The Consumer Financial Protection Bureau officially released the finalized updates to the Know Before You Owe mortgage disclosure rule, also known as the TILA-RESPA Integrated Disclosure rule, after industry calls asked for greater clarity and certainty.
Up until this finalized update, the industry was continuously told that examiners would be squarely focused on whether companies made good faith efforts to come into compliance with the rule.
Finally, last April, nearly half a year after TRID went into effect, the CFPB answered industry concerns and revealed that it would take another look at the controversial rule, writing a letter to eight industry trade groups that it had begun drafting a Notice of Proposed Rulemaking on the Know Before You Owe rule.
The CFPB later released the proposed updates in July and gave the industry roughly three months to submit comments on the proposal.
The CFPB said these new amendments are intended to formalize guidance in the rule, and provide greater clarity and certainty.
However, the CFPB also released a limited follow-up proposal, addressing when a creditor may use a Closing Disclosure, instead of a Loan Estimate.
“A mortgage is one of the largest financial decisions a consumer will ever make, and CFPB’s rules help ensure consumers have the easy-to-understand information they need before making a decision that will significantly impact their financial lives,” said CFPB Director Richard Cordray. “Our updates will clarify parts of our mortgage disclosure rule to make for a smoother implementation process for lenders and consumers.”
Here are a several updates from the finalized 560-page TRID rule.
1. Tolerances for the total of payments:
“Before the Know Before You Owe mortgage disclosure rule, the total of payments disclosure was determined using the finance charge as part of the calculation. The Know Before You Owe mortgage disclosure rule changed the total of payments calculation so that it did not make specific use of the finance charge. The Bureau is now finalizing updates to include tolerance provisions for the total of payments that parallel the tolerances for the finance charge and disclosures affected by the finance charge.”
2. Housing assistance lending:
“The Know Before You Owe mortgage disclosure rule gave a partial exemption from disclosure requirements to certain housing assistance loans, which are originated primarily by housing finance agencies. The Bureau’s update, as finalized, promotes housing assistance lending by clarifying that recording fees and transfer taxes may be charged in connection with those transactions without losing eligibility for the partial exemption. The update also excludes recording fees and transfer taxes from the exemption’s limits on costs. Through the update, more housing assistance loans will qualify for the partial exemption, which should encourage these loans."
3. Cooperatives:
“The Bureau is finalizing updates to extend the rule’s coverage to include all cooperative units. Currently, the rule only covers transactions secured by real property, as defined under state law. Cooperatives are sometimes treated as personal property under state law and sometimes as real property. By including all cooperatives in the rule, the Bureau is simplifying compliance and ensuring that more consumers benefit from the rule.”
4. Privacy and sharing of information:
“The Know Before You Owe mortgage disclosure rule requires creditors to provide certain mortgage disclosures to the consumer. The Bureau has received many questions about sharing the disclosures provided to consumers with third parties to the transaction, including the seller and real estate brokers. The Bureau understands that it is usual, accepted, and appropriate for creditors and settlement agents to provide a Closing Disclosure to consumers, sellers, and their real estate brokers or other agents. The Bureau is finalizing additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.”
The final rule added that it does not and cannot address every concern that has been raised to the bureau.
“The bureau believes that industry has made substantial implementation progress. The bureau is prioritizing its resources to further facilitate industry's implementation progress,” the rule stated. “This final rule does not contain any revisions that implicate fundamental policy choices, such as the disclosure of simultaneous issuance title insurance premiums, made in the TILA-RESPA Final Rule. This final rule also does not include additional cure provisions.”
The final rule is effective 60 days after it is published in the Federal Register. However, the mandatory compliance date is Oct. 1, 2018.
As for the limited follow-up proposal, the CFPB is looking into when a creditor may use a Closing Disclosure, instead of a Loan Estimate, to determine if an estimated closing cost was disclosed in good faith and within tolerance.
Comments on the proposal are due 60 days after its publication in the Federal Register and will be weighed carefully before a final regulation is issued.
