RESPA TILA INTEGRATED
DISCLOSURE RULE
BCAC
Speakers:
Richard Hogan, Vice President and Associate General Counsel, CATIC
Jeremy Potter, General Counsel and Chief Compliance Attorney,
Norcom Mortgage
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Agenda
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Basics: Why We’re Here
Final Rule
The New Forms
Evaluating the Rule
Challenges for banks and its attorneys
Questions
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Statutes that Transferred to the CFPB
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Alternative Mortgage
Transaction Parity Act
Consumer Leasing Act of
1976
Electronic Fund Transfer Act*
Equal Credit Opportunity Act
Fair Credit Billing Act
Fair Credit Reporting Act*
Home Owners Protection Act
of 1998
Fair Debt Collection Practices
Act
Federal Deposit Insurance
Act*
Gramm-Leach-Bliley Act*
Home Mortgage Disclosure
Act of 1975
• Home Ownership and Equity
Protection Act of 1994
• Real Estate Settlement
Procedures Act of 1974
• S.A.F.E. Mortgage Licensing
Act of 2008
• Truth in Lending Act
• Truth in Savings Act
• Omnibus Appropriations Act
of 2009*
• Interstate Land Sales Full
Disclosure Act
• Mortgage Reform and AntiPredatory Lending Act*
*Indicates that portions of this Act transferred to the CFPB
while other portions did not.
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Basics
• Applicable Loans
o Final rule applies to most consumer mortgages, EXCEPT:
• Home-equity lines of credit
• Reverse mortgages
• Mortgages secured by a mobile home or dwelling not
attached to land
• No-interest second mortgage made for down payment
assistance, energy efficiency or foreclosure avoidance
• Lenders who make 5 or fewer loans in a year
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The New Forms – TILA Liability
• Closing Disclosure
o Five pages long
• Combines three-page HUD-1
and final two-page TIL
o Who provides?
• Two options: lender or
combination of lender and
settlement agent
o When?
• Three days before closing
• Exceptions
• Loan Estimate
o Three pages long
• Combines early two-page TIL
and three-page GFE
o Who provides?
• Two options: lender or
mortgage broker
o When?
• Within three days of
application
o Still subject to tolerances
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LOAN ESTIMATE
• The New Forms Must Be Used with Respect to Any
Applications Received for a Covered Transaction
on or After August 1, 2015
• No change for the following:
o Cannot Impost Fees (Except for credit report) Before Consumer
Receives Loan Estimate and Indicates Intent to Proceed
o Cannot Require Submission of Verification Documents
• You Cannot Use New Forms Before Effective Date
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LOAN ESTIMATE – Timing - Quick
• Must Be Provided Within Three (3) Business Days
(open for substantially all business) of Receiving an
Application
o Delivered
o Or Placed in Mail
• That Delivery Date (or Date Placed in Mail) Must
Also Be no Later Than Seventh (7th) Business Date
Before Consummation
• Trigger Date is Date When “Application” Received
o By Creditor
o Or by Mortgage Broker
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LOAN ESTIMATE – Who Provides
• Mortgage Broker Can Provide Loan Estimate –
exception in MA
• But Broker Must Comply with All Requirements
Applicable to Creditor
o It Does Not Matter when the Credit Receives the Application
• And Creditor Must Ensure Broker’s Compliance
o Bound by Disclosure
• Will Creditors Let Brokers Provide the Loan Estimate?
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LOAN ESTIMATE
• Loan Estimate Must be Completed in “Good Faith”
o Based on Actual Information if Known
• Must Use “Good Faith” and Exercise “Due Diligence” to Try to
Obtain Information
o Estimate Must be Based on “Best Information Available”
• Using Good Faith and Due Diligence
o You Can Rely on Third Parties for Information
• Including Consumer
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Identified Providers List
• List Must be Provided Within Same Time-Frame as
Loan Estimate
• But Separate From Loan Estimate
• New “Model” List Provided by CFPB
• Identified Services Must Match Services Identified as
Shoppable on Page 2 of Loan Estimate Form
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Consumer Shopping
• A creditor permits a borrower to shop for third party
settlement services when they:
o Inform borrowers on Loan Estimate
o Provide them with a written list of settlement service providers
• The creditor may still impose reasonable
qualifications for providers.
o Example: Provider must be licensed – Impact on closed list
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LOAN ESTIMATE and VARIANCES
• Credit must identify at least one Provider for each
service
o Provider must be available to consumer
o Contact information must be provided
• Must disclose that consumer can choose a different
Provider
• If consumer selects Provider on list, charge must be
included in 10% Tolerance Bucket
• If consumer selects Provider not on list, charge is not
subject to any variance
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10% Variance Bucket
• 10% Tolerance Bucket includes:
o Recording fees
o Charges for service providers selected by consumer
• Where Provider is on the written list
• Not paid to creditor or affiliate
• 10% Tolerance is provided for All charges in bucket
o Individual charges may increase by more than 10%
o But aggregate cannot
• If charge in bucket is not actually performed, item
must be removed for comparison purposes
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Zero Variance Bucket
• Includes the following:
o Fees that are paid to a creditor and mortgage broker
o Fees paid to an affiliate of the creditor (New)
o Fees paid if borrower not permitted to shop for the service (New) –
appraisal, credit repot, etc.
o Transfer Taxes
• Zero tolerance may be overcome in changed
circumstances or in other circumstances where
revisions are permitted
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Permitted Revision (cont.)
• No Change:
• A revised loan estimate is also permitted if there are
“changed circumstances”
o That affect the “settlement charges”
o That affect eligibility for specific loan terms
• FICO
• Appraisal
o Where the increase in charges exceeds applicable tolerances
• Zero tolerance items
• Items in 10% bucket (but only if increase exceeds 10%
aggregate limit)
• APR tolerances
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When Must You Give the Revised Loan
Estimate?
• No Change:
• “General” rule, creditor must provide no later than 3
business days (open for substantially all business)
after you receive the information that permitted the
revision (i.e., a “triggering event”)
o Deliver in person
o Place in mail
• Exceptions to “general” 3 business day rule include
o when you are too close to closing
o or closing disclosure has already been provided
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When Must You Give the Revised Loan
Estimate?
• Revised loan estimate may not be provided on the
same date (or after) the closing disclosure is
provided
o Closing disclosure must be received by consumer no later than
three business days (Sundays and holidays) before closing
o Consumer must receive the revised loan estimate at least four (4)
business days prior to closing
• If delivered in person, “receipt” is that day
• If delivered by mail, email or other means, “receipt” is
considered to have occurred 3 business days later
o Unless you have evidence of actual receipt
o Be careful of this prohibition if closing disclosure is provided early
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What Happens if Things Change Close
to Closing and You Cannot issue a
Revised Loan Estimate?
• You can reflect the revised disclosures in the closing
statement
o but only if there is a triggering event permitted in the revision
• And only if there are less than 4 business days between
closing and the time the revised loan estimate would
have otherwise been required to be provided
o If the triggering event occurs between the 4th and 3rd business day
from closing
• Show the revised disclosures on the closing disclosure provided 3
business days before closing
o If the triggering event occurs after the first closing disclosure has been
provided
• Show revised disclosures on closing disclosure provided at closing
• You would then be able to compare those revised
disclosures to the actual charges for the purpose of
determining
o Whether disclosures were made in “good faith”
o Whether any refunds are necessary
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Figures Used In the Loan Estimate
Estimated Figures & Good Faith
Requirement
• There may be some
information that is unknown.
The creditor may use
estimates. When estimated
figures are used, they must be
designated as such.
• Creditors are responsible for
ensuring that the figures
stated in the Loan Estimate
are made in good faith and
consistent with the best
information reasonably
available to the creditor at
the time they are disclosed.
Tolerances for Figures that
Exceed the Estimate
A creditor may charge the consumer
more than the amount disclosed in the
Loan Estimate in specific circumstances:
1. Certain variations between the
amount disclosed and the amount
charged are expressly permitted by
the TILA-RESPA rule (See section 7.3
below for additional information on
which variations are possible) (§
1026.19(e)(3)(iii));
2. The amount charged falls within
explicit tolerance thresholds (and
the estimate is not for a zero
tolerance charge where variations
are never permitted) (§
1026.19(e)(3)(ii)) (See sections 7.5
and 7.10 below); or
3. Changed circumstances permit a
revised Loan Estimate or a Closing
Disclosure that permits the charge
to be changed. (§ 1026.19(e)(3)(iv))
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Exceptions to Rules Regarding Changes to
Charges in the Le
The exceptions include situations when:
1) The consumer asks for a change;
2) The consumer chooses a service provider that was
not identified by the creditor;
3) Information provided at application was
inaccurate or becomes inaccurate; or
4) The LE expires.
When an exception applies, the creditor generally
must provide an updated LE form within 3 business
days.
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Change to Charges in the Loan
Estimate
Charges for the following
services cannot increase:
1) The creditor’s or mortgage
broker’s charges for its own
services;
2) Charges for services
provided by an affiliate of
the creditor or mortgage
broker; and
3) Charges for services for
which the creditor or
mortgage broker does not
permit the consumer to
shop.
Charges for other services can
increase…
• but generally not by
more than 10 percent.
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What Must be Done if the Charges Exceed the
LE Thresholds
• If the amounts paid by the consumer at closing
exceed the amounts disclosed on the LE beyond
the applicable tolerance threshold, the creditor
must refund the excess to the consumer no later
than 60 calendar days after consummation.
o For charges subject to zero tolerance, any amount charged
beyond the amount disclosed on the Loan Estimate must be
refunded to the consumer.
o For charges subject to a 10% cumulative tolerance, to the extent
the total sum of the charges added together exceeds the sum of
all such charges disclosed on the LE by more than 10%, the
difference must be refunded to the consumer.
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Information
Contained on the
Loan Estimate
Page 1: General
information, loan terms,
projected payments, and
costs at closing
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Closing Disclosure
• Required by § 1026.19(f)
• Three business days before closing
• Provided by:
o Lender - § 1026.19(f)(1)(i)
o Lender may rely on Settlement Agent, but Lender
remains responsible for accuracy - § 1026.19(f)(1)(v)
• Contents in § 1026.38
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Closing Disclosure
Page 1
§ 1026.38(a)-(d)
(a) General Information
(b) Loan Terms
(c) Projected Payments
(d) Costs at Closing
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Closing Disclosure
Page 1 - Refi
§ 1026.38(a)-(d)
(a) General Information
Notes:
“Sale Price” replaced with “Appraised
Prop. Value”
“Seller” removed and “Lender” moved
up
(b) Loan Terms
(c) Projected Payments
(d) Costs at Closing
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Closing Disclosure Page 2
§ 1026.38(f)
(f) Loan Costs
A.
B.
C.
D.
Origination Charges
Services Borrower Did Not Shop For
Services Borrower Did Shop For
Total Loan Costs
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Closing Disclosure Page 2 - refi
§ 1026.38(f)
(f) Loan Costs
A.
B.
C.
D.
Origination Charges
Services Borrower Did Not Shop For
Services Borrower Did Shop For
Total Loan Costs
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Closing Disclosure Page 2 (cont.)
§ 1026.38(g)-(h)
(g) Other Costs
F. Prepaids:
01. Homeowner’s Ins. Premium
02. Mortgage Ins. Premium
03. Prepaid Interest
04. Property Taxes
H. Other:
01. HOA Capital Contribution
****
05. Real Estate Commission
06. Real Estate Commission
07. Title - Owners title
(h) Total Closing Costs
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Closing Disclosure Page 2 - Refi (cont.)
§ 1026.38(g)-(h)
(g) Other Costs
F. Prepaids:
01. Homeowner’s Ins. Premium
02. Mortgage Ins. Premium
03. Prepaid Interest
04. Property Taxes
H. Other:
01. HOA Capital Contribution
****
05. Real Estate Commission
06. Real Estate Commission
07. Title - Owners title
(h) Total Closing Costs
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Closing Disclosure Page 3
§ 1026.38(i)-(k)
(i) Calculating Cash to Close
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Tolerance amounts shown
here
(j) Summary of borrower’s
transaction
(k) Summary of seller’s
transaction
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Itemizations in I and J are
like page 1 of today’s HUD-1
Settlement Statement
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Closing Disclosure
Page 3 - Refi
§ 1026.38(i)-(k)
(t)(5)(vii) Payoffs and
Payments
(e) Calculating Cash to Close
(alternative table)
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Tolerance amounts shown
here
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Closing Disclosure Page 4
§ 1026.38(l)-(n)
(l) Loan Disclosures
(m)
Adjustable Payment
(AP) Table*
(n) Adjustable Interest Rate
(AIR) Table*
* Tables are only included if
applicable
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Closing Disclosure Page 5
§ 1026.38(o)-(q)
(o) Loan Calculations
(p) Other Disclosures
(q) Questions Notice
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Closing Disclosure Page Five (cont.)
§ 1026.38(r)-(s)
(r) Contact Information (Sale)
Contact information for:
1. Lender
2. Mortgage Broker
3. Real Estate Broker (B)
4. Real Estate Broker (S)
5. Settlement Agent
(r) Contact information (Refinance)
Contact information for:
1. Lender
2. Mortgage Broker
3. Settlement Agent
(s) Signature Statement
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Sale – Closing Date
Delivery By Hand:
SUNDAY
MONDAY
1
2
8
9
Sunday
doesn't count
TUESDAY
3
WEDNESDA
THURSDAY
FRIDAY
SATURDAY
Y
4
5
6
7
Hand
Disclosure
Delivery =
Day 1
Receipt
10
11
Disclosure
Disclosure
Day 2
Day 3 - OK to
close
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Delivery By Mail:
SUNDAY
MONDAY
1
2
8
9
Sunday
doesn't count
WEDNESDA
THURSDAY
FRIDAY
SATURDAY
Y
3
4
5
6
7
Closing
Mail Day 1
Mail Day 2 Mail Day 3 = Disclosure
Disclosure
Receipt
Day 1
MAILED
TUESDAY
10
11
Disclosure
Disclosure
Day 2
Day 3 - OK to
close
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Refinances – Closing Date
• Even with 3 days advance disclosure before
closing (consummation)
• 3-day rescission period still applies in refinance
of principal residence
SUNDAY
1
MONDAY
2
TUESDAY
3
WEDNESDAY
4
THURSDAY
5
FRIDAY
6
SATURDAY
7
Closing
Disclosure
MAILED
8
9
Sunday doesn't
count
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Mail Day 2
Mail Day 3 =
Receipt
Mail Day 1
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12
13
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Disclosure Day 1 Disclosure Day 2 Disclosure Day 3 - Rescission Day 1
OK to close
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Sunday doesn't Rescission Day 2 Rescission Day 3
count
= Rescission
expires at
midnight
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Issues to be Resolved
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Who creates Final Disclosure?
Who can amend Final Disclosure?
How will Lender and Closing software interact?
Will Lenders want to do more in-house?
What about Title Insurance disclosure?
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?QUESTIONS?
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