Consumer Financial Protection Bureau (CFPB) Director Richard Cordray recently informed several banking and other industry groups that the Bureau plans to introduce a proposed rule to address concerns related to CFPB mortgage disclosure requirements.
In an April 21, 2016 letter to several key industry groups, Cordray stated that the CFPB received feedback on the Know Before You Owe rule and began drafting a notice of proposed rulemaking. The Know Before You Owe rule is designed to help consumers understand their loan options, shop for the mortgage that is best for them, and avoid costly surprises during closing. The program combines four disclosure forms under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into two new forms – the Loan Estimate and the Closing Disclosure – and requires that consumers have three days to review the Closing Disclosure before closing on a mortgage. Such changes are designed to avoid overlapping and inconsistent information under the requirements of TILA and RESPA, which tend to confuse consumers and burden lenders and settlement agents. The changes were proposed as part of a wider program by the CFPB to restore “confidence and common sense” to the U.S. mortgage market, according to Bureau officials.
The CFPB hopes to release the proposal in July, and is meeting regularly to determine how best to implement the rule. Because the rule applies to a significant number of financial institutions and lenders, the CFPB desires a smooth transition for those affected, and has asked for continued feedback from the financial services industry to make that a reality.
The Mortgage Bankers Association praised Cordray’s letter, stating that “the approach laid out should provide a swift path to issuing a final rule that will give lenders, the secondary market and consumers the clarity and consistency of disclosures the market needs.” The American Bankers Association echoed this sentiment, as Chairman and CEO Rob Nichols stated that “we are particularly pleased that the notice of proposed rule-making is on a fast track, which will accelerate and strengthen strong compliance regimes.” Nichols further stated that “many of the elements in the industry identified for clarification or amendment were developed in ABA’s compliance working group meeting, and we look forward to the opportunity to continue sharing banker feedback with the CFPB.”