CFPB Integrated Mortgage Disclosure Presentation by ORNTIC
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Within the Dodd-Frank Wall Street Reform Act the CFPB was instructed to take the four disclosure forms received by Consumers when financing a home and combine them into one form in order to achieve better understanding and transparency. The CFPB’s goals were to help Consumers avoid costly surprises at the closing table; allow them to achieve easier comparisons of the estimated and final loan terms and fees; give them more time to consider choices and to put limits on closing cost increases. The CFPB had to take various existing Acts, including RESPA and TILA, then reconcile differing timing requirements in order to create one disclosure form that would replace the 1) Early TILA 2) GFE 3) Late TILA 4) HUD1 Settlement Statement. One thousand, eight hundred and eighty eight (1,888) pages later we had the final rule on 11/20/2013.
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CFPB Integrated Mortgage Disclosure Presentation by ORNTIC
- 1. Copyright 2014 ORNTIC Copyright 2014 ORNTIC Integrated Mortgage Disclosure Rule Jack O’Donohue, Esq. O’Donohue Law, LLC (978) 475-4896 jack@odlawllc.com
- 2. Copyright 2014 ORNTIC Copyright 2014 ORNTIC The Final Rule 2013
- 3. Copyright 2014 ORNTICCopyright 2014 ORNTIC Scope Expanded to cover most closed-end mortgages except: – Reverse mortgages – HELOC – Mobile home – Commercial purpose loans – Creditors making five or fewer loans per year – Certain no-interest, subordinate special purpose loans
- 4. Copyright 2014 ORNTICCopyright 2014 ORNTIC Effective Dates Most provisions apply to applications received by creditor or mortgage broker on and after 8/1/15 Some provisions take effect 8/1/15 without receipt of application state law exemption clarification requests use of estimates What can you do now?
- 5. Copyright 2014 ORNTICCopyright 2014 ORNTIC The New Jargon ▪ “Lender” is now “Creditor” ▪ “Borrower” is now “Consumer” ▪ TILA and GFE are now the Loan Estimate ▪ HUD1 is now the Closing Disclosure ▪ “Closing/Settlement” is now “Consummation”
- 6. Copyright 2014 ORNTICCopyright 2014 ORNTIC Loan Estimate Early Disclosure Form Delivered within three business days of application and at least seven days prior to consummation* Estimates allowed “Reasonably Available Standard” Acting in good faith, exercise due diligence, may rely on other parties and must be labeled as “estimate” *business day for LE purposes: any day company offices are open to the public conducting substantially all company business
- 7. Copyright 2014 ORNTIC Reliance on the Real Estate Professionals ▪ Creditor may rely on third parties to obtain information for Loan Estimate ▪ “For example, the creditor might look to …. Realtors for taxes and escrow fees.” Transfer taxes Seller credits Home warranties Personal property purchases HO Association fees Home Owner’s Insurance Flood Insurance
- 8. Copyright 2014 ORNTICCopyright 2014 ORNTIC Change of Circumstance 1. Information provided by consumer inaccurate 2. Extraordinary event 3. Discovery of new info specific to consumer or transaction 4. Revision requested by consumer 5. On day of locking rate 6. After 10-day expiration *Disclosure required within three days of knowledge but not on same day as Closing Disclosure
- 9. Copyright 2014 ORNTICCopyright 2014 ORNTIC Preparation of Closing Disclosure Final Rule determination: Creditors can continue to rely on settlement agents Gives creditors flexibility to divide responsibilities Suggested creditors provide Disclosure while settlement agents make corrections at consummation Creditor retention of liability
- 10. Copyright 2014 ORNTICCopyright 2014 ORNTIC 3-Day Review Period Three business days* in advance of consummation** with limited re-disclosure requirements *business day for CD purposes: all days except Sunday and 10 federal holidays **consummation is defined as “the time that a consumer becomes contractually obligated on a credit transaction”
- 11. Copyright 2014 ORNTICCopyright 2014 ORNTIC Delivery Defined Hand delivery: immediate (deliver on Monday, close on Thursday) US Mail: assumed receipt three days after placed in mail Email: with receipt confirmed by consumer after approval to use email method of delivery (if not, assumed three days to open email) Overnight Delivery: with consumer confirmed receipt
- 12. Copyright 2014 ORNTICCopyright 2014 ORNTIC Re-disclosure Requirements Requiring additional three-day review period 1. Inaccurate APR 2. Change in loan product 3. Prepayment penalty added
- 13. Copyright 2014 ORNTICCopyright 2014 ORNTIC Waiver Consumer may waive waiting period if they have a bona fide personal financial emergency. No waiver afforded for seller’s financial emergency. Purposely narrow definition by example: an imminent sale of consumer’s home at foreclosure. Bureau chose not to expand definition.
- 14. Copyright 2014 ORNTICCopyright 2014 ORNTIC Seller Closing Disclosure Seller provided Closing Disclosure by settlement agent at consummation. Nothing prohibits settlement agent from creating a separate form for seller purposes only
- 15. Copyright 2014 ORNTICCopyright 2014 ORNTIC Owner’s Title Insurance Modifier Requires inclusion of the word “Optional” after Owner’s Title Insurance on Loan Estimate and Closing Disclosure Only protection afforded consumer You are the professional if you suggest the protection is not necessary you may have just self insured.
- 16. Copyright 2014 ORNTIC Copyright 2014 ORNTIC The Loan Estimate Form
- 17. Copyright 2014 ORNTIC Loan Estimate Form – Page 1
- 18. Copyright 2014 ORNTIC Loan Estimate Form – Page 2
- 19. Copyright 2014 ORNTIC Copyright 2014 ORNTIC The CLoSING DISCLOSURE
- 20. Copyright 2014 ORNTIC Closing Disclosure Form – Page 1
- 21. Copyright 2014 ORNTIC Closing Disclosure Form – Page 2
- 22. Copyright 2014 ORNTIC Closing Disclosure Form – Page 3
- 23. Copyright 2014 ORNTIC Closing Disclosure Form – Page 5
- 24. Copyright 2014 ORNTIC What you can start doing now ▪ Develop systems of communication with lenders ▪ Develop systems of communication with closing company well in advance of closing ▪ Learn the forms ▪ Assure your title entities are preparing ▪ Review technology available to lenders ▪ Review change of circumstance triggers
- 25. Copyright 2014 ORNTICCopyright 2014 ORNTIC THANK YOU! Jack O’Donohue, Esq. O’Donohue Law, LLC (978) 475-4896 jack@odlawllc.com