It’s Finally Here — CFPB’s Proposed Mortgage Disclosure Forms

Blog posted by John Zasada 

This week the Consumer Financial Protection Bureau (CFPB) finally issued the first two of what will surely be several mortgage loan proposals. For over a year, the CFPB has been researching, testing, and writing about the proposed rule that would be coming.

Credit unions have their work cut out for them — the two proposals are a total of 1,392 pages. Credit unions must now try to sift through and understand all the potential changes, assess the impact of these potential changes, and give the CFPB comments on ways to improve the changes before the final rules are released.

The CFPB’s 1,099 page proposal combines the Truth in Lending Act’s and the Real Estate Settlement Procedures Act’s initial and closing disclosures.

Credit unions have until November 6, 2012, to comment on the proposal — with one exception. Comments about the changes to the calculation of the finance charge and the annual percentage rate (APR), and the delay of the effective date for certain disclosures required by the Dodd-Frank Act, are due on September 7, 2012.

Two new forms

The proposal requires two new forms. The “Loan Estimate” form would be provided within three business days of receiving an application, and replaces the GFE and early TIL forms. The “Closing Disclosure” form would be given within three business days before the loan closing, and it replaces the HUD-1 and final TIL forms.

The proposal broadens the definition of APR to include almost all up-front loan costs. It also places certain limits on increases in loan closing costs, but carves out several exceptions.

High-cost mortgage loans

The CFPB surprised us by issuing a 293 page proposal on high-cost mortgage loans. That proposal would expand the coverage of these loans, although reverse mortgages would still be excluded.

The thresholds for high-cost mortgage loans would be revised, and the definition of “finance charge” would change. Credit unions could no longer charge prepayment penalties and financing points and fees. Late fees would be capped at 4 percent of the past due payment amount. It would be impermissible to charge a loan modification or deferral fee. Credit unions would have to provide a list of federally certified or approved homeownership counselors or counseling organizations to members within three business days of applying for a mortgage loan.

View the proposed rules and related resources on CFPB’s website.