[authors: E. Bardin Simmons Jr.,Brian F. Corbett]
Attention all U.S. mortgage industry participants: it is not too late to take part in the CFPB’s rulemaking process relating to the integrated RESPA/Truth-in-Lending mortgage disclosures and forms. All mortgage industry participants, including lenders, mortgage brokers, and title insurance and settlement agents, still have the opportunity to be a part of this process which is sure to result in significant changes in practices and procedures for closing certain closed-end consumer mortgage loans.
The proposed rule, published by the CFPB on July 9, 2012, has bifurcated deadlines for receiving public comments. Comments relating to the proposed changes to the definition of the finance charge (APR) and certain timing issues for disclosure requirements were originally due on or before September 7, 2012, and comments on all other portions of the proposed rule are due on or before November 6, 2012. On August 30, 2012, the CFPB extended the deadline for receiving comments relating to the proposed changes to the definition of the finance charge (APR) to November 6, 2012.
The proposed rule provides two new forms to be used in connection with the closing of certain closed-end consumer mortgage loans: (1) the Loan Estimate, which would replace the current Good Faith Estimate (GFE) and the “early” Truth-in-Lending disclosure; and (2) the Closing Disclosure, which would replace the current HUD-1. The proposed rule provides extensive guidance on the use of these forms and the required changes to procedures utilized for the closing of these closed-end consumer mortgage loans. One goal of the proposed rule is to make it easier for consumers to locate key information, such as the interest rate, monthly payments, and closing costs, prior to sitting down at the closing table. The proposed rule also changes the way the finance charge (APR) of a loan is calculated, with the goal of making it easier for consumers to use the finance charge (APR) to compare or shop for loans. Lastly, the proposed rule imposes some rather stringent recordkeeping requirements on lenders relating to the use of the two new forms; and the CFPB is currently seeking comments on the issue of whether smaller lenders should be exempt from these recordkeeping requirements.
The text of the final proposed rule is available here.
While the proposed rule portends to require significant changes in the practices and procedures for closing certain closed-end consumer mortgage loans, many of the other RESPA/Truth-in-Lending rules relating to these closings remain unchanged. It will be important for all mortgage industry participants to become familiar with the proposed rule, and if desired to become involved with the rulemaking process by submitting comments on the proposed rule before the November 6, 2012 deadline.