If you work in the lending industry, you need to be familiar with disclosure regulations under TILA-RESPA. What follows in this article are explanations about the critical components of this rule and what you need to do to be in compliance.
This rule is the result of an amendment of Regulation Z (also known as the Truth in Lending Act) and Regulation X (the Real Estate Settlement Procedures Act) so that mortgage loan disclosures would be integrated.
What It Looks Like
This rule brings together four separate disclosures required under current RESPA and TILA rules relating to closed-end credit transactions. This applies to transactions that are secured by real property. Instead of the separate disclosures, these forms are now consolidated into two: a loan estimate and a closing disclosure.
Deadlines Affecting These Disclosure Rules
- The loan estimate form has to be provided to the borrower by mail a maximum of three business days after the application has bene received.
- The closing disclosure has to be sent to the consumer a minimum of three days before the loan is consummated.
What Loans Are Covered by This Rule?
The majority of closed-end consumer credit transactions that are secured by real property fall under the requirements of this rule, but there are some exceptions. The following loan applications are exempted from these requirements:
- Reverse mortgages
- Loans secured by a mobile home
- Loans secured by other dwellings that are not attached to pieces of real property
- Home Equity Lines of Credit
- Any situation involving an entity or person who makes available five or less mortgages within a calendar year
When Must We Comply?
The effective date for these disclosures is coming up quickly. Integrated disclosures must be provided to consumers beginning on August 1, 2015. Any applications that are received prior to August 1 should be treated as under the regulations tied to HUD-1, the GFE, and Truth-in-lending.
Restrictions on Activity Prior to Loan Estimate Access
It’s important to realize that there are some restrictions on activity before a consumer receives his or her loan estimate. These restrictions are also active on August 1 and include prohibitions against:
- Imposing fees on the consumer prior to his/her receipt of the loan estimate
- Giving written estimates of costs or terms prior to the loan estimate without a statement outlining that these terms may change
- Mandating submission of particular documents or evidence related to the application before the consumer has received the loan estimate
What Must the Disclosures Include?
The loan estimate has to be a good faith estimate of transaction terms and credit costs. It must be provided in writing and it usually cannot be revised later for errors. Sample forms are available to help lenders comply with these new requirements effectively.
The closing disclosure must include the actual costs and terms associated with the transaction such as the loan terms table, a projected payments table, a costs at closing table, the calculating cash to close table, adjustable payment table, adjustable interest rate table, and contact information.