Alert July 10, 2012

CFPB Issues Proposed Rule on Combined TILA/RESPA Disclosures

The CFPB issued a proposed rule detailing two new mortgage loan disclosures - the Loan Estimate, which replaces the Good Faith Estimate and early Truth in Lending disclosure, and must be provided within 3 business days of an application, and the Closing Estimate, which replaces the HUD-1 Settlement Statement, and must be provided at least 3 business days before closing.  According to the CFPB’s press release, the disclosures were designed “to present the costs and risks of the loan in clearer terms.”  Key provisions of the rule include:  (1) a specific definition for what constitutes an application and a broader finance charge definition; (2) changes in the calculation of finance charges and annual percentage rates; and (3) a recommendation to delay compliance with certain disclosure requirements until after the January 21, 2013 mandated deadline.  The proposed rule also discusses six upcoming proposed rules that the CFPB is developing and finalizing related to:  the Home Ownership and Equity Protection Act (discussed below); servicing; loan originator compensation; appraisals; ability to repay; and escrows.  The CFPB is seeking comment on a number of issues, ranging from whether small businesses should be exempt from the electronic recordkeeping requirements, to whether lenders, as opposed to settlement agents, should be required to provide the new Closing Estimate.  Comments on the finance charge and APR calculations, and the delay of the effective date are due by September 7, 2012; comments for the remaining sections of the proposed rule are due by November 6, 2012.  Additional resources, including a detailed summary of the rule and a report on the CFPB’s discussions with small businesses, are available on the CFPB’s Know Before You Owe page.