Not too early to prepare for TILA/RESPA

As fall approaches, we here in NAFCU’s regulatory compliance division are preparing for our Regulatory Compliance Seminar in Baltimore. In just a short few months – beginning Oct. 14 – we’ll be meeting to discuss compliance hot topics, regulatory updates and proposed regulations on the horizon. But we’re doing some long-term planning too – because as of this month, we have one year left before the implementation date of the Truth in Lending Act/Real Estate Settlement Procedures Act (TILA/RESPA) integrated mortgage disclosures final rule, scheduled for Aug. 1, 2015.

Nearly 2,000 pages in length, the TILA/RESPA rule will significantly impact mortgage departments at credit unions around the country. NAFCU’s compliance team has been working diligently to help credit unions get a head start tackling this rule through a number of avenues, including our Compliance Monitor (NAFCU log-in required) and Compliance Blog (open to the public). We will also be going into far greater detail on the subject matter at the Regulatory Compliance Seminar, but in the meantime, here’s a quick look at the scope of the final rule.

The new disclosure rule applies to nearly all closed-end mortgage loans – regardless of your credit union’s asset size or pricing of the mortgage (for example, higher-priced mortgage loans). Closed-end mortgage loans are consumer credit transactions secured by real property and include transactions such as purchases, refinances and loans for second homes or vacation homes. The disclosure rule also applies to construction-only loans, loans secured by vacant land and loans secured by 25 acres or more. Currently, those last three types of loans are not within the scope of RESPA but are subject to the new TILA/RESPA rule, so this will be a change that credit unions will need to adopt in their policies and procedures. Because there is no small creditor exemption under this rule, all credit unions who originate closed-end mortgage loans must comply with these new mortgage disclosure regulations. However, there are a few types of mortgage loans that won’t require the new disclosure form, including: home-equity lines of credit (HELOCs); reverse mortgages; mortgages secured by a dwelling not attached by real property (like mobile homes); and mortgage loans made by people not considered “creditors” under Regulation Z.

It’s a lot to keep track of, but one of the issues facing credit union compliance teams is that they can’t get a head start: the rule does not allow for early compliance. That means you can only start using the new disclosure forms for applications received on or after Aug. 1, 2015; in fact, early use of the new disclosures would constitute violation of the current TILA and RESPA rules. So the timing here is tricky.

But here’s the good news: if you attend our Regulatory Compliance Seminar, you’ll get to hear the most important information about the integrated-disclosures rule from a speaker who led the final rulemaking process for the rule at CFPB. Richard Horn is now a partner at Dentons US LLP, but he previously served as senior counsel and special advisor in the Office of Regulations at the bureau. In addition to leading the rulemaking process, he led the design and qualitative and quantitative consumer testing of the TILA/RESPA integrated disclosures.

Horn will discuss not only how the rule will overhaul the procedures for mortgage origination, but also where your credit union should be on the road to implementation and what challenges may lie ahead in the coming months. He’ll help your compliance staff think about how best to finalize your credit union’s road map to the rule’s effective date next year.

Horn will join a roster of speakers, among them: members of NAFCU’s regulatory compliance staff; NAFCU’s former vice president of regulatory compliance, Steve Van Beek; Transportation Federal Credit Union Compliance Officer Rusty Vellek; and NCUA Director of Examination and Insurance Larry Fazio. And with any free time you may have between sessions and networking opportunities, you’ll find it’s a quick trip from the Renaissance Baltimore Harborplace Hotel to the National Aquarium in the Inner Harbor, or to historic Fort McHenry.

Our team is looking forward to checking in with you at the seminar and seeing how we can help you prepare for the integrated-disclosure rule and all of the other compliance challenges presenting themselves this year. Hope to see you there!