Frequently Asked Questions were last updated 19 February 2015.
This FAQ page is intended to provide an overview of TILA-RESPA hot topics. But remember, CSi is not a licensed provider of legal services. The content on CSi’s website is for general information purposes only and is not legal advice (that’s what your lawyers are for).
The TILA-RESPA Integrated Mortgage Disclosure Rule was originally set to take effect on August 1, 2015. On July 21, the CFPB issued a final rule moving the effective date to October 3, 2015. The Rule integrates overlapping disclosures currently required under the Truth-In-Lending Act and Real Estate Settlement Procedures Act. The new “Know Before You Owe” forms are intended to help consumers understand loan options, comparison shop for the best deal, and avoid surprises at closing. The forms are based on more than two years of CFPB research and consumer testing.
The new forms include a Loan Estimate and a Closing Disclosure. The Loan Estimate replaces the early Truth in Lending statement and Good Faith Estimate, and it must be provided within three days of a lender’s receipt of a mortgage loan application. The three-page document will include terms and estimated costs that consumers can use to comparison shop.
The new five-page Closing Disclosure provides detailed information on all costs associated with the loan. This form must be given to borrowers three days before closing, and it replaces the final Truth in Lending Statement and the HUD-1 settlement statement.
That depends on what types of loan products your institution offers. Creditors cannot use the new Integrated Disclosures instead of the GFE, HUD-1, and Truth-in-Lending forms for transactions that are covered by TILA or RESPA that require those disclosures (e.g., reverse mortgages).
No. The TILA-RESPA rule applies to most closed-end consumer credit transactions that are secured by real property. The rule does not apply to HELOCs, reverse mortgages or mortgages secured by a mobile home or by a dwelling that is not attached to real property.
The new Loan Estimate and Closing Disclosure must be used for transactions with an application date on or after October 3, 2015. The CFPB has made it clear that early implementation is not permitted. However, lenders should test their systems and processes for providing the new disclosures well in advance of the effective date to ensure compliant implementation.
Yes, a creditor is allowed to request additional information along with the six pieces of information that constitute an application. However, once the six items are received, the three business day timeframe to issue the Loan Estimate is triggered whether or not other requested information is provided.
The CFPB has also provided informal guidance stating that it is permissible to intentionally sequence collection of the six pieces of data and wait to collect information such an applicant’s social security number until a creditor has all other information required of the consumer.
Yes, that practice is permitted under the rule. However, if the written estimate is specific to a particular consumer, the estimate must include a conspicuous disclosure stating that costs and rates could be higher and that the consumer should get an official Loan Estimate before choosing the loan. In addition, the estimate cannot have headings, content, or format substantially similar in appearance to the Integrated Disclosures. Advertisements targeted at a general audience are not covered by the rule.
Yes. Creditors are prohibited from imposing fees before the consumer has received a Loan Estimate AND expressed intent to proceed with the transaction. For example, if the creditor requires the applicant to provide a check for a processing fee before that occurs, even if the check will be held until a later time, that request would violate the Rule. EXCEPTION: The creditor may charge a reasonable fee for obtaining a credit report. However, if the credit report fee is charged to a consumer’s credit card, a separate authorization is required for subsequent fees to be charged.
The new Loan Estimate and Closing Disclosure are legally required to disclose only the features that apply to the transaction at hand. Absent a dynamic solution, a lender would be looking at thousands of templates to manage all possible transaction permutations. are legally required to be dynamic, meaning only the features that apply to the transaction may be disclosed. If certain tables are not applicable, they are not permitted to appear. This leaves the industry with two alternatives:
(1) a data-driven software solution that dynamically renders the appropriate disclosure, or
(2) a static form template solution with limited disclosure capabilities (and limited types of loan products that can be offered).
The TILA-RESPA Rule explicitly requires creditors to use the shading design of the model Loan Estimate and Closing Disclosure.
The models are “standard forms required to be used” for federally-related mortgage loans. Comment Appendix H-30. The preamble to the Rule clarifies that “for federally related mortgage loans, § 1026.37(o)(3) requires the use of form H-24, including all of its elements, meaning that various font sizes, bolding, shading, and underscoring are required by § 1026.37(o)(3).” 78 FR 79994. “A tab that uses a white background with black font, or that does not use rounded corners as illustrated on form H-24 would not comply…” 78FR 79920.
The preamble also responds to concerns about printing/scanning/faxing documents with this type of shading.
“With regard to shading specifically, industry commenters argued that documents with shading can be difficult to print or fax without obscuring text and are expensive to print because they require more ink than documents without shading…the Bureau believes that the design elements of the integrated disclosures contribute significantly to their better performance with consumers. The Bureau believes that this benefit to consumers outweighs the one-time cost of programming software to implement these design elements or any increased costs of copying and printing forms with these elements.” 78 FR 79994.
That’s true. The Rule dictates:
1. Rounding and truncating of dollar amounts and percentages is required in numerous data fields on the new disclosures. For example, in the Loan Estimate, the loan amount must be truncated at the decimal if the amount is a whole dollar. Additionally, most of the amounts disclosed must be rounded. Percentages are typically disclosed up to two or three decimals, rounded at the third, and truncated (or shaved) when the percent is a whole number.
2. Time periods disclosed on the Loan Estimate and Closing Disclosure are micromanaged by the new Rule. Numerous time period disclosures (for example, Loan Term, Introductory Period, Product Feature Duration, and the time when the maximum balance, rate, or payment can be reached) must be disclosed as either a period of months, years, combination of years and months, or years with a decimal (for example, “18 months” “5 years” “4 yr. 3 mo.” or “2.58 year”) depending on whether the term is less than or greater than or equal to 24 months.
3. Calculations are strictly regulated by The Rule. Not only does it dictate rounding of disclosed fees, but it also requires rounding of certain totals and subtotals, either specifically or based on a rounded amount being included in the total.
Page 2 of the Closing Disclosure includes blank lines where certain fees are to be defined. In addition, The Rule requires that both Loan Costs and Other Costs dynamically change to disclose all fees that may be listed in those tables. Under the Rule, when the available lines are fully used, the tables can (1) borrow lines from other subsections within each table, (2) borrow lines from the other table, or (3) expand to two pages (2a and 2b) when all available rows in both tables are full.
To satisfy this dynamic regulatory requirement, a data-driven software based solution that can evaluate the data supplied, and borrow rows within tables or between tables, and render two tables on two separate pages must be implemented.
The Loan Estimate and Closing Disclosure cannot exceed 3 and 5 pages, respectively. Using an addendum for disclosures is required (and only permitted) in specific instances under the Rule. For example, if an applicant’s name and address, property address, acknowledgment signatures, or other data cannot fit in the space provided, an addendum must be used. This means that dynamic functionality must be used to evaluate the data supplied and render a properly-formatted addendum when required. When an addendum is not permitted, the information must be disclosed in a format that ensures the data fits the allotted space.
No. A modified version of the Closing Disclosure may be provided to the seller that excludes borrower-specific information, such as loan terms, projected payments schedules, costs at closing, loan disclosures, loan calculations, and other information that pertains only to the borrower.
Yes. Both the Loan Estimate and the Closing Disclosure may be altered for transactions without a seller. The Regulation provides the option to use alternative tables which exclude seller-specific information from the disclosures. This ensures the disclosures are applicable to the transaction at hand and removes any irrelevant information supplied to borrowers. NOTE: If one alternative table is used in either the Loan Estimate or Closing Disclosure, all alternative tables must be used throughout the remainder of the disclosures.