The Consumer Financial Protection Bureau submitted the much-awaited proposed rule revamping the current GFE/TIL disclosure and HUD-1 settlement statements. The rule will be published in the Federal Register in the next few days, and the rule will be open for public comment until November 6, 2012, (September 7, 2012 for the section dealing with APR calculation changes).
If you want to view the proposed disclosures (which I recommend you take some time to do), you can find them at the links below.
- New GFE/TIL combined disclosure: http://files.consumerfinance.gov/f/201207_cfpb_loan-estimate.pdf
- New settlement statement: http://files.consumerfinance.gov/f/201207_cfpb_closing-disclosure.pdf
- The full text of the rule can be found at: http://files.consumerfinance.gov/f/201207_cfpb_proposed-rule_integrated-mortgage-disclosures.pdf
At this point, I’ve only done a cursory review of the disclosures and the rule itself (it’s 1,099 pages and was just published yesterday), so I’m not going to do an in-depth analysis yet. However, here are some off-the-cuff highlights of the changes:
- There is a signature line on the new combined GFE/TIL disclosure (YES!!!!)
- There is a signature line on the new combined GFE/TIL disclosure (there are some things that bear repeating; this is one of them.)
- A line has been added to the cost disclosure that estimates total cash-to-close!
- The lender cost-of-funds has been added to the settlement statement, although it is now called “Approximate Cost of Funds” or ACF. (In my opinion, this is completely useless information for borrowers because they cannot possibly affect the lender’s cost of funds, nor does the cost of funds generally have any real-world impact on their loan terms, but I don’t work for the Bureau and they don’t consult me.)
- There is a new carve-out exemption to the need to re-disclose three business days before closing if the reason for the change in terms results from the final walk-through on a purchase transaction or if the changes are minor (result in less than $100 in increased cost.) However, if redisclosure is required (if the change does not meet the carve-out provisions), it must be done three business days before closing; the exemption to allow for an at-closing redisclosure for a last-minute change is eliminated.
- HELOCs and reverse mortgages are exempt from these specific disclosure requirements.
- Lenders who make fewer than five residential mortgage loans per year are also exempt.
- Providing any sort of loan estimate prior to application (in other words, a non-binding cost estimate that is not done on the official form) will now require the use of a disclaimer.
- The CFPB is soliciting comments on who should be responsible for providing the settlement disclosure – the settlement agent or the lender. Either way, it appears the lender will be responsible for the accuracy of the form.
- Lenders will be responsible for keeping electronic copies of all loan estimates and closing disclosures, although the CFPB is considering exempting “smaller lenders” from this provision.
After I’ve had the time to read and digest the APR calculation changes (it appears that virtually all costs will affect APR) and the balance of the rule, I’ll put together a post with more in-depth analysis. I’m sure we’ll also have some good conversations during our CE courses this year!
****On a separate note, the Bureau also issued a proposed rule implementing the Dodd-Frank changes to HOEPA. The new high-cost test will measure APR against the Average Prime Offer Rate instead of the Treasury yield, and the triggers will be 6.5% over the APOR (1st lien loans) and 8.5% over the APOR (subordinate lien loans); additionally, the points and fee triggers for high-cost loans will be reduced to 5% of the loan amount (you Illinois readers are already familiar with this limitation because it’s been a state law for years). Also, remember that Dodd-Frank requires that PURCHASE MONEY LOANS AND HELOCS BE SUBJECT TO HIGH-COST REQUIREMENTS.