INFOBYTES SPECIAL ALERT:
CFPB FINALIZES RULE COMBINING TILA AND RESPA MORTGAGE DISCLOSURES
December 2, 2013
On November 20, 2013, the CFPB finalized its long-awaiting rule combining the mortgage disclosures
consumers receive under the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures
For more than 30 years, the TILA and RESPA mortgage disclosures had been
administered separately by, respectively, the Federal Reserve Board (“FRB”) and the U.S. Department of
Housing and Urban Development (“HUD”). In 2010, the Dodd-Frank Wall Street Reform and Consumer
Protection Act (“Dodd-Frank Act”) transferred authority over TILA and RESPA to the Bureau and directed
the Bureau to create “rules and model disclosures that combine the disclosures required under [TILA] and
sections 4 and 5 of [RESPA], into a single, integrated disclosure for mortgage loan transactions covered
by those laws.”
Congress did not, however, amend TILA and RESPA provisions governing timing,
responsibility, and liability for the disclosures, leaving it to the Bureau to resolve the inconsistencies.
Unlike the Bureau’s other Dodd-Frank Act mortgage rules, Congress did not impose a January 2013
deadline for the TILA-RESPA Integrated Disclosure rule. Nevertheless, from the outset, the Bureau
made the project the public centerpiece of its rulemaking efforts, announcing its commencement in
December 2010 and releasing the first prototype disclosures for public comment in conjunction with the
beginning of consumer testing in May 2011. Over the next twelve months, the Bureau released nine
additional sets of prototype disclosures, conducted nine additional rounds of testing, and convened its
first Small Business Review Panel, culminating in the release of the proposed rule in July 2012.
Following the proposal, the Bureau conducted additional testing and developed Spanish-language and
refinancing versions of the disclosures.
For additional background, please review our report on the rule as proposed.
EFFECTIVE DATE AND SCOPE
The final rule generally applies to covered transactions for which the creditor or mortgage broker receives
an application on or after August 1, 2015.
The rule applies to most closed-end consumer mortgage
loans, although it establishes different requirements for timeshares and construction loans. The rule does
not apply to:
Home equity lines of credit
Bureau of Consumer Financial Protection, Final Rule, Integrated Mortgage Disclosures under the Real Estate
Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) (Nov. 20, 2013),
http://www.consumerfinance.gov/regulations/integrated-mortgage-disclosures-under-the-real-estate-settlementprocedures-act-regulation-x-and-the-truth-in-lending-act-regulation-z/(publication in the Federal Register
forthcoming) (hereinafter “TILA-RESPA Integrated Disclosure Rule” or “TRID Rule”). The CFPB has also released a
guide summarizing the rule: http://files.consumerfinance.gov/f/201311_cfpb_tila-respa_detailed-summary.pdf.
Dodd-Frank Act § 1032(f).
TRID Rule at p. 1243. 2
Mortgage loans secured by a mobile home or by a dwelling that is not attached to real property
Loans made by a lender who makes five or fewer mortgages in a year
Certain no-interest second mortgage loans made for the purpose of downpayment assistance,
property rehabilitation, energy efficiency, or foreclosure avoidance
Use of the Bureau’s forms is mandatory for most transactions and only limited modifications are
Despite requests from industry, the Bureau’s regulation and official interpretations do not
specify which disclosures are subject to TILA liability and which are subject to RESPA liability. Instead,
the Bureau stated that the “detailed discussions [in the final rule’s preamble] of the statutory authority for
each of the integrated disclosure provisions provide sufficient guidance for industry, consumers, and the
courts regarding the liability issues raised by the commenters.”
We will continue to study this issue.
The Loan Estimate: Truth in Lending Statement + Good Faith Estimate
The Bureau’s Loan Estimate combines some of the disclosures that are currently provided in the initial
Truth in Lending (“TIL”) statement with the disclosures that are currently provided in the RESPA Good
Faith Estimate (“GFE”). The form also incorporates other disclosures that are required by the Dodd-Frank
Act or are currently provided separately, such as the Total Interest Percentage required by TILA (as
amended by the Dodd-Frank Act), the appraisal notice required by the Equal Credit Opportunity Act, and
the servicing notice required by RESPA.
(click to enlarge)
12 C.F.R. § 1026.19(e)(1)(i) and (f)(1)(i). Unless otherwise noted, all citations to the Code of Federal Regulations
and the commentary are to revised version adopted in the TRID Rule.
12 C.F.R. § 1026.2(a)(17)(v). Thus, this long-standing exception in Regulation Z now applies to provision of the
RESPA §§ 4 and 5 disclosures.
12 C.F.R. § 1026.3(h).
12 C.F.R. §§ 1026.37(o), 1026.38(t).
TRID Rule at pp. 120-21. 3
The Closing Disclosure: Truth in Lending Statement + HUD-1/1A Se ttleme nt Sta teme nt
The Bureau’s Closing Disclosure combines the disclosures that are currently provided in the final TIL
statement with the disclosures that are currently provided in the RESPA HUD-1 or HUD-1A settlement
statement. Like the Loan Estimate, the form also incorporates other disclosures, including the new TILA
negative amortization and escrow account notices.
(click to enlarge)
The regulation and official interpretations provide extensive, highly-detailed guidance on how to fill out the
Loan Estimate and Closing Disclosure.
In addition to the sample Loan Estimate above (which is for an
interest-only adjustable rate purchase loan), the Bureau provided samples for fixed-rate, balloonpayment, and negative amortization purchase loans and for a refinancing.
The Bureau also provided
See 12 C.F.R. §§ 1026.37 and 1026.38 and Official Interpretations.
See Sample Forms H-24(B)-(F). 4
two variations of page one and four variations each of pages two and three of the Loan Estimate to
address the variable content requirements. Similarly, the Bureau provided multiple samples of the
Closing Disclosure, including samples separating the borrower and seller information for privacy
Although our analysis of the final rule is ongoing, we make the following observations regarding the
Itemization: Unlike HUD’s 2010 GFE, the Bureau’s Loan Estimate requires the itemization of
individual charges. The GFE prohibits separately disclosing the items that are consolidated in,
for example, the origination charge. But the Loan Estimate mandates providing a consolidated
figure on page 2 under the subheading of “Origination Charges,” with an itemization of each
amount that the consumer will pay to each creditor and loan originator for originating and
extending the credit.
These separately disclosed items may include, for example, an
application fee, origination fee, underwriting fee, processing fee, verification fee, and rate-lock
A consolidated subtotal and an itemization of individual amounts must also be provided
for “Services You Cannot Shop For” and “Services You Can Shop For.”
The items listed as
loan costs under these provisions generally must be labeled using terminology that describes
each item and listed alphabetically.
Disclosure of Discount Points: Under the subheading “Origination Charges” on page 2 of the
Loan Estimate, the points paid to the creditor to reduce the interest rate must be disclosed as a
separate line item, listed as both a dollar amount and as a percentage of the amount of credit
extended labeled as “__% of Loan Amount (Points).”
A charge imposed to pay for a loan
level pricing adjustment (“LLPA”) assessed on the creditor, which the creditor passes on to the
consumer as a charge at consummation and not as an adjustment to the interest rate, must be
Disclosure of Brok er Compensation: One of the most significant revisions made to the GFE in
2010 was the emphasis placed on disclosing compensation paid to a mortgage broker by the
lender as both a charge to the consumer and a “credit” from the lender. The Loan Estimate
does not disclose creditor-paid mortgage broker compensation in the same manner.
Consumer-paid broker compensation must be disclosed on the Loan Estimate as an individual
line item under “Origination Charges” on page 2.
Unlike the GFE, the CFPB does not require
(and, in fact, prohibits) disclosure of creditor-paid broker compensation (e.g., compensation to a
See Sample Forms H-25(B)-(J).
12 C.F.R. § 1026.37(f)(1).
12 C.F.R. § 1026.37(f)(2, 3).
12 C.F.R. § 1026.37(f)(5).
12 C.F.R. § 1026.37(f)(1)(i).
12 C.F.R. § 1026.37(f)(1) and Official Interpretations. 5
loan originator paid indirectly by the creditor through the interest rate) on the Loan Estimate.
On the Closing Disclosure, borrower-paid and creditor-paid compensation are separately
disclosed on page 2. Consumer-paid broker compensation is disclosed as a “Borrower-Paid”
charge, whereas lender-paid broker compensation is disclosed as a charge in the “Paid by
De-emphasis of APR and Other TIL Disclosures: Based on consumer testing performed by the
FRB and the Bureau indicating that the traditional “TIL Box” disclosures of Annual Percentage
Rate (“APR”), Finance Charge, Amount Financed, and Total of Payments were not helpful to
consumers, the Bureau used its exception and adjustment authority to move the APR to the
last page of the forms and to provide the other disclosures only on the last page of the Closing
Disclosure. While these changes were supported by industry, consumer advocates strongly
opposed the relegation of the APR to the back page.
Elimination of Average Cost of Funds: Based on its consumer testing, the Bureau used its
exception authority to eliminate the Average Cost of Funds disclosure required by Congress in
the Dodd-Frank Act, which would have required creditors to disclose a figure representing the
cost to the creditor of the funds used to make the loan. This disclosure was strongly opposed
by industry as being burdensome and unhelpful to consumers.
The Loan Estimate
The Loan Estimate must provide a “good faith estimate” of the loan’s costs and terms.
Until the Loan
Estimate is provided and the consumer indicates an intent to proceed with the transaction, a creditor
cannot impose any fee other than a bona fide and reasonable credit report fee.
A creditor is also
prohibited from requiring the consumer to submit documents verifying information relating to the
consumer’s application until the Loan Estimate has been provided.
The Loan Estimate must be delivered or placed in the mail not more than three business days after
receipt of an application and not less than seven business days before consummation of the
Two definitions are critical to understanding this requirement:
Application. Under the final rule, an “application” has been received for purposes of triggering
the obligation to provide the Loan Estimate once the creditor receives six pieces of information:
1. The consumer’s name;
12 C.F.R. § 1026.38(f)(1) and Official Interpretations.
12 C.F.R. § 1026.19(e)(1)(i).
12 C.F.R. § 1026.19(e)(2)(i)(A).
12 C.F.R. § 1026.19(e)(2)(iii).
12 C.F.R. § 1026.19(e)(1)(iii). 6
2. The consumer’s income;
3. The consumer’s social security number to obtain a credit report;
4. The property address;
5. An estimate of the value of the property; and
6. The mortgage loan amount sought.
This represents a departure from the definition of application that applies to the current RESPA
GFE and initial TIL disclosures, which includes a seventh “catch-all” element that permits the
loan originator to determine what other information is necessary to complete the application.
The CFPB acknowledged the difficulties associated with eliminating the seventh catch-all
element, but concluded that creditors can resolve those issues by collecting any other
information deemed necessary before obtaining all six pieces of information from the consumer
(e.g., by requiring the consumer to submit all other information deemed necessary to process
the application before obtaining the consumer’s social security number).
Business Day. “Business day” has two different meanings for purposes of the Loan Estimate.
For the requirement that the Loan Estimate be provided within three business days of
application, business day means “a day on which the creditor’s offices are open to the public for
carrying on substantially all of its business functions.”
However, for purposes of the seven
business day waiting period before consummating the transaction, business day means all
calendar days except Sundays and the legal public holidays.
Although having multiple
definitions is confusing, this distinction benefits creditors by allowing more time to provide the
Loan Estimate without lengthening the waiting period after the Loan Estimate is provided before
the loan may be consummated.
The seven business day waiting period may be waived or modified if the consumer determines,
after receiving the Loan Estimate, that the extension of credit is needed to meet a “bona fide
personal financial emergency.”
However, the Bureau retained the existing requirements for
such waivers or modification, which require the consumer to give the creditor a dated written
statement that: (1) describes the emergency; (2) specifically modifies or waives the waiting
12 C.F.R. § 1026.2(a)(3)(ii).
TRID Rule at 120.
See, e.g., TRID Rule at 132-3; see also comment 2(a)(3)-1 (“This definition does not prevent a creditor from
collecting whatever additional information it deems necessary in connection with the request for the extension of
credit.”). In addition, if a creditor provides a written estimate of terms or costs specific to a consumer before the
consumer receives the Loan Estimate, the creditor must clearly and conspicuously state at the top of the front of the
first page: “Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a
loan.” 12 C.F.R. § 1026.19(e)(2)(ii).
12 C.F.R. § 1026.2(a)(6).
12 C.F.R. § 1026.19(e)(1)(v). 7
period; (3) bears the signature of all consumers who are primarily liable on the legal obligation;
and (4) is not a printed form.
Because investors have historically been unwilling to purchase
loans where the waiting period has been waived or modified, it is unclear whether this
exception will be meaningful in allowing consumers to avoid closing delays.
Responsibility for Provision
The Loan Estimate must be provided either by the creditor or the mortgage broker who received the
However, the creditor retains ultimate responsibility – and liability – for
ensuring the Loan Estimate is provided in accordance with the rule, even if the mortgage broker delivers
The Bureau generally retained the “tolerance” regime adopted by HUD in 2010, with certain adjustments.
The Loan Estimate must provide a “good faith estimate of the closing costs.”
An estimate is in good
faith if the “charge paid by or imposed on the consumer does not exceed the amount originally disclosed,”
except as follows:
10% increase permitted for certain third-party charges. A third-party service fee or a recording
fee may be estimated and will be considered in good faith if:
o The aggregate amount of charges for third-party services and recording fees
ultimately paid by or imposed on the consumer does not exceed the aggregate
amount of such charges disclosed on the Loan Estimate by more than 10%;
o The third-party service charge is not paid to the creditor or its affiliate; and
o The consumer is permitted to shop for the third-party service.
No limitations on increases for certain charges. The following charges may be estimated and
will be considered in good faith if they are consistent with the best information reasonably
available to the creditor at the time the estimate is provided, regardless of the amount actually
o Prepaid interest;
o Property insurance premiums;
12 C.F.R. § 1026.19(e)(1)(i)-(ii).
12 C.F.R. § 1026.19(e)(1)(ii).
12 C.F.R. § 1026.19(e)(1)(i) and (e)(3)(i).
12 C.F.R. § 1026.19(e)(3)(i)-(ii). A fee is not considered “paid to” a person if the person does not retain the fee but
instead passes it on to a servicer provider. Comment 19(e)(3)(i)-3. 8
o Amounts placed into an escrow, impound, reserve, or similar account;
o Charges paid to third-party service providers selected by the consumer that are not
on the creditor’s list of service providers; and
o Charges paid for third-party services not required by the creditor, even if paid to an
affiliate of the creditor.
Exceptions for revisions to estimates. Unless a revision is permitted for one of the reasons
discussed below, increases are not allowed for other estimated charges, such as creditor and
loan originator charges and charges paid to an affiliate of the creditor. In addition, for
unaffiliated third-party charges subject to the 10% limitation, the aggregate amount of such
charges cannot increase by more than 10% unless an exception applies. A creditor may
increase an estimated charge beyond the limitations discussed above if the increase is due to
any of the following reasons:
o Changed circumstances affecting eligibility or settlement charges. One of the
following changed circumstances affects the consumer’s creditworthiness or the
value of the security or causes the estimated charge to increase:
An extraordinary event beyond the control of any interested party or other
unexpected event specific to the consumer or transaction;
Information specific to the consumer or transaction that the creditor relied
upon when providing the Loan Estimate and that was inaccurate or changed
after the disclosures were provided; or
New information specific to the consumer or transaction that the creditor did
not rely on when pr ovi ding the original Loan Estimate.
o Consumer request. The consumer requests revisions to the credit terms or the
settlement that cause an estimated charge to increase.
o Interest rate dependent charges. The discount points, loan originator charges, and
loan originator credits change because the interest rate was not locked when the
Loan Estimate was provided. On the date the interest rate is locked, the final rule
requires the creditor to provide a revised Loan Estimate that includes the revised
interest rate, discount points, loan originator charges and credits, and all other
interest rate dependent charges and terms.
12 C.F.R. § 1026.19(e)(3)(iii).
12 C.F.R. § 1026.19(e)(3)(iv)(A)-(B).
12 C.F.R. § 1026.19(e)(3)(iv)(C).
12 C.F.R. § 1026.19(e)(3)(iv)(D). 9
o Expiration. The consumer does not indicate an intent to proceed with the transaction
within 10 business days after the Loan Estimate was provided.
If an estimate is revised for one of the above reasons, the creditor must provide a revised Loan Estimate
within three business days of receiving information sufficient to establish that the reason applies.
However, the creditor must not provide a revised Loan Estimate on or after the date it provides the
Therefore, the consumer must receive the revised Loan Estimate not later than four
business days prior to consummation.
For unaffiliated third-party charges subject to the 10% limitation, it appears that the final rule permits the
creditor to provide a revised Loan Estimate when such charges increase by less than 10%, regardless of
whether this increase is due to a changed circumstance or other exception. However, unless these
charges increase in the aggregate by more than 10% due to a changed circumstance or other exception,
the revised Loan Estimate does not “re-set” the 10% tolerance and the final charges will be measured
against those disclosed on the original Loan Estimate or on the last revised Loan Estimate that was
based on a changed circumstance or other exception.
The Closing Disclosure
The Closing Disclosure generally must state “the actual terms of the credit transaction, and the actual
costs associated with the settlement of that transaction.”
If, however, information is not known despite
the creditor having exercised due diligence to obtain that information, the creditor may disclose an
estimate based on the best information reasonably available, even if the creditor knows that more precise
information will be available at or before consummation.
The final rule requires that the consumer receive the Closing Disclosure no later than three business days
If the Closing Disclosure is not delivered in person, it is presumed received three
business days after it is placed in the mail, sent by email, or otherwise delivered.
However, the creditor
12 C.F.R. § 1026.19(e)(3)(iv)(E).
12 C.F.R. § 1026.19(e)(4)(i).
12 C.F.R. § 1026.19(e)(4)(ii).
I d. If the revised Loan Estimate is not provided to the consumer in person, the consumer is considered to have
received it three business days after the creditor delivers or places it in the mail. I d. If there are less than four
business days between the time the revised Loan Estimate is required to be provided and consummation, a creditor
may comply with this requirement if the revised disclosures are reflected in the Closing Disclosure. Comment
12 C.F.R. § 1026.19(f)(1)(ii)(A).
12 C.F.R. § 1026.19(f)(1)(iii); comments 19(f)(1)(iii)-1 and -2. 10
may rely on evidence that the consumer received the Closing Disclosure earlier (e.g., the consumer’s
signed receipt of delivery by overnight mail or acknowledgment of receipt via email).
For purposes of these requirements, “business day” means all calendar days except Sundays and the
legal public holidays.
The three business day waiting period may be waived or modified in the case of a
bona fide personal financial emergency, consistent with the standard discussed above.
As discussed below, the Bureau’s final rule substantially relaxes the proposed limitations on changes to
the amounts disclosed on the Closing Disclosure. Nevertheless, this requirement means that the creditor
and settlement agent must coordinate to obtain the “best information reasonably available” for each item
on the Closing Disclosure several days or even a week before closing in order to ensure that the
consumer receives the completed form three business days before closing.
Responsibility for Provision
The Closing Disclosure must be provided by either the creditor or a settlement agent. However, as with
the Loan Estimate, the creditor retains ultimate responsibility – and liability – for ensuring that the
disclosure is provided in accordance with the rule.
The requirements governing changes to the terms and costs on the Closing Disclosure vary depending
on what item changes and when the change occurs:
Changes during the three business day waiting period. In response to industry concerns about
harmful closing delays, the Bureau made substantial revisions to the proposed rule, which
would have required a revised Closing Disclosure and an additional three business day waiting
period for most changes. Under the final rule, if a change occurs after the initial provision of the
Closing Disclosure but before consummation, the creditor is generally permitted to provide a
revised Closing Disclosure at or before consummation.
The only changes that require redisclosure and a new three business day waiting period are:
1. A change in the APR of more than 1/8 of 1 percentage point above or below the disclosed
APR or, if the transaction is irregular (e.g., multiple advances or irregular payment periods),
a change of more than 1/4 of 1 percentage point;
Comments 19(f)(1)(iii)-1 and -2.
12 C.F.R. § 1026.2(a)(6).
12 C.F.R. § 1026.19(f)(1)(iv).
12 C.F.R. § 1026.19(f)(1)(v).
12 C.F.R. § 1026.19(f)(2)(i). The consumer must be permitted to inspect the Closing Disclosure, completed with all
information known to the creditor at the time of the inspection, during the business day immediately preceding
consummation, but the creditor may omit from the inspection items relating only to the seller’s transaction. 12 C.F.R.
12 C.F.R. §§ 1026.19(f)(2)(ii), 22(a). 11
2. A change in the loan product (e.g., from adjustable rate to fixed rate);
3. The addition of a prepayment penalty.
Changes after consummation. If during the 30 calendar days following consummation an event
in connection with the settlement occurs that causes the Closing Disclosure to become
inaccurate and the inaccuracy results in a change to an amount actually paid by the consumer
(e.g., the fee charged by the recorder’s office after closing for recording the security instrument
differs from the amount disclosed and paid at closing), the creditor must provide a corrected
Closing Disclosure within 30 calendar days of receiving information sufficient to establish the
If the Closing Disclosure contains non-numeric clerical errors, the creditor must
provide a corrected Closing Disclosure no later than 60 days after consummation.
Curing Tolerance Violations. If the estimated costs disclosed on the Loan Estimate increase
the beyond the permitted levels and the consumer pays those amounts at consummation, then
no later than 60 days after consummation the creditor must (1) refund the excess payment to
the consumer; and (2) provide a corrected Closing Disclosure reflecting the refund.
Othe r Issue s
“All-In” APR: In the face of strong industry opposition and a mixed reaction from consumer
advocates, the Bureau did not adopt the proposed amendments adding additional costs (such
as title insurance) to the finance charge. If adopted, these amendments would have simplified
the process of calculating the finance charge but also significantly increased APRs and, as a
result, the number of loans considered “high-cost” or “higher-priced” unless the Bureau also
made adjustments to those thresholds. The amendments could have also decreased the
number of Qualified Mortgages that are eligible for the safe harbor. The Bureau did, however,
state that it would reexamine this issue as part of the five-year review required by the DoddFrank Act for major rules.
Record Retention and Electronic, Machine-Readable Format Requirement: The final rule
generally requires creditors to retain evidence of compliance for three years after the later of
consummation or the date a disclosure or other action is required. The final Closing
Disclosure, however, and any related documents must be retained for five years after
consummation by the creditor or any assignee.
In response to strong industry opposition, the
Bureau did not adopt its proposed requirement that creditors maintain evidence of compliance
in an “electronic, machine readable format.” The Bureau emphasized, however, that it would
continue to work with industry and the GSEs to promote the development of electronic forms
and to reduce the amount of paper used in the closing process.
* * *
12 C.F.R. §§ 1026.19(f)(2)(ii), 37(a)(10).
12 C.F.R. § 1026.19(f)(2)(ii).
12 C.F.R. § 1026.19(f)(2)(iii).
12 C.F.R. § 1026.19(f)(2)(iv).
12 C.F.R. § 1026.19(f)(2)(v).
12 C.F.R. § 1026.25(c). 12
Questions regarding the matters discussed in this Alert may be directed to any of our lawyers listed
below, or to any other BuckleySandler attorney with whom you have consulted in the past.
Jeffrey P. Naimon, (202) 349-8030
Clinton R. Rockwell, (310) 424-3901
Joseph J. Reilly, (202) 349-7965
John P. Kromer, (202) 349-8040
Joseph M. Kolar, (202) 349-8020
Jeremiah S. Buckley, (202) 349-8010
Benjamin K. Olson, (202) 349-7924
Jonathan W. Cannon, (310) 424-3903
Brandy A. Hood, (202) 461-2911