Effective October 3: Sweeping Changes to Mortgage Loan Disclosures

For closed-end mortgage loan applications received on or after October 3, 2015, a single TILA/RESPA integrated disclosure regime now applies. The former rules continue to apply to covered mortgage loans for which applications were received before October 3, 2015 and to new loans not covered by the new amendments.

NCLC’s Truth in Lending (9th ed. 2015) (two volumes) and its online version describes and analyzes these important changes. The text highlights the differences and similarities between the former disclosures rules and the new regime. To assist with understanding and interpreting the regulations, the footnotes contain the location in the 635 page Federal Register where the Consumer Financial Protection Bureau discusses the rationale for each provision, its legal authority under either the Real Estate Settlement Procedures Act (RESPA) or TILA, comments it received, and differences between the proposed and final provisions.

The Changes in a Nutshell

In a nutshell, the disclosure forms are renamed and transformed. The early disclosure (“Loan Estimate”) replaces the good faith estimate; the consummation document (“Closing Disclosure”) supplants the settlement statement. The TILA “federal box” no longer appears in the early disclosures and an altered version is located in “Loan Calculations” on the last page of the closing disclosure. The disclosures have grown in length and content. The loan estimate is three pages while the closing disclosure is five pages.

All of the new rules appear in Regulation Z, even though some of the requirements are mandated by the Real Estate Settlement Procedures Act. As a result, practitioners should not search Regulation X after October 3, 2015 for rules governing mortgage loans covered by the TILA/RESPA integrated disclosure rules. The applicable provisions of Regulation Z appear in new sections 1026.19(e) and (f), 1026.37, and 1026.38.

Where to Go for More Details

Both NCLC’s Truth in Lending (9th ed. 2015) (2 volumes) and its online version have been updated to reflect all the changes. The key primary sources are:

• The relevant provisions of Regulation Z;
• The related official interpretations; and
• The supplementary information accompanying the final rule.

Because the Federal Register including the rule, interpretations, and supplementary information is 635 pages, Truth in Lending’s online version, at Appendix B Addendum conveniently presents the Federal Register content in 15 separate documents, each representing a different section of the notice. In addition the online version of Appendix B and Appendix C provides a current version of Regulation Z, with the recent changes redlined and integrated into the rest of Reg. Z.

In addition, secondary sources can be found at the CFPB website, which contains links to other compliance resources. For a list of the CFPB’s materials and the link to the CFPB’s dedicated webpage, see NCLC’s Truth in Lending § 5.11.2.3.

Major Issues Presented by the New Rules

Major issues presented by the new rules:

• Coverage: Not all mortgage loans are subject to the new rules. See Truth in Lending § 4.4.7.1.3.
• Timing of disclosures: For the loan estimate and its redisclosure before closing, see §§ 4.4.7.2.1, 4.4.7.3. For the list of settlement service providers and the special information booklet, see §§ 4.4.7.2.1, 5.11.2.4. For the closing disclosure, see § 4.4.7.4
• Limits to fees during shopping process: See § 4.4.7.2.3.
• Use of estimates and the “good faith” standard: See § 4.5.7.3.
• Waiver or modification of the pre-closing waiting period: See § 4.4.7.5.
• Section–by–section description of the information contained in the loan estimate: See § 5.11.2.5.
• Section–by–section description of the information contained in the closing disclosure: See § 5.11.2.6.
• Remedies: See §§ 11.5.1a (actual damages), 11.6.8.3 (statutory damages).