TILA-RESPA Integrated Disclosure
Guide to the Loan Estimate and Closing Disclosure forms
Fayetteville Regional Association of REALTORS®
February 19, 2015
Disclaimer
There is no express or implied warranty respecting the information presented and
assumes no responsibility for errors or omissions.
The presentation is for informational purposes only and is not and may not be
construed as legal advice. You should consult with an attorney prior to embarking
upon any specific course of action.
A New Sheriff in Town……..
Outline
Overview of the CFPB regulations
 Lenders’ Responsibilities
 The Loan Estimate Form
 Variances – the New Tolerances
 The Closing Disclosure Form
 Three –Day Closing Disclosure Rule
 Probable Impacts
 What Realtors Should Be Doing Now
 FRAR Support

Overview of the CFPB Regulations
Dodd-Frank Act
 Created
the CFPB - Consumer Financial Protection
Bureau.
 Purpose is to “Protect consumers by carrying out
Federal consumer financial laws.”
 Mandated that the RESPA/TILA disclosures be
integrated to replace the existing disclosures required
by RESPA and TILA with a single disclosure.
Overview of the CFPB Regulations
CFPB Goals
 Improve the Borrower’s understanding of the risks,
costs and monthly payments associated with the
loan.
 Facilitate comparison shopping for competing loan
offers and closing costs.
 Avoid costly surprises at closing.
Overview of the CFPB Regulations
Final Rule and Forms
 Published November 20, 2013.
 Effective for loans originated on or after August 1, 2015.
 Applies to consumer mortgage loans except:
 Home-equity lines of credit
 Reverse mortgages
 Mobile Homes not affixed to Real Property
 Loans made by a creditor who makes 5 or less loans per
year.
 New laws assign significant authority and legal responsibility
to the lenders.
Lenders Responsibilities

Lenders are responsible for the production and delivery of the Closing
Disclosure.


Can outsource to settlement agents.
Lender is responsible for the accuracy of the forms.
 Private right of action for violations (Civil penalties as high as $1 million per day. Even an
unintentional violation could result in fine of $5,000 per day.)





Lender is responsible and liable for acts of all of their service providers.
Major lenders report they will be responsible for delivery of documents to
Borrower.
Other lenders will likely outsource.
Lender must provide consumer with a Settlement Service Providers List.
American Land Title Association (ALTA) Best Practices Certification will likely be
required for service providers. (Attachment)
Loan Estimate Form






Effective for loans originated on or after August 1, 2015.
Three page form replaces previous Truth-In-Lending statement (TILA)
and Good Faith Estimate. (GFE)
Provides summary of key loan terms and estimates of loan and
closing costs.
Intent to promote comparison shopping.
Loan Estimate is based on unverified information provided by the
customer. No collection of any documentation is required.
Shopping is made easier because the CFPB rules define an
application as only including six items: borrower name, SSN,
borrower income, property address, and estimate of property value
and mortgage amount requested.
Loan Estimate Form



Once the six items are collected, lenders are not permitted to
require other items before issuing a Loan Estimate, as had been
allowed earlier.
Provided to consumers by the lender within three business days after
submission of loan application.
If the Loan Estimate is not provided to the consumer in person, the
consumer is considered to have received it three business days after
it is delivered or placed in mail.
Variances – the new Tolerances




The CFPB essentially has turned the Loan Estimate into an “exact” loan
estimate by expanding the categories in which fees can’t change.
Unless an exception applies, charges of the following services cannot
increase:

The lender’s charges for its own services.

Charges for services provided by an affiliate of the lender.

Charges for services for services for which the lender does not permit the consumer to shop.
Charges for other services can increase, but generally not by more than 10 percent.
(Charges for services recommended by the lender that were in the 10 percent bucket
are now in the zero-variation bucket.)
LE – Why Does it Matter to Realtors?

Clients may receive multiple Loan Estimates due to:
“Changed Circumstances” –certain variance increases.
 Multiple applications with different lenders.
 Multiple applications for different loan products with same
lender.



Important for Realtor to understand the LE because the
same #s come over to the Closing Disclosure Form.
76% of all cases against brokers are brought by
disgruntled purchasers.
Closing Disclosure Form





Five pages that detail the disclosure of closing costs
and loan terms.
Used when a loan is originated on or after August 1,
2015.
Received by consumers three business days before
consummation.
Repeats much of the information from the Loan
Estimate.
Replaces final Truth-In-Lending statement and HUD-1
Settlement Statement.
Closing Disclosure Form




Different versions for purchase and refinance transactions.
Separate form for Sellers that doesn’t include the loan
disclosure and Borrower costs. Helps protect NPI –
Nonpublic Personal Information.
Lender or settlement agent can complete and deliver the
form to the Borrower.
Settlement agent is responsible for delivering the form to
the Seller.
Three-Day Closing Disclosure Rule

Disclosure forms must be received by consumer three
business days before consummation.


The three-day period is measured by days, not hours.

Thus, disclosures must be delivered three days before closing, and not 72 hours prior to
closing.

If a federal holiday falls in the three-day period, add a day for disclosure
delivery.
Delivery Options

In person: A disclosure is deemed received by the consumer the day it is delivered in
person.

Mail/Fed-Ex/courier: A lender or settlement agent can presume the consumer received
the disclosure three business days after mailing. Can be rebutted by evidence the
consumer received earlier.

E-Mail: Same presumption as postal mail.
Three-Day Closing Disclosure Rule



The three-day notice can be waived due to “financial emergency” but they
will be extremely rare.
Generally if changes occur between the time the Closing Disclosure form is
given and the closing, the consumer must be provided a new form and three
additional business days to review.
Changes that automatically require a new Closing Disclosure to be issued
(with three additional business days) include:

Changes to the APR above 1/8% of a percent on most loans.

Changes to the loan product.

Addition of a prepayment penalty to the loan.
Three-Day Closing Disclosure Rule
Possible Impacts to Real Estate Closing Process







CFPB erred on the side of Consumer Protection and less on
Consumer Convenience.
Consumers and their representatives will be frustrated – plan
on it now, and be ready to educate consumers.
Consumers will have more information, possible multiple LEs,
but lack the knowledge to understand it.
New disclosure periods will likely disrupt expectations of
parties, particularly at the beginning.
Can’t expect perfection in an imperfect process.
While Realtors are primary conduit to the consumer, ultimate
legal responsibility rests with lenders.
Every closing is a potential lawsuit.
What Should Realtors Be Doing Now?

Recognize that the Closing Disclosure will fundamentally change the
closing process and ultimately impact their clients.





Impact of 3 day rule.
Impact on back-to-back closings; last minute closing expenses
Longer closings with more questions.
Increased legal responsibility
NAR Current Recommendations





Make sure clients are ready 7 days prior to closing.
Make sure sellers abide by their agreements.
Keep your communications tight.
Add 15 days to the closing time.
Do the walk-through early to allow for changes.
What Should Realtors Be Doing Now?





Learn as much as you can about the new rules and prepare for the
changes in the transaction process well ahead of time.
Meet with lenders you trust to learn more about the new rules.
Make sure your closing partners are vetted and verified for Best
Practices by your lenders and meet with them to discuss the new
disclosures and their preparations for the new regulatory
environment.
Learn the lingo – CFPB, consummation, NPI, Best Practices, etc.
Get informed.


www/consumerfinance.gov; www/alta.org/cfpb; www.realtor.org
Professional training opportunities
Fayetteville Regional Association of Realtors Support


Education Committee has established a sub-committee to study new disclosure
forms and related changes and to identify key issues impacting local Realtors.
Education & Training




Membership meeting on February 19th.
BIC Meeting on March 24th.
“Nuts & Bolts” – 3-day rule, loan estimate, closing documents, etc., on June 23rd.
An area on the Association website established to provide updated information
on disclosure forms and related changes.






Links to sources of information.
Download the new forms – LE & CD
Video training
Locally-generated information.
FAQs
Definitions (CFPB, NPI, Consummation, etc.)
Fayetteville Regional Association of REALTORS®

Image of Updated web site sample with information
available
Questions?
David Allred
Cunningham & Company Mortgage Bankers
868-4300
davida@cunninghammortgage.com
Tony Chavonne
Single Source Real Estate Services
222-4444
tony@chavonne.net