“Simplified” mortgage disclosures won’t be a simple change for credit unions
by. Jonathan Bundy
The Consumer Financial Protection Bureau’s first six mortgage rules became effective in January and delivered a major helping of compliance details for credit unions to digest. Still, for many credit unions, complying with the new rules didn’t fundamentally change the mortgage process for members. Complying with the seventh new rule, however, will absolutely change the disclosures and mortgage process for your members.
The CFPB issued the final rule requiring new disclosures at application and prior to closing for most closed-end mortgage loans in October 2013. Although it doesn’t take effect until August 2015, it’s a good idea to start taking a look at the new rule well before the start of the new year.
Four Disclosures Become Two
As directed by the Dodd-Frank Act, the CFPB has combined separate disclosure regimes under the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA). The two sets of disclosures have long been a confusing aspect of the mortgage lending process for the members receiving the disclosures and for the mortgage lenders trying to explain them. The two new disclosures under the seventh rule are designed to simplify the process:
- The Loan estimate. This disclosure replaces the Good Faith Estimate under RESPA and the early Truth in Lending disclosure under TILA. The credit union must provide the Loan Estimate to applicants no more than three business days after the application is received. The Loan Estimate will provide the member with an estimate of the mortgage payments over the life of the loan and the closing costs the member can expect.