On Tuesday, June 17, 2014, the CFPB and Federal Reserve Board co-hosted a webinar on the TILA-RESPA Integrated Disclosure Rule, which will go into effect on August 1, 2015. The webinar is the first in a planned series to help explain the rule and its procedural requirements. This webinar provided an overview of the rule, and later webinars will be dedicated entirely to questions and answers.
The CFPB has posted the recording of the webinar and the presentation slides on the Bureau’s Regulatory Implementation Webpage. We also have created a TILA-RESPA Integrated Disclosure Rule Topic Page with links to the final rules and compliance resources from the CFPB, such as a Compliance Guide, Guide to Forms, and Integrated Loan Disclosure Forms and Samples.
General Overview
The CFPB’s new Integrated Disclosure Rule covers any application received on or after August 1, 2015 for a closed-end credit transaction secured by real property. The rule’s new Loan Estimate form integrates the first Truth-in-Lending (“First TIL”) disclosure and the RESPA Good Faith Estimate (GFE). The new Closing Disclosure form integrates the final Truth-in-Lending disclosure (“Final TIL”) and the RESPA HUD-1 disclosure. The two new integrated disclosures include much of the same information found on the current disclosures, but with new timing requirements, new tolerance levels, and new pre-disclosure requirements.
The presentation reviews the general contents of both forms (slides 5–7 and 18) and compares and contrasts the new disclosures with current disclosures (slides 8 and 20). The presentation also discusses the good faith requirement, tolerances, changed circumstances, correcting and revising the forms, and more.
The CFPB staff identifies some pitfalls in the rules, such as the revised the definition of “applications.” Currently, Regulation Z permits creditors to define what they consider to be an “application.” This rule will remove a creditor’s discretion to define an “application,” and instead provides a uniform definition consisting of six elements: (1) name, (2) income, (3) social security number, (4) property address, (5) property value estimate, and (6) mortgage loan amount.
Another potential pitfall is the difference between the definitions of a “business day” for the disclosures. The Loan Estimate must be given three “business days” after an application, and the Closing Disclosure must be given three “business days” prior to consummation. However, the definition of “business day” differs for each disclosure. For purposes of providing the Loan Estimate, a business day is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions (the standard Regulation Z definition). For purposes of delivering the Closing Disclosure, a business day is any calendar day except Sundays and legal public holidays (the alternative Regulation Z definition).
Questions & Answer Session
At the end of the session, the CFPB staff addressed three questions from the audience.
Question 1
Under new the definition of “application,” may creditors collect additional information in addition to the six items that constitute an application before providing a Loan Estimate?
Answer
The CFPB staff stated that a creditor may request additional information beyond the six items listed in the “application” definition. However, once the six items are received, the clock starts ticking for the Loan Estimate, which must be placed in the mail within three business days, regardless of whether the creditor has received the additional information.
The CFPB also noted that if a creditor asks for additional information, the creditor still must abide by the pre-disclosure restrictions, which prohibit the creditor from requiring the consumer to submit verifying information. In addition, this rule prohibits a creditor from requiring credit card information during the application process, even if no payments are processed at that time.
Question 2
Does a creditor need to collect all six pieces of information that constitute a completed application at once?
Answer
The CFPB staff says no, a creditor does not need to obtain all six pieces of information at once. The CFPB anticipates that creditors will strategically stagger the information they collect, for example by delaying the collection of a social security number, to control the timing of when the Loan Estimate will be required.
Question 3
The summary in the preamble to the final rule states that the pre-disclosure disclaimer requirement applies to advertisements. Are advertisements subject to the pre-disclosure disclaimer requirement?
Answer
The CFPB explained that there was a technical error from the preamble to the regulatory text. The regulation itself is clear that the disclaimer requirement in 12 CFR 1026.19(e)(2)(ii) applies only to written information specific to a consumer. As a result, the disclaimer requirement does not apply to advertisements. The CFPB also referred to the staff commentary — Official Interpretations, 12 CFR 1026, Paragraph 19(e)(2)(ii), Comment 1.