HERE S. TRID ACC Quick Hit -- Truth-in-Lending Act/RESPA Integrated Disclosures Rule June 18, 2015 ROBERT E. PINDER rpinder@rtlaw.com (904) 346-5551
HERE S. TRID 2
COUNTDOWN TO TRID TRID Goes into Effect in: 43 Days 9 Hours 3
STOP THE PRESSES! TRID Delayed Until October 1, 2015 4
WHAT IS TRID? Ø TILA-RESPA Integrated Disclosures Rule aka Ø Know Before You Owe Mortgage Rule 5
EFFECTIVE DATE Ø TRID applies to transactions for which the creditor or mortgage broker receives an application on or after August 1, 2015. 6
APPLICABILITY Ø Applies to most closed-end consumer credit transactions secured by real property v Includes Mortgages for: Owner Occupied Property Second Homes Personal Investment Property Condominiums Townhomes Manufactured Homes v Does Not Include: HELOCS Reverse Mortgages Mortgages not secured by land (e.g. Mobile Home) Non-creditor Loans (5 or fewer mortgages/ year) 7
AUTHORITY Ø Truth in Lending Act (TILA) 15 U.S.C. 1601 et seq. Implemented by Regulation Z Ø Real Estate Settlement Procedures Act (RESPA) 12 U.S.C. 2601 et seq. Implemented by Regulation X 8
AUTHORITY Ø Ø Ø The CFPB* was established by 1011 of the Dodd- Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203, July 21, 2010) to regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws The Dodd-Frank Act transferred rulemaking authority under both TILA and RESPA to the CFPB The Dodd-Frank Act directed the CFPB to integrate the mortgage loan disclosures under TILA and RESPA 9
AUTHORITY Ø Nov 20, 2013 CFPB Issued the TILA-RESPA Final Rule Ø Dec 31, 2013 CFPB Published the TILA-RESPA Final Rule (78 FR 79730) Ø February 19, 2015 CFPB Published Amendments to the TILA-RESPA Final Rule (80 FR 8767) 10
TRID S EFFECT [C]ombine two existing disclosure regimes under TILA and RESPA and make mortgage disclosure easier for consumers to understand and use. Ø CFPB Website http://www.consumerfinance.gov/regulatory-implementation/ 11
REQUIREMENTS Ø New Forms for Real Estate Transactions Ø Timing Disclosures Lender Must Make to Consumers Ø Lender Liability for Costs Exceeding Tolerances Ø May Delay Transaction Due to Changes Near Closing 3 Day Waiting Period 12
NEW TERMS Ø Creditor --------------- Ø Consummation ---- Day Ø Settlement Day --- Ø Notice of Intent to Proceed Lender Day Loan Docs are Signed Close of Escrow Day 13
NEW FORMS Ø Loan Estimate Ø Closing Disclosure 14
STAKEHOLDERS Ø Consumers Ø Lending Industry Ø Settlement Services/Escrow Ø Title Industry Ø Real Estate Industry 15
CONSUMER BENEFITS Ø Combine several forms into two forms to reduce paperwork and consumer confusion Ø Clear language and design will help consumers understand complicated mortgage loan and real estate transactions Ø Highlight information most important to consumers (i.e. interest rate, monthly payments, and the total closing costs) Ø Provide additional information about the costs of taxes and insurance and how the interest rate and payments may change in the future Ø Warn consumers about features they may want to avoid (i.e. early payoff penalties or loan balance increases) 16
CONSUMER BENEFITS Ø Make the cost estimates consumers receive for mortgage loan services more reliable (i.e. appraisal, pest inspection fees) Ø Prohibit increases in charges from lenders, their affiliates, and for services for which the lender does not permit the consumer to shop unless a specific exception applies (Exceptions - information provided by a consumer at application was inaccurate or becomes inaccurate, or consumer requested change in the services) Ø Provide Consumers the Closing Disclosure at least three business days before closing on the mortgage loan 17
NEW FORMS Ø Loan Estimate (LE) v v v v v Replaces the Good Faith Estimate (GFE) and initial Truth in Lending Disclosure (TIL) Designed to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage Provides good-faith estimates of credit costs and transaction terms Provided by Lender or Mortgage Broker Must be delivered or placed in the mail no later than the 3 rd business day after receiving the consumer s application and no later than the 7 th business day before consummation 18
NEW FORMS - LE Page 1: General information, loan terms, projected payments, and costs at closing 19
NEW FORMS - LE Page 2: Closing cost details 20
NEW FORMS - LE Page 3: Additional information about the loan 21
LOAN APPLICATION Ø Receipt of Loan Application (the submission of a consumer s financial information for purposes of obtaining an extension of credit) triggers LE Obligation Six pieces of information: 1. Consumer s Name 2. Consumer s Income 3. Consumer s SSN 4. Property Address 5. Property Value Estimate 6. Mortgage Loan Amount 22
LOAN APPLICATION Ø Loan Application Format: v Written v Electronic v Written Record of an Oral Application 23
RESTRICTIONS Ø Limits Prior to Disclosure or Application v v v v Cannot Impose Fees Until the Consumer Receives the LE and Indicates Intent to Proceed NOTE: A fee is imposed if the consumer is required to provide a payment method Prohibited fees include appraisal, application, underwriting fees EXCEPTION Bona fide and reasonable fee for obtaining credit report 24
NEW FORMS Ø Closing Disclosure (CD) v v v v Replaces the final TIL and the HUD-1 Provides disclosures that will be helpful to consumers in understanding all of the costs of the transaction Prepared by Lender/Settlement Agent (or combination of both) Must be received by the consumer at least three business days prior to consummation 25
BUSINESS DAY Ø Loan Estimate v Business day - a day on which the creditor s offices are open to the public for carrying out substantially all of its business functions Ø Closing Disclosure v Business day - all calendar days except Sundays and legal public holidays 26
NEW FORMS - CD Page 1: General information, loan terms, projected payments, and costs at closing 27
NEW FORMS - CD Page 2: Loan costs and other costs 28
NEW FORMS - CD Page 3: Calculating cash to close, summaries of transactions, and alternatives for transactions without a seller 29
NEW FORMS - CD Page 4: Additional information about this loan 30
NEW FORMS - CD Page 5: Loan calculations, other disclosures and contact information 31
CHANGES Ø Re-disclosure required if: v v v v Change in the APR Change in the Loan Product Addition of Prepayment Penalty These changes restart the three business day clock 32
CFPB s POSITION Ø CFPB June 3, 2015 Fact Sheet 33
CFPB s POSITION Ø CFPB June 3, 2015 Fact Sheet 34
RESPONSIBILITY Ø Large Lenders have decided to deliver the disclosures to the Borrower 35
CFPB s POSITION The new rule allows for ordinary changes that do not alter the basic terms of the deal. Ø CFPB June 3, 2015 Fact Sheet 36
GOOD FAITH Ø Estimated closing cost disclosed in the LE is in good faith if the charge paid by or imposed on the consumer does not exceed the amount originally disclosed
VARIANCES Ø Three Variance/Tolerance Categories Zero Tolerance Ø No Increase at Closing v Creditor/Affiliate Charges v 3 rd Party Service Provider Charges w/o Consumer Ability to Shop (Appraisal, Inspection, Credit Report. Tax Service) ** v Transfer Taxes 10% Tolerance Ø 10% Cumulative v Recording Fees v Unaffiliated 3 rd Party Settlement Service Provider Charges with Consumer Ability to Shop From Creditor List No Limit Tolerance Ø Fees may Increase (subject to good faith) v Prepaid Interest v Property Insurance Premiums v 3rd Party Service Provider Charges selected by Consumer and not from Creditor List v Charges for 3 rd Party Services not required by Creditor 38
RECORD RETENTION Ø Creditor must retain copies of the Closing Disclosure (and all documents related to the Closing Disclosure) for 5 years after consummation Ø The creditor, or servicer if applicable, must retain the Post- Consummation Escrow Cancellation Notice (Escrow Closing Notice) and the Post-Consummation Partial Payment Policy disclosure for 2 years Ø For all other evidence of compliance with the Integrated Disclosure provisions of Regulation Z (including the Loan Estimate) creditors must maintain records for 3 years after consummation of the transaction Ø If a creditor sells, transfers, or otherwise disposes of its interest in a mortgage and does not service the mortgage, the creditor must furnish a copy of the Closing Disclosure to the new owner or servicer as part of the transfer of the loan file. Both creditor and new owner or servicer must retain the Closing Disclosure for the remainder of the 5 year period 39
COMPLIANCE [O]ur oversight of the implementation of the Rule will be sensitive to the progress made by those entities that have squarely focused on making goodfaith efforts to come into compliance with the Rule on time. Ø Director Richard Cordray June 3, 2015 ltr to Senators Donnelly and Scott 40
QUESTIONS? ROBERT E. PINDER rpinder@rtlaw.com (904) 346-5551