This is the second part of the synthesized information about the upcoming new disclosure requirements for the application and closing of mortgage transactions. As I mentioned in the first installment, part one presents the new Loan Estimate Disclosure (this new form consolidates the current Initial Truth in Lending and the RESPA Good Faith Estimate, GFE disclosures). The second part , this post, presents the new Closing Disclosure; and the third part, discusses other type of disclosure requirements. This information was presented by the CFPB and the Federal Reserve during a co-hosted webinar earlier this month. (1)

THE NEW CLOSING DISCLOSURE (2)

This new disclosure embodies the consolidation of the current Final Truth in Lending Disclosure and the RESPA HUD-1. This form must contain the actual terms and costs of the loan.

STRUCTURE OF THE CLOSING DISCLOSURE

This disclosure contains all key information about the loan:

• loan terms
• projected payments
• costs at closing
• cash to close summary
• loan disclosures
• escrow amount
• AO and AIR tables (if it applies)
• total loan calculations
• lenders contact information
• area for optional applicants signature to confirm receipt of the estimate

ALTERNATIVE LOAN ESTIMATE FORMAT

An alternative Loan Estimate may be used when the transaction has no seller

TIMING REQUIREMENTS

The Closing Disclosure must be given 3 days prior to the closing of the transaction. Within the mortgage closing transaction, a day is defined as a calendar day, with the exception of Sundays and legal public holidays.

The lender may contract a settlement agent to provide this document to the applicant, and if the form is not handed to the borrower directly, the form will be considered received 3 days after delivery or mail stamp date.

REVISIONS AND CORRECTIONS LIMITATIONS

Changes to the Closing Disclosure may trigger new waiting periods depending on the circumstances. Requirements after a change on this form are as follows:

• changes before consummation that require a new 3 day waiting period
  • the disclosed APR changes and is deemed inaccurate
  • the loan product changes
  • a prepayment penalty is added to the terms of the loan
  • any other changes DO NOT require a new 3 day waiting period, but consumer has the right to inspect the revised form one business day prior to closing
• changes after consummation that require a corrected Closing Disclosure (consumer has the right to revise a revised disclosure )
  • within 30 days after consummation, a situation arises that impacts the settlement of the loan causes the disclosure to become inaccurate, and results in the consumer and/or seller having to pay different amounts from figures stated in the Closing form
  • the lender is required to issue a refund for having exceeded the costs threshold levels mandated for the Loan Estimate Disclosure
  • lender identifies a non-numerical clerical error which doesnt change the disclosure figures, timing of delivery, or any other requirements

CURING VIOLATIONS

If closing costs to the consumer exceed the limitations stated above, 0% and 10% range tolerance, the lender must refund the borrower within 60 days of closing, and also issue and deliver a revised Closing Disclosure. The amount of the refund must equal the excess of the established level thresholds.

Just like the new Loan Estimate, the main difference of the new Closing Disclosure is the categorization and itemization of costs in a more intuitive way. This form also shows the changes from the Estimate to the Closing costs. Noteworthy are the Fed Box and the Contact Information Box; the first one prompts the borrower to ask us question if he/she has any questions and includes the CFPBs websites url; and the second one includes all contact information, including our respective licenses, or the lender, mortgage broker, real estate broker, and settlement agent. Well, borrowers won't be able say uncle Sam is not looking out for them...

Here you can view the annotated new Closing Disclosure: http://files.consumerfinance.gov/f/201312_cfpb_tila-respa_annotated-closing-disclosure.pdf

Here you can read thorough details on the upcoming rule: http://www.consumerfinance.gov/regulatory-implementation/tila-respa/

Part 1

Part 3

1) June 17th, 2014 http://www.cfpbmonitor.com/2014/06/19/cfpb-provides-guidance-on-the-tila-respa-integrated-disclosures-rule/

2) http://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook/outlook-live/2014/061714h.pdf#page=6

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