A Realtor’s Guide to… What you need to know before

CFPB Challenged to combine FOUR familiar disclosures. INITIAL FINAL

Credit Cards Mortgages Bank Accounts & Services Credit Reporting Money Transfers Debt Collection And More What does the CFPB regulate?

Relief Available (Sec 1055)  Rescission or reformation of contracts  Refund of monies or return of real property  Disgorgement or compensation for unjust enrichment  Payment of damages  Public notification of violation  Limits on activities or functions  Civil penalties against businesses or individuals not complying with the law:  Up to $5,000/day  If reckless, up to $25,000/day  If knowingly, up to $1,000,000/day Protecting Consumers…

Notable fines include:  Ally Bank $80 Million  JP Morgan Chase $309 Million  American Express $59 Million Remember that the CFPB oversees RESPA. It is possible for the CFPB to reach outside of the banking and lending environment for fines and penalties. Protecting Consumers cont’d…

Lending Ecosystem

TILA/RESPA Integrated Disclosures (TRID)  1888 Page Rule  Governed by the Truth-in-lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA)  TILA provides different accuracy expectations and enforcement provisions than RESPA, as well as some differences in definitions, with associated risks and penalties for the lender that are much more severe than RESPA.  The new forms put all loan information onto a level playing field for “easy reading” for the consumer.  Eliminate costs and risks buried in the fine print.  Elimination of confusing points and fees.  Elimination of last-minute closing shocks.  The creditor is responsible for delivering the Closing Disclosure to the consumer.  Creditors may use settlement agents to provide the Closing Disclosure, provided they comply with the final rule. What you need to know by

TRID continued…  Loan Estimate (LE)  Replaces GFE and Initial TIL  3 Pages long  Delivery to Consumer within 3 days of Loan Application  Closing Disclosure Form (CD or CDF)  Replaces HUD-1 and Final TIL  5 Pages long  Delivery to consumer 3 days prior to closing  Lender must receive both the buyer and seller sides  Realtors and Sellers will not be provided a copy of the buyers’ CDF unless by buyer due to NPI associated with the loan terms  ALTA is creating a “Settlement Statement or Disbursement Authorization” form template for Settlement Agents to prepare as one combined form with a statement signed by Seller, Buyer, and Settlement Agent validating it as “true and accurate” reflection of the terms of the transaction. What you need to know by

6 items of information required to complete Loan Application  The consumer’s name;  The consumer’s income;  The consumer’s social security number to obtain a credit report;  The property address;  An estimate of the value of the property; and  The mortgage loan amount sought. NOTE: This new definition of application is similar to the current definition under Regulation X (§ (b)). The Bureau has revised the definition of application to remove the seventh “catch-all” element of the current definition under Regulation X, that is, “any other information deemed necessary by the loan originator.” Loan Application

 Hand delivery: In person delivery to consumer. (i.e. deliver CDF on Monday, close on Thursday)  US Mail: assumed receipt 3 days after placed in mail  with receipt confirmed by consumer after approval to use method of delivery (if not, assumed 3 days to open )  Overnight Delivery: with consumer confirmed receipt Delivery Options § (f)(1)

There are some compliance concerns if the lender chooses a delivery method other than “Hand Delivery” or “US Mail”.  Protection of NPI or NPPI (Non-Public Information and Non-Public Personal Information)  Risk to lender to document confirmation of receipt was actually received from borrower(s) required to receive the form within the timing requirements under the rule  Most lenders are choosing to implement processes to document delivery by US Mail or Hand Delivery Delivery Option Concerns

Waiver § (f)(1)(iv)  Consumer may waive waiting period if they have a bona fide personal financial emergency.  Must be in writing by consumer and not pre-typed form provided by lender.  Lender compliance departments will most likely take the conservative approach to NOT WAIVE when reviewing request for waiver  No waiver afforded for Seller’s financial emergency.  Purposely narrow definition by example: an imminent sale of consumer’s home at foreclosure for refinances transactions. Bureau chose not to expand definition.

Re-disclosure Requirements If the creditor makes any of the following changes between the time the Closing Disclosure form is given and consummation, a new Closing Disclosure must be delivered to the borrower and a new waiting period must commence: Requiring additional 3-day review period  Inaccurate APR  Change in loan product  Prepayment penalty added

Delivery Period Examples If the delivery of the Closing Disclosure is by any means other than “hand delivery,” a three day delivery period is added.  The three day delivery period expires on third day or upon receipt of signed confirmation by ALL borrowers.  Then the three day waiting period starts.

Delivery Period Examples The waiting period is based on business days of Monday through Saturday, excluding Sunday and federal holidays. If the settlement agent or lender hands the Closing Disclosure to the borrower on a Monday, the soonest the transaction can close is Thursday.

Most close-ended loans originated after August 1, 2015 will be subject to the new rules and forms.  Purchase money  Refinance  25 acre  Vacant Land  Construction-only  Timeshare Loan Types Affected

Close-ended loans not subject to the new rule  Reverse Mortgages  Home Equity Line of Credit (HELOCs)  Chattel-dwelling/Mobile Home-only loans  Creditors who originate less than 5 loans in a calendar year The portions of TILA and RESPA governing reverse mortgages are not being replaced or deleted. For these loans:  Creditors must issue a TILA disclosure and Good Faith Estimate  Settlement agents must use a 2010 HUD-1 settlement statement to close Exempted Transactions

TRID Terminology New Terminology  Consummation is defined as the day the borrower becomes legally obligated under the loan, which would be the date of signing, even if the loan has a rescission period under TILA’s Regulation Z.  It is anticipated lenders will send out the Closing Disclosure prior to delivering loan documents to the settlement agent for signing.

Loan Estimate The creditor can only reissue a Loan Estimate based on six events which qualify as a “Changed Circumstance:”  Information provided by consumer inaccurate  Extraordinary event  Discovery of new info specific to consumer or transaction  Revision requested by consumer  On day of locking rate  After 10-day expiration *Disclosure required within 3 days of knowledge but not on same day as Closing Disclosure

How will this affect our industry?  Lenders are more likely to prepare their own Closing Disclosure earlier and mail it out far in advance of the actual closing.  Statement to explain the closing costs at signing.  Sellers will know if closing will occur.  Lenders are requiring final information 10 days prior to closing  The rule doesn’t cover sellers therefor sellers may not receive final figures until day of closing as the final numbers come through to the Settlement Agent

 Nationally - NAR, MBA, ABA & ALTA Industry Publications  RESPA-TILA-TALK.com  CFPB.gov  5 page Executive Summary  Small Business Compliance Guide – great 89 pages  What it Means for Service Providers summary  Sign up for s Resources and References

1.Example of Closing Disclosure 2.RESPA/TILA article by Waco CEO, Patrick Curry 3.TRID Resources 4.Link for TRID Questions 5.Stay engaged in the conversation #wacoisready AND #wacoknows WACO IS READY