March 21 2012
Know Before You Owe: Last Round?
The CFPB is finally winding down its "Know Before You Owe" campaign to integrate the TILA and RESPA early and closing disclosures. After nine rounds and over 30,000 public comments, the Bureau is close to producing prototypes that it will publish for public comment in the Federal Register along with a proposed rule.
The Bureau's most recent prototypes are an early disclosure, "Tupelo," and a settlement disclosure, "Basswood." The early "Tupelo" disclosure is a three-page disclosure containing the loan's terms, estimated costs and other information (i.e., assumptions, servicing, etc.) and is available here: http://files.consumerfinance.gov/f/2012/02/20120220_cfpb_tupelo-loan-estimate.pdf.
The Basswood Settlement Statement, a five-page disclosure that reflects the disclosures contained in the early disclosure as well as being reminiscent of the HUD-1 Settlement Statement currently in use, is available here: http://files.consumerfinance.gov/f/2012/02/20120220_cfpb_basswood-settlement-disclosure.pdf.
The CFPB anticipates publishing the proposed rule relating to these forms this summer.
Apart from the "Know Before You Owe" campaign, however, the Bureau has published a roadmap for amendments to Regulations Z and X relating to providing these integrated disclosures. We discuss this roadmap, below, with the "Small Business" materials.
Small Business Lenders
Often the phrase most associated with the Dodd-Frank Act is "Too Big to Fail," however, with a regulatory agenda of nearly 300 regulations, the more pressing concern for many in the financial services industry is "Too Small to Comply."
With this concern in mind, the Bureau has created a Small Business Review Panel ("Review Panel") consistent with the Small Business Regulatory Enforcement Fairness Act. This panel of about 15 to 20 members will meet for the purpose of providing feedback on the Bureau's proposed options for TILA and RESPA regulatory reform.
The Bureau is proposing, among other things:
- Shopping Tool: Permit lenders to provide a shopping sheet to borrowers before taking an application, and thus, triggering the mandatory disclosure requirements to provide the "Loan Estimate" (Tupelo) disclosure.
- Affiliate Tolerances: Apply a zero tolerance (rather than 10 percent) for service providers that are affiliates of the lender.
- Timing: Require that all lenders provide the Settlement Disclosure three days prior to closing.
Within 60 days of convening, the Review Panel will complete a report on the issues. The Bureau will then consider the Review Panel's input in preparing the proposed rule.
Even though the CFPB issued the above proposal as part of their Small Business initiative, the issues relate to the mortgage industry more broadly; and should be reviewed and considered by any entity that originates mortgage loans.
Monthly Statements – Know After You Owe
As anyone in the mortgage industry can attest, mortgage servicing is increasingly becoming the focus of regulatory and Congressional scrutiny. As such, the Bureau places great importance on the ability of consumers to understand their financial obligations during the life of the loan and has launched an effort to obtain feedback on the format for periodic statements.
Unless a mortgage lender or servicer provides a coupon book that contains substantially similar information, lenders and servicers will be required to provide borrowers with a periodic statement for each billing cycle that discloses:
- The principal loan amount;
- The current interest rate;
- The date on which the interest rate may next reset;
- A description of any late-payment fees and any prepayment fee to be charged;
- Information about housing counselors;
- Phone number and email address for borrower to obtain information about the mortgage; and
- Other information the CFPB may prescribe in regulation.
The Bureau expects to use the feedback from this prototype to publish regulations sometime this summer.
New forms coming . . .
Thanks to Venable for the information
New Jersey Title Insurance Linkedin Group
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