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1.5.3.4.3 Closed-end credit review

The FRB began its work on the second phase of its review of Regulation Z by suggesting major improvements in the closed-end disclosures for real-estate-secured transactions.254 The FRB noted in its announcement that the practice of recognizing extensive exceptions to the finance charge is seriously flawed and that it creates an incentive for lenders to unbundle the costs of credit and add junk fees. Under its proposal, the finance charge would always include credit insurance premiums, fees for recording and releasing security interests, all the real-estate-related fees except late payments and seller’s points, and all settlement agent charges. After rulemaking under TILA was transferred to the CFPB, the CFPB announced that it would postpone changes to the finance charge rule for at least five years.255

The second phase of the closed-end rulemaking was launched in September 2010, with a proposed rule that addressed topics including rescission, reverse mortgages, and disclosures for loan modifications.256 After receiving comments on the proposed rule, which would have undermined rescission rights, the FRB referred the matter to the CFPB for final rulemaking,257 which has not occurred.

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