The CFPB has issued two proposed changes to the TILA-RESPA Integrated Disclosures Rule (Final Rule) that will be effective for applications received on or after August 1, 2015: (1) an adjustment to the timing requirement for revised Loan Estimate disclosures when the consumer locks a rate or extends a rate lock after the initial Loan Estimate is provided, and (2) an amendment to permit language related to new construction loans to be included on the Loan Estimate form. Comments must be received by the CFPB on or before November 10, 2014.
As originally adopted, the Final Rule requires creditors to disclose the locked interest rate dependent charges and loan terms by providing a revised Loan Estimate on the same business day that a rate is locked. The CFPB is now proposing to relax the timing requirement to state that creditors must provide a revised Loan Estimate no later than the next business day after the date the rate is locked, instead of the same date.
The changes in the disclosure requirement for interest rate locks comes in response to significant feedback from industry stakeholders on the provision since the Final Rule was published in 2013. Specifically, creditors have raised consumer protection and operational concerns. With the CFPB’s announcement, it appears that the Bureau has listened to those concerns and assessed the potential negative consequences for consumers.
In the preamble to the proposed rule, the CFPB states it “believes that, absent the proposed change, this requirement is likely to result in at least some creditors limiting consumers’ ability to lock their interest rates only to times early in a business day due to the implementation of costs of getting the disclosure to the consumer the same date if the consumer requested a rate lock sufficiently late during the business day or after hours.” The CFPB then states it “believes that consumers are unlikely to choose creditors based on the creditors’ policies regarding interest rate locks. Moreover, consumers would be unlikely to know whether their creditors will in fact allow interest rate locks at all times until the consumer actually attempts to lock the interest rate.”
Although the proposal is a welcomed change from the same business day timing requirement of the Final Rule, the industry still may be concerned about having to issue a revised Loan Estimate on the next business day, and may still tighten interest rate lock practices if the proposed time period is adopted. The industry may well support the ability to issue a revised Loan Estimate to reflect a locked rate in the standard timeframe for other changes, which is three business days after learning of the change.
The CFPB also is proposing to permit a change to the Loan Estimate form for loans on new construction. In cases of new construction when closing is expected to occur more than 60 days after the initial Loan Estimate is provided, the Final Rule permits a creditor to reserve the right to provide a revised Loan Estimate any time before 60 days prior to closing if the initial Loan Estimate includes a clear and conspicuous statement of such right. However, for most transactions the Loan Estimate is a standard form and it may not be modified except as provided by the Final Rule, and the Final Rule does not list the inclusion of such a statement as one of the permitted revisions.
The proposal would correct this oversight and provide for the inclusion of such a statement in the initial Loan Estimate. In announcing the proposal, the CFPB stated that the proposal would “create a space on the Loan Estimate form where creditors could include language informing consumers that they may receive a revised Loan Estimate for a construction loan that is expected to take more than 60 days to settle.” The proposal does not actually include a model version of the Loan Estimate with a model statement. Instead, the proposal simply permits the inclusion of a statement among the information disclosed on page 3 of the Loan Estimate in the “Other Considerations” section. Industry members may well request that the CFPB provide a model form with a model statement.
Finally, the proposal amends the 2013 Mortgage Loan Originator Final Rule to provide for the placement of the NMLSR ID on the Loan Estimate and Closing Disclosure and makes other various non-substantive corrections and updates to the regulatory text and commentary in the Final Rule.