On October 10, 2014, the US Consumer Financial Protection Bureau ("CFPB") issued a proposed rule ("Proposal") to amend the TILA-RESPA Integrated Mortgage Disclosure Rule ("Final Rule"), which takes effect on August 1, 2015. The CFPB proposed to make two modifications to the Final Rule: (1) an adjustment to the timing requirement for when a revised Loan Estimate is required to be provided when the consumer locks an interest rate, from the same business day of the rate lock to the next business day; and (2) an amendment to provide a space on the Loan Estimate for language to be included related to construction loans. Additionally, the CFPB is proposing certain technical corrections, citation and cross-reference updates, and clarifications.
The proposed amendments are the result of feedback from stakeholders after issuance of the Final Rule. The first of two these amendments would amend § 1026.19(e)(3)(iv)(D) and related commentary. That section permits creditors to issue a revised Loan Estimate when there are changes in interest rate dependent charges due to a rate lock, extension, or re-lock, but requires the revised Loan Estimate to be provided on the same business day as the rate lock (or a rate lock agreement is entered into, per the Final Rule's commentary and preamble). The Proposal would extend the time period in which a revised Loan Estimate must be provided to the consumer from the same business day to the next business day.
The CFPB states that the same-day redisclosure requirement was originally proposed to prevent “rent-seeking” or other disadvantageous behavior by creditors. Since then, the CFPB has received feedback suggesting that creditors may in certain instances not control when a rate is locked, and that there may be significant operational challenges to implementing a same-day redisclosure of the Loan Estimate. In addition, the CFPB stated concerns regarding negative effects on consumer flexibility to lock rates late in the day or after business hours. The CFPB seeks comment on the proposed one-business day extension.
The second proposed amendment would provide for language to be included on the Loan Estimate to allow for revisions of the Loan Estimate for construction loans when the creditor reasonably expects settlement to occur more than 60 days after providing the initial Loan Estimate. Under the Final Rule, § 1026.19(e)(3)(iv)(F), a creditor may issue a revised Loan Estimate for such loans, if the original Loan Estimate clearly and conspicuously states the creditor may issue revised disclosures at any time prior to 60 days before consummation. However, the Final Rule did not state where disclose this language on the Loan Estimate. The Proposal would require this statement to be disclosed in the "Other Considerations" section on the last page of the Loan Estimate, pursuant to a new subsection § 1026.37(m)(8).
The proposed language for this statement is: "You may receive a revised Loan Estimate at least 60 days prior to consummation". The CFPB did not include a sample or model form for this statement in Appendix H. Therefore, the Proposal would not provide industry with a standard or model form for how this disclosure would appear on the Loan Estimate.
In addition, the Proposal would add § 1026.36(g)(2)(ii) under the Loan Originator Compensation Rule, to include the integrated disclosures in the list of loan documents that must contain the loan originator’s name and NMLSR ID. The Proposal also includes other technical corrections, citation and cross-reference updates, and clarifications of wording. The CFPB declined to push back the effective date of the Final Rule from August 1, 2015 to accommodate these proposed changes. In a blog post published to announce the Proposal, the CFPB states that there is "plenty of time to consider these changes while implementation decisions are being made, and we do not think that the proposed changes will affect the industry's ability to implement the rules on time."
The Proposal provides a 30-day comment period from issuance on the CFPB's website, rather than publication in the Federal Register. Comments are due by November 10, 2014. The Proposal is available at: Know Before You Owe: Proposed updates to TILA-RESPA final rule.
It is important to note that by issuing this Proposal, the CFPB has evidenced that it is considering industry's concerns regarding implementing the integrated disclosures. As the CFPB noted in the Proposal, one of the reasons the CFPB finalized the rate lock provision with a same-business day requirement is that it "received few comments specific" to the provision when it was initially proposed. In light of this, it is important to comment on these proposed changes, to ensure the Bureau considers all available information when amending this significant rulemaking.