partial payments and apply such payments to the
consumer’s loan;
– If periodic payments that are less than the full amount due are
accepted but not applied to a consumer’s loan until the consumer
pays the remainder of the full amount due, a statement that the
covered person, using the term “lender,” may hold partial payments in
a separate account until the consumer pays the remainder of the
payment and then apply the full periodic payment to the consumer’s
loan;
– If periodic payments that are less than the full amount due are not
accepted, a statement that the covered person, using the term
“lender,” does not accept any partial payments; and
– A statement that, if the loan is sold, the new covered person, using the
term “lender,” may have a different policy.
35
Record Retention
 Closing Disclosure – 5 years after consummation.
 Includes all documents related to Closing Disclosure
 Post Consummation Escrow Closing Notice and
Partial Payment Policy – 2 years after
consummation
 All other evidence of compliance including Loan
Estimate – 3 years after consummation.
 Different requirements if you transfer or sell the loan.
 Any format including electronic is permitted, so long
as they can be reproduced accurately.
36
18
5/19/2015
All Related Resources
 http://www.consumerfinance.gov/regulatoryimplementation/tila-respa
– Compliance Guide
– Guide to Forms
– Disclosure Timeline
– Disclosure Forms and Samples
– Videos
– Readiness Guide
37
Staff Training
 Consider:
–
–
–
–
–
–
–
Processes affected
New processes created
Timing requirements
Form changes
Use real life examples
Practice
2nd review process
during transition
38
19
5/19/2015
Questions?
Thank you for your time!!!
39
20