In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed, which created a new and independent regulatory agency known as the Consumer Finance Protection Bureau (CFPB). The CFPB was tasked with promulgating regulations to integrate the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). In addition, the CFPB was charged with proposing rules and model disclosures combining TILA and RESPA into a single, integrated disclosure. The CFPB was given until July 21, 2012 to publish its proposed rule.
On July 9, 2012, the CFPB issued its 1099 page Proposed Rule. The Proposed Rule includes a replacement for the HUD-1 Settlement Statement (which was just recently revamped in 2010). The traditional HUD-1 Settlement Statement would now be replaced with a new five-page document titled “Closing Disclosure,” which now includes both RESPA and TILA requirements. As part of the Proposed Rule, the CFPB has offered two potential options for the preparation of the Closing Disclosure: (1) preparation by the lender; or (2) shared preparation by both the lender and the title company.
In addition, the Proposed Rule requires that the Closing Disclosure be given to the consumer three business days prior to closing. Exemptions to the three-day rule include last minute negotiations between parties, changes that amount to less than $100 and technical errors. There are certainly additional exemptions that may be appropriate, such as seller side changes or if the cash required to close decreases rather than increases.
The CFPB is currently seeking public comment on the Proposed Rule. Comments are due no later than November 6, 2012.