On November 20, 2013 the Consumer Financial Protection Bureau (CFPB) issued a rule that will simplify and improve disclosure forms for consumer mortgage transactions. This rule implements the Dodd-Frank Act’s directive to integrate mortgage loan disclosures required by the Truth In Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The two new disclosures are the Loan Estimate, which must be given three business days after application, and the Closing Disclosure, which must be given three business days before closing.
The Loan Estimate form replaces two current federal forms, the Good Faith Estimate designed by the U.S. Department of Housing (HUD) under RESPA and the “early” Truth in Lending disclosure required by TILA. The Closing Disclosure form replaces the current form used to close a loan, the HUD-1, which was designed by HUD under RESPA. It also replaces the revised Truth in Lending disclosure designed by the Federal Reserve Board under TILA.
These new rules apply to most closed-end consumer mortgages. They do not apply to home equity lines of credit, reverse mortgages or mortgages secured by mobile homes or by dwellings not attached to real property. To assist lenders, the final rule and official interpretations contain detailed instructions as to how these forms should be completed.
To permit time for lenders to come into compliance, the final rule will be effective on August 1, 2015.