ICBA Summary of the TILA- RESPA Integrated Disclosure (TRID) Rule

Transcription

1 ICBA Summary f the TILA- RESPA Integrated Disclsure (TRID) Rule Octber 2015 Mnth Year Mn Cntact: Je Grmley Assistant Vice President & Regulatry Cunsel jseph.grmley@icba.rg

2 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule BACKGROUND AND SCOPE In Nvember 2013, the Cnsumer Financial Prtectin Bureau (CFPB) issued a final rule amending Regulatin Z (Truth in Lending Act) and Regulatin X (Real Estate Settlement Prcedures Act) t integrate several mrtgage lan disclsures. On July 21, 2015, the CFPB issued a final rule establishing Octber 3, 2015, as the new effective date fr implementatin f these new frms and the assciated rules. The TILA-RESPA Integrated Disclsure Rule is cmmnly knwn as the TRID rule. Link t the Rule and CFPB summaries: Applicability t Cmmunity Banks The TRID rule applies t cmmunity banks, unless the bank extended credit t a cnsumer 25 r fewer times including mrtgage lans in the previus r current calendar year. What is the new TRID rule? The TRID rule cnslidates fur existing disclsures required under TILA and RESPA fr clsedend credit transactins secured by real prperty, the appraisal ntice required by the Equal Credit Opprtunity Act, and the servicing ntice required by RESPA int tw frms: a Lan Estimate (LE) that must be delivered r placed in the mail n later than the third business day after receiving the cnsumer s applicatin, and a Clsing Disclsure (CD) that must be prvided t the cnsumer at least three business days prir t lan cnsummatin. TRID als establishes a new definitin f applicatin fr cnsumers t btain an LE While this rule includes majr changes t mrtgage lan disclsures and delivery requirements, due t ICBA advcacy, n prpsed changes requiring creditrs t disclse an all-inclusive annual percentage rate (APR) were finalized. Lans Cvered By the Rule The TRID rule applies t mst clsed-end cnsumer credit transactins secured by real prperty, but des NOT apply t: Hme Equity Lines f Credit (HELOCs); Reverse mrtgages; r Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 1

3 Chattel-dwelling lans, such as lans secured by a mbile hme r by a dwelling nt attached t real prperty. The TRID rule applies t all lenders making mrtgage lans, including cmmunity banks, unless the lender extended credit t a cnsumer 25 r fewer times including mrtgage lans, r made five r fewer mrtgage lans in the previus calendar year r current calendar year. NOTE: Certain types f lans that are currently subject t TILA but nt RESPA are subject t the TRID rule s integrated disclsure requirements, including: Cnstructin-nly lans; and Lans secured by vacant land r by 25 r mre acres. Effective Date The new Integrated Disclsures must be prvided by a creditr r mrtgage brker that receives an applicatin frm a cnsumer fr a clsed-end credit transactin secured by real prperty n r after Octber 3, The riginally scheduled effective date was August 1, 2015, but the date was pstpned due t an administrative errr by the CFPB. On Octber 1, 2015, the CFPB and ther financial regulatrs annunced that during initial examinatins fr cmpliance with the TRID rule, examiners will evaluate an institutin s cmpliance management system and verall effrts t cmply with the new requirements. Lenders will be expected t make gd faith effrts t cmply with the Rule s requirements in a timely manner. Specifically, examiners will cnsider: the lender s implementatin plan, including actins taken t update plicies and prcedures; its training f staff; and, its handling f early technical prblems r ther implementatin challenges. Creditrs are still required t use the current Gd Faith Estimate (GFE), HUD-1, and Truth-in- Lending frms fr applicatins received prir t Octber 3, As the applicatins received prir t Octber 3, 2015 are cnsummated, withdrawn, r cancelled, the use f the GFE, HUD-1, and Truth-in-Lending frms will n lnger be used fr mst mrtgage lans. The TRID rule includes sme new restrictins n certain activity prir t a cnsumer s receipt f the LE. These restrictins take effect n Octber 3, 2015, regardless f whether an applicatin has been received n that date. These activities include: Impsing fees n a cnsumer befre the cnsumer has received the lan estimate except fr a bna fide and reasnable charge t btain a cnsumer s credit reprt; Prviding written estimates f terms r csts specific t cnsumers befre they receive the LE withut a written statement infrming the cnsumer the terms and csts may change; and Requiring submissin f dcuments verifying infrmatin related t the cnsumer s applicatin befre prviding the LE. Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 2

4 The Lan Estimate Fr clsed-end credit transactins secured by real prperty (ther than reverse mrtgages), the creditr is required t prvide the cnsumer with gd faith estimates f credit csts and transactin terms n the Lan Estimate (LE). Mdel/sample frms can be fund at: This new frm integrates and replaces the existing RESPA GFE and the initial TILA disclsure fr these transactins. The LE must cntain a gd faith estimate f credit csts and transactin terms. The LE must be in writing. The creditr must deliver the LE r place it in the mail n later than the third business day after receiving the applicatin. Creditrs generally may nt issue revisins t the LE because they later discver technical errrs, miscalculatins, r underestimatins f charges. Creditrs can issue a revised LE nly in certain situatins such as when changed circumstances result in increased charges. If a mrtgage brker receives a cnsumer s applicatin, either the creditr r the mrtgage brker may prvide the LE. Mandatry Use f Mdel Frms Fr any lans subject t the TRID rule that are federally-related mrtgage lans subject t RESPA (which will include mst mrtgages), frm H-24 is a standard frm, meaning creditrs must use frm H-24. Fr ther lans subject t the TRID rule that are nt federally-related mrtgage lans, frm H-24 is a mdel frm, meaning creditrs are nt strictly required t use frm H-24 but the disclsures must cntain the exact same infrmatin and be made with headings, cntent, and frmat substantially similar t frm H-24. Page 1 f the LE includes general infrmatin: Lan Terms table; Prjected Payments table; Csts at Clsing table; and Link fr cnsumers t btain mre infrmatin abut lans secured by real prperty at a website maintained by the CFPB. Page 1 f the LE includes the title Lan Estimate and the phrase Save this Lan Estimate t cmpare with yur Clsing Disclsure. The tp f the page als includes the name and address f the creditr. If there are multiple creditrs, use nly the name f the creditr cmpleting the LE. If a mrtgage brker is cmpleting the LE, use the name f the creditr if knwn. If nt knwn, leave space blank. Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 3

5 Page 2 f the LE includes clsing cst details: A gd faith itemizatin f the lan csts and ther csts assciated with the lan; A Calculating Cash t Clse table; Fr transactins with adjustable payments, an Adjustable Payment table; and Fr transactins with adjustable interest rates, an Adjustable Interest Rate table. Page 3 f the LE includes additinal infrmatin abut the lan: Cntact infrmatin; A Cmparisns table; An Other Cnsideratins table; and If desired, a signature statement fr the cnsumer t sign t acknwledge receipt. Delivery f the Lan Estimate The creditr is generally required t prvide the LE within three business days f the receipt f the cnsumer s lan applicatin. Fr purpses f prviding the LE, r any revised LE, a business day is a day n which the creditr s ffices are pen t the public fr carrying ut substantially all f its business functins. 1 The creditr must arrange fr delivery as fllws: By prviding it t the cnsumer in persn; r By mailing r ing it. If mailed r ed, the cnsumer is cnsidered t have received the LE three business days after it is delivered r placed in the mail unless the cnsumer cnfirms receipt befre that perid elapses. If disclsures are prvided electrnically delivery must meet the requirements under the federal ESIGN Act 2. Applicatin cnsists f the submissin f the fllwing six pieces f infrmatin frm a cnsumer: Name; Incme Scial Security Number t btain a credit reprt; Prperty address; An estimate f the value f the prperty; and Mrtgage lan amunt sught. 1 Fr all ther purpses under the TRID rule, business day means all calendar days except Sundays and legal public hlidays specified in 5 U.S.C. 6103(a) such as, New Year s Day, the Birthday f Martin Luther King, Jr., Washingtn s Birthday, Memrial Day, Independence Day, Labr Day, Clumbus Day, Veterans Day, Thanksgiving Day, and Christmas Day. 2 ESIGN Act: Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 4

6 NOTE: A creditr r ther persn may nt cnditin prviding the LE n a cnsumer submitting dcuments verifying infrmatin related t the mrtgage lan applicatin befre prviding the LE. If a creditr determines within the three-business-day perid the cnsumer s applicatin will nt r cannt be apprved n the terms requested by the cnsumer, r if it the applicatin is withdrawn within that perid, the creditr des nt have t prvide the LE. If a mrtgage brker receives a cnsumer s applicatin, the mrtgage brker may prvide the LE t the cnsumer n the creditr s behalf. Hwever, the creditr is expected t maintain cmmunicatin with the mrtgage brker t ensure the LE and its delivery satisfy all requirements and the creditr is legally respnsible fr any errrs r defects. If a mrtgage brker prvides the Lan LE, the mrtgage brker must cmply with the threeyear-recrd-retentin requirement. Creditrs must act in gd faith in btaining infrmatin fr the LE. If infrmatin is unknwn, creditrs may use estimates if they are designated as such n the LE. Any revised LEs must be delivered r placed in the mail n later than three business days after receiving the infrmatin. The revised LE must be delivered t the cnsumer r placed in the mail n later than seven business days befre cnsummatin f the transactin. Fr purpses f the seven-business-day requirement, business day is defined as all calendar days, except Sundays and legal public hlidays. A cnsumer may mdify r waive the seven-business-day waiting perid after receiving the LE if the cnsumer determines the mrtgage lan is needed t meet a bna fide persnal financial emergency. The CFPB prvides limited guidance as t what cnstitutes a bna fide persnal financial emergency and the nly example ffered in cmmentary t the TRID rule is the imminent sale f the hme at freclsure. In January 2015, the Bureau made tw imprtant amendments regarding the LE. The timing requirement t prvide a revised LE in cnnectin with an interest rate lck was adjusted s that revised disclsure must be prvided n later than three business days after the rate is lcked instead f n the date the rate is lcked. Fr transactins invlving new cnstructin, at the ptin f the creditr, where the creditr reasnably expects that settlement will ccur mre than 60 days after the prvisin f the lan estimate, a clear and cnspicuus statement that the creditr may issue a revised LE any time prir t 60 days befre cnsummatin. Tlerances n the Lan Estimate Creditrs are respnsible fr ensuring the figures stated in the LE are made in gd faith with the best infrmatin reasnably available at the time f disclsure. Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 5

7 Generally, if the charge paid by r impsed n the cnsumer exceeds the amunt disclsed n the LE, it is nt in gd faith. A creditr may charge the cnsumer mre than the amunt disclsed in the LE when: Certain variatins between the amunt disclsed and the amunt charged are expressly permitted by the TRID rule; The amunt charged falls within a tlerance threshld; r Changed circumstances permit a revised LE Estimate r a Clsing Disclsure that permits the amunt t be changed: An event beynd the cntrl f the parties ccurs; Infrmatin the creditr relied upn is inaccurate; r New infrmatin specific t the cnsumer r transactin the creditr did nt rely n is fund. Creditrs may charge cnsumers mre than the amunt n the LE withut any tlerance limitatin fr: Prepaid interest; Prperty insurance premiums; Amunts placed int an escrw, impund, reserve r similar accunt; Services required by the creditr if the creditr permits the cnsumer t shp and the cnsumer selects a third party service prvider nt n the creditr s list f service prviders; r Charges paid t third-party service prviders fr services nt required by the creditr. The creditr may charge the cnsumer mre than the amunt disclsed n the LE fr any f the fllwing, s lng as the ttal sum f the charges added tgether des nt exceed the sum f all such charges disclsed n the LE by mre than 10 percent: Recrding fees; r Charges fr third-party services where: The charge is nt paid t the creditr r their affiliate; and The cnsumer is permitted by the creditr t shp fr the third-party service and the cnsumer selects a third-party service prvider n the creditr s written list f service prviders. If a cnsumer chses a prvider nt n the creditr s list f prviders, then the creditr is nt limited in the amunt that may be charged fr the service. Fr all ther charges, creditrs are nt permitted t charge cnsumers mre than the amunt disclsed n the LE under any circumstances ther than changed circumstances that permit a revised LE. Zer tlerance charges include: Fees paid t the creditr, mrtgage brker, r an affiliate f either; Fees paid t an unaffiliated third-party if the creditr did nt permit the cnsumer t shp fr a third-party service prvider fr a settlement service; r Transfer taxes. Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 6

8 If the amunts paid by the cnsumer at clsing exceed the amunts disclsed n the LE beynd the tlerance threshld, the creditr must refund the excess t the cnsumer n later than 60 calendar days after cnsummatin. Limits n Fees Fr charges subject t zer tlerance, any amunt charged beynd the amunt disclsed n the LE must be refunded t the cnsumer. Fr charges subject t a 10 percent cumulative tlerance, t the extent the ttal sum f the charges added tgether exceeds the sum f all charges disclsed n the LE by mre than 10 percent, the difference must be refunded. A creditr r ther persn may nt impse any fee n a cnsumer in cnnectin with the applicatin fr a mrtgage transactin until the cnsumer has received the LE and has indicated intent t prceed with the transactin. This includes limits n impsing: Applicatin fees; Appraisal fees; Underwriting fees; and Any ther fees. The exceptin t this exclusin is fr reasnable fees fr btaining a cnsumer s credit reprt. A cnsumer s intent t prceed is shwn when the cnsumer cmmunicates, in any manner, they chse t prceed after the LE has been delivered, unless a manner f cmmunicatin is required by the creditr. The creditr must dcument the cmmunicatin t satisfy recrd retentin requirements. Other Estimates f Csts and Terms The new TRID rule des nt prhibit a creditr r ther persn frm prviding a cnsumer with estimated terms r csts prir t the cnsumer receiving the LE. Hwever, if a written estimate is prvided befre the LE, it must clearly and cnspicuusly state at the tp f the frnt f the first page, Yur actual rate, payment, and csts culd be higher. Get an fficial Lan Estimate befre chsing the lan. This statement must be in 12-pint fnt size r larger; and There must be n headings, cntent, r frmat substantially similar t the LE r the Clsing Disclsure. Example: Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 7

9 The Clsing Disclsure Fr lans that require a LE and that prceed t clsing, creditrs must prvide a new final disclsure reflecting the actual terms f the transactin called the Clsing Disclsure (CD). The frm integrates and replaces the existing HUD-1 and the final TILA disclsure fr these transactins. Mdel/sample frms can be fund at: The creditr is generally required t ensure the cnsumer receives the CD n later than three business days befre cnsummatin f the lan. Cnsummatin ccurs when the cnsumer becmes cntractually bligated t the creditr n the lan, nt, fr example, when the cnsumer becmes cntractually bligated t a seller n a real estate transactin. This pint in time depends n applicable state law. The CD generally must cntain the actual terms and csts f the transactin. Creditrs may estimate disclsures using the best infrmatin reasnably available when the actual term r cst is nt reasnably available t the creditr at the time the disclsure is made. Hwever, creditrs must act in gd faith and use due diligence in btaining the infrmatin. The creditr nrmally may rely n the representatins f ther parties in btaining the infrmatin, including, fr example, the settlement agent. The creditr is required t prvide crrected disclsures cntaining the actual terms f the transactin at r befre cnsummatin. If the actual terms r csts f the transactin change prir t cnsummatin, the creditr must prvide a crrected disclsure. If the creditr prvides a crrected disclsure, it may als be required t prvide the cnsumer with an additinal three-business-day waiting perid prir t cnsummatin. Mandatry Use f Mdel Frms Fr any lans subject t the TRID rule that are federally-related mrtgage lans subject t RESPA, frm H-25 is a standard frm that creditrs must use. Fr ther transactins subject t the TRID rule that are nt federally-related mrtgage lans, frm H-25 is a mdel frm, s creditrs are nt strictly required t use the frm but disclsures and frmat must be substantially similar t frm H-25. Page 1 f the CD must include: Infrmatin identifying brrwer and lan; Lan Terms table; Prjected Payments table; and Csts at Clsing table. Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 8

10 Page 2 f the CD must include: Lan Csts table; and Other Csts table NOTE: The number f items in these tables can be expanded and deleted t accmmdate the disclsure f additinal line items. Items required t be disclsed even if they are nt charged t the cnsumer cannt be deleted. Lan csts and ther csts tables can be disclsed n tw separate pages if the page cannt accmmdate all the csts required t be disclsed n ne page. Page 3 f the CD must include: The Calculating Cash t Clse table; and Summaries f Transactins tables. Fr transactins withut a seller, a Payffs and Payments table may substitute fr the Summaries f Transactins table and be placed befre the alternative Calculating Cash t Clse table. Page 4 f the CD must include: Lan disclsures; Adjustable Payment table; and Adjustable Interest Rate table. Page 5 f the CD must include: Lan Calculatins table; Other disclsures; Cntact infrmatin; and Cnfirmatin f receipt. Delivery f Clsing Disclsure The creditr must arrange fr delivery as fllws: By prviding it t the cnsumer in persn; r By mailing r ing it. If mailed r ed, the cnsumer is cnsidered t have received the CD within three business days after it is delivered r placed in the mail unless the cnsumer cnfirms receipt befre that perid elapses. If disclsures are prvided electrnically delivery must meet the requirements under the ESIGN Act. Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 9

11 Settlement agents may prvide the CD n the creditr s behalf; hwever, the creditr is legally respnsible fr any errrs r defects with delivery. In a purchase transactin, settlement agents will still be respnsible fr prviding the CD t the seller. The settlement agent must prvide the seller its cpy f the CD n later than the day f cnsummatin. Disclsures must be prvided separately t each cnsumer wh has the right t rescind the transactin under TILA. In transactins that are nt rescindable, the CD may be prvided t any cnsumer with primary liability n the bligatin. Revisins and Crrectins t the Clsing Disclsures Creditrs must re-disclse terms r csts n the CD if certain changes ccur t the transactin after the CD was first prvided that cause it t becme inaccurate. Changes that require a crrected CD include: Changes that ccur befre cnsummatin that require a new three-business-day waiting perid, such as: The APR increases by mre than 1/8 f a percent fr a fixed rate lan r 1/4 f a percent fr adjustable lans (A decrease in APR will nt require a new 3-day review if it is based n changes t interest rate r ther fees.) 3 ; The lan prduct changes; r A prepayment penalty is added. Changes that ccur befre cnsummatin and d nt require a new three-business day waiting perid (which includes all ther changes). Fr these changes, the creditr must ensure nly that the cnsumer receives the revised CD at r befre cnsummatin. Changes that ccur after cnsummatin, such as: An incrrectly disclsed recrding fee. Other pst-cnsummatin events nt related t settlement, such as tax increases, d nt require a revised CD. BUT, creditrs must prvide a crrected CD if an event in cnnectin with the settlement ccurs during the 30-calendar-day perid after cnsummatin that causes the CD t be inaccurate and result in a change t an amunt paid by the cnsumer frm what was previusly disclsed. In this case, the crrected CD must be delivered r placed in the mail n later than 30 calendar days after receiving infrmatin the event ccurred. Creditrs must prvide a revised CD t crrect clerical errrs n later than 60 calendar days after cnsummatin. 3 CFPB Factsheet: Will the new mrtgage disclsures delay my clsings, Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 10

12 If a creditr cures a tlerance vilatin by prviding a refund t the cnsumer, the creditr must deliver r place in the mail a crrected CD n later than 60 calendar days after cnsummatin. Delivery f the Hme Lan Tlkit (Special Infrmatin Bklet) As part f the TRID implementatin prcess, CFPB has develped a new Special Infrmatin Bklet which it calls the Hme Lan Tlkit. The Hme Lan Tlkit can be fund at: Creditrs must prvide a cpy f the Hme Lan Tlkit t cnsumers wh apply fr a cnsumer credit transactin secured by real prperty, except: If the cnsumer is applying fr a Hme Equity Line f Credit (HELOC), the creditr can instead prvide a cpy f the brchure entitled, When Yur Hme is On the Line: Lines f Credit. The creditr need nt prvide the special infrmatin bklet if the cnsumer is applying fr a real prperty-secured cnsumer credit transactin that des nt have the purpse f purchasing a ne-t-fur family residential prperty, such as a refinancing, a clsed-end lan secured by a subrdinate lien, r a reverse mrtgage. Creditrs must deliver r place in the mail the Hme Lan Tlkit n later than three business days after receiving the cnsumer s lan applicatin. This need nt be prvided if the creditr denies the applicatin r the applicatin is withdrawn. Fr multiple applicants, the creditr may prvide a cpy f the special infrmatin bklet t just ne f them. If used, the mrtgage brker must prvide the special infrmatin bklet instead f the creditr. Escrw Clsing Ntice This ntice must be prvided prir t cancelling an escrw accunt t cnsumers fr whm an escrw accunt was established n a clsed-end mrtgage secured by a first lien, except fr a reverse mrtgage. This additinal ntice must be prvided n later than three business days befre the cnsumer s escrw accunt is cancelled. Ntice is nt required if the escrw accunt being cancelled was established in cnnectin with the cnsumer s delinquency r default n the debt bligatin r when the debt bligatin is terminated. Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 11

13 The ntice must include: The date n which the accunt will be clsed; That an escrw accunt may als be called an impund r trust accunt; The reasn why the escrw accunt will be clsed; That withut the accunt, the cnsumer must pay all prperty csts, such as taxes and insurance directly, in ne r tw large payments a year; A table titled Cst t Yu that has an itemizatin f the amunt f any fee the creditr r servicer impses n the cnsumer in cnnectin with the clsure f the escrw accunt, labeled Escrw Clsing Fee, and a statement the fee is fr clsing the escrw accunt; and Under the reference In the future : The cnsequences if the cnsumer fails t pay prperty csts; A telephne number the cnsumer can use t request additinal infrmatin abut the cancellatin f the escrw accunt; Whether the creditr/servicer ffers the ptin f keeping the escrw accunt pen and a telephne number the cnsumer can use t request the accunt be kept pen; and Whether there is a cut-ff date t request the accunt be kept pen. The creditr/servicer may als, at its ptin, disclse: Its name r lg; The cnsumer s name, telephne number, mailing address, and prperty address; The issue date f the ntice; r The lan number r cnsumer s accunt number. The disclsures must als: Cntain a heading; Be clear and cnspicuus; Be written in 10-pint fnt r larger; and Be cnslidated n the frnt side f a ne-page dcument, separate frm all ther materials, and substantially similar t mdel frm H-29 fund at Recrd Retentin Requirements The creditr must retain cpies f the CD (and all dcuments related t the CD) fr five years after cnsummatin. The creditr, r servicer if applicable, must retain the Pst-Cnsummatin Escrw Cancellatin Ntice (Escrw Clsing Ntice) and the Pst-Cnsummatin Partial Payment Plicy disclsure fr tw years. Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 12

14 Fr all ther evidence f cmpliance with the Integrated Disclsure prvisins f Regulatin Z (including the LE), creditrs must maintain recrds fr three years after cnsummatin f the transactin. If a creditr sells, transfers, r therwise dispses f its interest in a mrtgage and des nt service the mrtgage, the creditr shall prvide a cpy f the CD t the new wner r servicer f the mrtgage as a part f the transfer f the lan file. Bth the creditr and such wner r servicer shall retain the CD fr the remainder f the five-year perid. Octber 2015 ICBA Summary f the TILA-RESPA Integrated Disclsure (TRID) Rule 13