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AUGUST 25, 2014


The New Integrated Mortgage Disclosures (Final rule effective on 08/01/15)


The Dodd–Frank Wall Street Reform and Consumer Protection Act (The Dodd-Frank Act) directed the Consumer Financial Protection Bureau (CFPB) to combine the two separate disclosures forms (Good Faith Estimate and HUD Settlement Statements 1 or 1A) to make it easier for consumers to understand and less burdensome for lenders and settlement agents. 

The first new form, the Loan Estimate, is designed to provide disclosures that will be helpful to consumers in understanding the key features, costs and risks of the mortgage loan for which they are applying.  The Loan Estimate form must be completed and provided to the applicant within three business days after they have submitted a loan application.  The second new form, the Closing Disclosure, is designed to provide disclosures that will assist consumer to understand all of the costs associated with the loan transaction.  The Closing Disclosure must be provided to the applicants three business days before the closing of the loan.


Both new forms use clear, consistent language throughout and were designed to make it easier for consumers to locate key information, such as interest rate, monthly payments and costs required to close the loan.  The forms were also designed to provide additional information to help consumers decide whether they can afford the loan.



The final rule applies to most closed-end consumer mortgages and does not apply to the following:

¨      Home Equity Lines of Credit (HELOC)

¨      Mobile Home loans or loans secured by a dwelling not attached   real estate


These types of loans will still require the use of the GFE and HUD 1, 1A and Truth-in-Lending Act (TILA) forms required under the current law.


However, certain types of loans that are currently subject to TILA, but not RESPA, will be subject to the TILA-RESPA rule’s integrated disclosure requirements, including:

¨      Construction-only (not construction perm) loans

¨      Loans secured by vacant land or by 25 or more acres.


Your financial institution’s loan production software provider should provide these forms that your loan officers and support staff can practice with, or you can download the form at to save and then practice on your PC.  You should take advantage of the many training opportunities (seminars, webinars) that will be emerging soon if not already and get your key people trained.  Your institution must be ready for these drastic changes and your lenders should be confident when explaining these documents to the consumer.


Defining Small Servicers 

There has been some confusion at to the meaning of small bank or small servicers who are exempt from some of the CFPB’s new mortgage servicing rules.  Institutions are small servicers if they are under $2 billion in assets; service 5,000 or fewer mortgage loans; and meet certain other requirements.


Refunding Excess Points and Fees 

Under the ability-to-repay rule, certain loans called “qualified mortgages” are subject to special consumer protections, which include the points and fees charged to a consumer on a qualified mortgage. Those points and fees generally cannot exceed 3 percent of the loan principal. 


The CFPB is proposing to allow a creditor to cure an inadvertent excess over the qualified mortgage points and fees limits by refunding to the consumer the amount of the excess, under certain conditions, and still have the loan meet the legal status of a qualified mortgage loan.  The refund must occur within 120 days after the loan is made and the creditor must also maintain and follow policies and procedures for reviewing the loans and providing refunds to consumers.  This amendment is designed to encourage lenders to provide access to credit to consumers seeking loans that are at or near the points and fees limits.


In addition, the CFPB is also seeking comments on whether and how to provide a limited post consummation cure for loans that are originated with the good faith expectation of qualified mortgage status, but that actually exceed the 43 percent debt-to-income ratio limit that applies to certain qualified mortgages.


We urge financial institutions to comment on the proposed amendments by visiting the CFPB’s website at



Adjustable Rate Mortgage (ARM) Notification and Look Back Period


The Department of Housing and Urban Development (HUD) has proposed two revisions to the Federal Housing Administration’s (FHA’s) regulations governing its single family adjustable rate mortgage (ARM) program to align FHA interest rate adjustment and notification regulations with the requirements for notifying mortgagors of ARM adjustments, as required by the 2013 Truth-in-Lending Act (TILA)/Regulation Z servicing rules. 


This rule proposes two revisions to FHA’s regulations governing its single family adjustable rate mortgage (ARM) program to align FHA interest rate adjustment and notification regulations with the requirements for notifying mortgagors of ARM adjustments, as required by the regulations implementing the Truth in Lending Act (TILA), as recently revised by the Consumer Financial Protection Bureau (CFPB). The first proposed amendment of this rule would require that an interest rate adjustment resulting in a corresponding change to the mortgagor’s monthly payment for an ARM be based on the most recent index value available 45 days before the date of the rate adjustment. The date that the newly adjusted interest rate goes into effect is often referred to as the ‘‘interest change date.’’ The number of days prior to the interest change date on which the index value is selected is called the ‘‘look-back period.’’ FHA’s current regulations provide for a 30-day look back period. The second proposed amendment would require that the mortgagee of an FHA-insured ARM comply with the disclosure and notification requirements of the 2013 TILA Servicing Rule, including at least a 60-day but no more than 120-day advance notice of an adjustment to a mortgagor’s monthly payment. FHA’s current regulations provide for notification at least 25 days in advance of an adjustment to a mortgagor’s monthly payment.


Deadline for comments on this proposal ended June 2014 and we are awaiting the final rule, which when passed, should take effect one year from the passage date.