Today, in a broadcast streamed live on the internet, the CFPB unveiled the long awaited final rule that contains the Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (“RESPA”), Regulation X, and the Truth-In-Lending Act (“TILA”), Regulation Z.[1]

The final rule applies to most closed-end consumer mortgage loans (including timeshare estate products), but explicitly exempts 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, and loans made by a creditor who makes five or fewer mortgages in a year.  The new rule is effective, and new disclosures will be required to be given to consumers for applicable mortgage applications received on or after August 1, 2015.

Overview of New Forms[2]

The final rule contains detailed instructions for completing each line of the forms.  The CFPB has also released sample forms for different types of loan products.  We have also included links to some of the new forms below.

Loan Estimate Form

Pursuant to the final rule, the new Loan Estimate form replaces the current Good Faith Estimate (“GFE”) form and the initial TILA disclosures, and includes some new disclosures.  The Loan Estimate form must be provided by either the mortgage broker or creditor upon receipt of an application by a mortgage broker, but in no event, later than three business days after the consumer applies for a mortgage loan.  Without regard to who provides the Loan Estimate form, the creditor will remain responsible for ensuring that the borrower timely receives the Loan Estimate form with all of the required information.  With the exception of fees for a creditor to obtain a consumer’s credit report, the creditor may not charge a consumer any fees until after the consumer has been given the Loan Estimate form.

The final rule also clarifies the definition of what constitutes an “application” for a consumer mortgage.  An application will be deemed to have been received if the consumer provides the following information:  his or her name, income, social security number with permission to obtain a credit report, the property address, an estimate of the value of the property, and the proposed mortgage loan amount.  Creditors may provide consumers with written estimates prior to the consumer’s submission of a formal application, but the creditor must provide a disclaimer on the written estimate warning the consumer that the estimate is not a substitute for, nor should it be confused with, the Loan Estimate form.  Notably, this latter disclaimer is required for all advertisements.

The Closing Disclosure

The Closing Disclosure form replaces the current HUD-1 form and the final TILA disclosure, and also includes additional disclosures.  The creditor must ensure that the consumer receives the Closing Disclosure form at least three business days before the consumer closes the loan.  Business days include only Monday through Friday, even if the creditor is open for business on Saturdays.

The creditor must provide a revised Closing Disclosure form if there are changes to the terms of the loan.  If significant changes occur, the creditor must provide an additional three-business-day waiting period after the consumer receives the new Closing Disclosure.  Significant changes include changes to the APR above 1/8 of a percent for most loans (and ¼ of a percent for loans with irregular payments or periods), a change to the loan product, or if a prepayment penalty is added to the terms of the loan.  For less significant changes, the creditor may provide the consumer with the new Closing Disclosure at or before closing, and need not delay the closing.

A creditor may utilize the services of a settlement agent to provide Closing Disclosures, but the creditor is ultimately responsible for ensuring that the settlement agent complies with the final rule.

Closing Costs

The final rule continues restrictions regarding the circumstances in which consumers can be required to pay higher closing costs than those included on their Loan Estimate form.  Generally, after issuing a Loan Estimate form to a consumer, a creditor cannot increase: (1) the creditor’s or mortgage broker’s charges for its services; (2) charges for services provided by an affiliate of the creditor or mortgage broker; (3) charges for services for which the creditor or mortgage broker does not permit the consumer to shop; and (4) a charge more than 10% for services for which the creditor or mortgage broker does permit the consumer to shop.

You may also be interested in reviewing the following forms:

Loan Estimate for refinancing with no seller

Closing Disclosure provided to the seller separately