Know Before You Owe: Proposed updates to TILA-RESPA final rule

Nearly a year ago, we issued the TILA-RESPA Integrated Disclosure Rule. Many of you know this work as Know Before You Owe and we’ve been talking about it for a while now.

Today, we’re issuing a proposal to modify and make technical amendments to this rule. The rule introduced new, easier-to-use mortgage disclosure forms that clearly lay out the terms of a mortgage for consumers. The new Loan Estimate and Closing Disclosure mortgage forms will replace the existing federal disclosures and help consumers understand their options, choose the deal that’s best for them, and avoid costly surprises at the closing table.

Proposed changes

There are two issues we’re addressing in today’s proposal.

First, we’re proposing to give creditors some extra time to provide consumers with revised Loan Estimates after a consumer locks a floating interest rate. Under the current rule, when consumers lock their interest rates, creditors are required to give them a revised Loan Estimate the same day. After considering feedback from stakeholders on this requirement, we think that such a short turnaround may be challenging for creditors that currently allow consumers to lock interest rates late in the day or after business hours. This could result in creditors only allowing consumers to lock interest rates during business hours or even early in the day (e.g., before noon). We’re proposing to give creditors until the next business day to provide the revised disclosures, which we believe should provide creditors with enough time to provide new disclosures without having to reduce flexibility that consumers may have today in locking their rates.

Second, we’re proposing a minor addition on the Loan Estimate form. Construction loans often take longer to settle than other loans, and the estimated charges can change when more than 60 days pass. Our 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.

We determined that these issues are important and may significantly affect implementation planning and decisions.

Throughout the Know Before You Owe project, feedback has been an important part of the process. This step is no different. We welcome your comments on this proposal , so submit them by November 10, 2014.

Effective date

The effective date for the TILA-RESPA rule is now October 3, 2015. We’re proposing these changes now so that there’s plenty of time to consider these changes while implementation decisions are being made, and we do not think that the proposed changes will affect the industry’s ability to implement the rules on time.

Implementing the rules

As part of our work to support the implementation of our rules, we have regulatory implementation resources available including compliance guides, sample Loan Estimate and Closing Disclosure forms, and a calendar showing timing requirements based on a sample real estate transaction.

Updated on July 27, 2015 to include the new effective date of October 3, 2015 for the Know Before You Owe disclosure rule.

Due to technical issues, the commenting feature of our blog is temporarily unavailable. We’re working to bring this functionality back, and look forward to hearing your feedback and comments about the CFPB’s work soon.