The Consumer Financial Protection Bureau (CFPB) has proposed further changes to the new consolidated Loan Estimate and Closing Disclosure Mortgage forms that are scheduled to go into effect on August 15, 2015. The proposed forms were unveiled by CFPB last November as part of the TILA-RESPA Integrated Disclosure Rule combining certain disclosure forms that consumers receive in connection with applying for and closing on a mortgage loan. CFPB has nicknamed this the "Know Before You Owe Rule."
The Bureau called the proposed changes "technical amendments" to the rule and said it was proposing them now so there is plenty of time to consider them while implementation decisions are being made. A statement released by CFPB said they do not think the changes will affect the industry's ability to implement the rules on time.
There are two issues addressed by the proposed amendments. The first is an attempt to give creditors some extra time to prepare and provide mortgage applicants with revised Loan Estimates after the consumer locks in a floating loan rate. Under the current rule that revision must be provided on the same day as the consumer does the lock. Industry response indicates this could be a challenge, particularly where creditors now allow consumers to lock in late in the day or even outside of business hours. Rather than force lenders to limit the flexibility they currently allow consumers, CFPB is proposing to require the disclosures be provided by the end of the following business day.
The second change is a minor addition to the Loan Estimate form itself and relates only to construction loans. As these loans often take longer to settle than other loans the estimated charges reflected in the original disclosures may change over time. Today's proposed amendment would allow creditors to insert into the original disclosure form language informing the borrower(s) that they may receive a revised Loan Estimate in the event a construction loan takes more than 60 days to settle.
The Bureau is also proposing several corrections, updates, and wording changes both to the TILA-RESPA Final rule and to the 2013 Loan Originator Final Rule for clarification purposes. These changes, CFPA says, are non-substantive in nature.
The Bureau will said it believes these proposed changes are relatively straightforward and mostly technical in nature and it expects to be able to finalize the proposal in sufficient time to allow creditors and other stakeholders to implement the final changes prior to the August 1, 2015 effective date. Comments on the proposed changes will be accepted until November 10, 2014. The proposal in its entirety will be published in the Federal Register.
The law firm of Ballard and Spahr, which closely tracks CFPB activity said yesterday that the changes in the disclosure requirement were in response to significant feedback from the industry, specifically regarding consumer protection and operational concerns.
Among those concerns was that the same day requirement was likely to result in some creditors limiting the ability to make rate locks to early in the business day due to the costs of turning around a revision in the disclosures for a rate lock done at other times. An article in the law firm's CFPB focused blog says that although the proposal is a welcome change the industry may still be concerned about the timing of the revision requirement and may still tighten rate lock practices. "The industry may well support the ability to issue a revised Loan Estimate to reflect a locked rate in the standard timeframe for other changes, which is three business days after learning of the change."
