United States

Integrated mortgage disclosures rule finalized


The Consumer Financial Protection Bureau (CFPB) has finalized the rule combining certain disclosures required by the Truth in Lending Act/Regulation Z and the Real Estate Settlement Procedures Act/Regulation X. The rule applies to most closed-end consumer credit transactions secured by real property (it does not apply to home equity lines of credit, reverse mortgages, mortgage loans secured by a mobile home or by a dwelling that is not attached to real property, or to loans made by a creditor who originates five or fewer mortgages in a year). The final rule was issued on Nov. 20, 2013, and is over 1,800 pages in length. The effective date of the final rule is Aug. 1, 2015, and applies to transactions for which an application is received on or after that date. 

The final rule establishes two new forms. The first form is the Loan Estimate which replaces the current Good Faith Estimate and early Truth-in-Lending disclosures. The Loan Estimate must be given within three business days after submission of a mortgage loan application. The second form is called the Closing Disclosure which replaces the current settlement statement and final Truth-in-Lending disclosures. The Closing Disclosure must be given at least three business days before closing on a mortgage loan. As noted in the summary of the final rule found here: http://files.consumerfinance.gov/f/201311_cfpb_tila-respa_detailed-summary.pdf, the new forms are designed to alleviate differences between the current disclosures and include several mandated disclosures such as the appraisal notice under the Equal Credit Opportunity Act. In addition, the final rule provides detailed instructions on how to complete the new forms.

The final rule did not adopt the following proposed provisions:

  • Redefined Annual Percentage Rate or APR calculation
  • Requirement to keep records of the Loan Estimate and Closing Disclosure forms provided to consumers in an electronic, machine readable format
  • Requirement to disclose the creditor’s cost of funds (the approximate amount of the wholesale rate of funds in connection with the loan)

This article won’t get into too much detail on the new rule given industry focus on the implementation of the other new mortgage rules effective this January. The CFPB states on its website to look for compliance guides and other information it is planning to release over the coming months to help understand and implement this final rule. The integrated mortgage disclosures final rule can be found here: http://files.consumerfinance.gov/f/201311_cfpb_final-rule_integrated-mortgage-disclosures.pdf