THE NEW TILA/RESPA INTEGRATED DISCLOSURES

Transcription

1 THE NEW TILA/RESPA INTEGRATED DISCLOSURES IN PLAIN ENGLISH TRID Workshop Finals E F F E C T I V E A U G U S T 1, *PROPOSAL PENDING TO DELAY EFFECTIVE DATE UNTIL OCTOBER 3RD, 2015

2 WHAT YOU WILL LEARN The basics Coverage Exemptions Effective immediately Key definitions The new integrated disclosure forms Formatting Rounding Preliminary worksheets Record retention Disclosure and fee timing E-SIGN applicability Intent to proceed How to complete the new Loan Estimate How to complete the new Closing Disclosure Additional considerations Workshop 2

3 WHAT IT S ALL ABOUT Out with the old, in with the new Loan Estimate GFE and the early TIL Closing Disclosure HUD-1/1A and Final TIL RESPA vs. Regulation Z Look to Regulation X (RESPA) for completing current (2010) forms Look to Regulation Z for completing new forms Private right of action RESPA vs. Regulation Z 3

4 REGULATORY CHANGES TriNovus, LLC, A Temenos Company Regulation Z (12 CFR 1026) Coverage Definitions Exemptions General Disclosure Requirements Content of Disclosures Certain Mortgage and Variable Rate Transactions Disclosure Requirements Regarding Post-consummation Events APR Accuracy Advertising Record Retention Loan Estimate Closing Disclosure Scope Appendix D Construction Advances Appendix H Closed end Forms and Clauses RESPA (12 CFR 1024) Coverage Mortgage Servicing Scope Mortgage Servicing Transfers Appendix A Instructions for Completing the HUD 1/1A Appendix B Illustrations of Requirements of RESPA Appendix C Instructions for completing the GFE 4

5 COVERAGE Coverage Closed end loan secured by real property Except Reverse mortgages subject to Does not apply to: Mobile home only loans No dirt HELOCs Acreage of any amount for business purpose Which applications Applications received on or after August 1, 2015 Proposal pending to change effective date to October 3rd, 2015 Applications received prior to effective date that are consummated, withdrawn or cancelled Generally, must use new forms May not use before effective date May use for non-covered transactions If new form is not required, use current GFE/HUD and TIL, as applicable 5

6 NOT EXEMPT FROM NEW FORMS NOT exempt: Loans on secured properties covering 25 acres or more that are for a consumer purpose Personal, family or household purposes Vacant land Construction only loans Regardless of transfer of title to the first user Certain trusts Consumer purpose Personal, family or household trusts established for tax or estate planning purposes is considered to be extended to a natural person rather than to an organization even if a legal entity 6

7 EFFECTIVE IMMEDIATELY (AUGUST 1, 2015*) Regardless of when the application was received, may not: Impose a fee before Loan Estimate or GFE (as applicable) has been received by consumer and intent to proceed indicated May charge reasonable credit report fee Must document the intent to proceed No model form No collecting post-dated checks or credit card numbers in advance for other fees or charges Provide written estimate of terms or costs before consumer receives Loan Estimate unless provide written statement informing consumer terms and costs may change Must use language in Model form H-26 Require consumer to submit documents verifying information before providing Loan Estimate or GFE (as applicable) *PROPOSAL PENDING TO DELAY EFFECTIVE DATE UNTIL OCTOBER 3RD,

8 KEY DEFINITIONS Application 1. Name 2. Monthly income 3. SSN 4. Property address 5. Estimated value of the property 6. Loan amount Triggers timing for Loan Estimate disclosure No additional items permitted to be considered an application for triggering requirement to provide LE May add additional requirements for credit-decisioning But not for providing the Loan Estimate Be sure to update your policy and procedures 8

9 WHAT IS AN APPLICATION? TriComply TRID Quick Compliance Guide TriNovus, LLC, A Temenos Company 9

10 KEY DEFINITIONS Business Day Different definitions apply Loan Estimate Provide Loan Estimate/Revised LE Any day in which creditor s offices are open to public for carrying out substantially all of its business functions Receive at least (7) Business Days prior to consummation All calendar days except Sundays and legal public holidays Closing Disclosure All calendar days except Sundays and legal public holidays Rescission definition of a business day 10

11 KEY DEFINITIONS Consummation Consumer becomes contractually obligated to the creditor on the loan Based on State law vs. Closing Generally, when documents are signed by the consumer Could be same as consummation => check State law Generally, dates under TRID are tied to consummation date Closing date on CD enter consummation date Know your state law definitions 11

12 KEY DEFINITIONS Finance charge Finally, a break no changes! 12

13 KEY DEFINITIONS Product Comprised of (2) features Description of loan features that may change the periodic payment Disclose only the first applicable loan feature in the order the following features: Negative amortization Interest only Balloon payment Step payment Seasonal payment Description of the interest rate Adjustable rate Stepped rate Fixed rate Except for Seasonal payment and Fixed rate, description must be preceded by the duration of any introductory rate or payment period, and the first adjustment period, as applicable Examples 5/3 Adjustable rate (if no loan feature and only interest rate feature with introductory period) 0/3 Adjustable rate (if no loan feature and no introductory period) Fixed rate (if no loan feature) 5 Year Interest Only, Fixed Rate (with loan feature) Year 7 Balloon Payment, 3/1 Step Rate Rounding rules apply: > 24 months, use years up to (2) decimal points (e.g., 66 months = 5.5 years < 24 months, not whole years, use mo. (e.g., 18 mo./18mo. Adjustable Rate 13

14 FORMATTING Standard forms required Loan Estimate baseline Model Form H-24 Closing Disclosure baseline Model Form H-25 Additional standard forms provided for permissive changes Clear and conspicuous (legible and in a readily understandable form); in writing; and grouped together, segregated from everything else, and provided on (physically) separate pages that are not commingled with any other documents or disclosures, including any other disclosures required by State or other laws State law disclosures must be physically separate from LE/CD May not include is same pdf file May not include any other information unless expressly permitted 14

15 FORMATTING Must use designated order and grouping May omit certain non-applicable sections May not omit all, even if not applicable So... Check twice before you do! Some items are to be left blank if not applicable Some require enter zero 0 if not applicable Rounding rules TriComply TRID Quick Compliance Guide Page Options More on that later when we get to the actual forms Addenda Very limited circumstances where an addendum is permitted Must have format similar to LE/CD Must use same terminology as in applicable section TriComply TRID Quick Compliance Guide 15

16 FORMATTING Who writes this stuff? TriNovus, LLC, A Temenos Company (4) ROUNDING (i) Nearest dollar. (A) The dollar amounts required to be disclosed by paragraphs (b)(6) and (7), (c)(1)(iii), (c)(2)(ii) and (iii), (c)(4)(ii), (f), (g), (h), (i), and (l) of this section shall be rounded to the nearest whole dollar, except that the per diem amount required to be disclosed by paragraph (g)(2)(iii) ) of this section and the monthly amounts required to be disclosed by paragraphs aphs (g)(3)(i) through (iv) of this section shall not be rounded. (B) The dollar amount required to be disclosed by paragraph p (b)(1) of this section shall not be rounded, and if the amount is a whole number then the amount disclosed shall be truncated at the decimal point. TriComply TRID (C) The dollar amounts required to be disclosed by paragraph Quick (c)(2)(iv) of this section shall be rounded to the nearest est whole dollar, Compliance if any of the component amounts are required by paragraph (o)(4)(i)(a) of this Guide section to be rounded to the nearest whole dollar. (ii) Percentages. The percentage amounts required to be disclosed under paragraphs (b)(2) and (6), (f)(1)(i),), (g)(2)(iii), (j), and (l)(3) of this section shall not be rounded and shall be disclosed up to two or three decimal places. The percentage amount required to be disclosed under paragraph (l)(2) of this section shall be disclosed d up to three decimal places. l If the amount is a whole number then the amount disclosed shall be truncated at the decimal point. Watch for what is rounded and what is not Always be careful on escrow payments Rounding up a cushion could cause a violation 16

17 FORMATTING: PRELIMINARY ESTIMATES/WORKSHEETS Preliminary worksheets or estimates May provide preliminary worksheet or estimate Must avoid worksheets that could create confusion and cause the consumer to think it is the Loan Estimate form Expressly prohibited to use model Loan Estimate form headings, content and format substantially similar Mandatory disclosure - H-26 Clear and legible text and uses the required formatting, including bold font Must be on the top of the page May not be smaller than 12-point font Changes that are not expressly permitted may cause loss of protection from civil liability under TILA Model Form H-26: Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan. 17

18 RECORD RETENTION Loan Estimate Must maintain records of compliance with LE for (3) years after the later of: Date of consummation, Date disclosures are required to be made, or Date the action is required to be taken Closing Disclosure Must maintain records of compliance with CD for (5) years after consummation Includes all documents related to CD Transfer of Servicing If sell, transfer or otherwise dispose of interest in a mortgage and no longer services the loan, Must provide a copy of Closing Disclosure to new servicer as part of loan file New servicer required to retain CD for remainder of 5-year period Originator must still retain for 5-year period after consummation You may retain records by any method that reproduces the disclosures and other records accurately 18

19 TIMING GENERAL RULES TRICOMPLY TRID QUICK COMPLIANCE GUIDE Application Initial Loan Estimate Impose Fees/Charges Revised LE Receive (6) Items, LE triggered Must be delivered or placed in mail within (3) business days of application Must provide LE and receive intent to proceed before charging any fee other than a credit report fee Generally, within (3) business days of valid changed circumstance; Consumer must receive no later than (4) business days prior to closing; May not provide once CD is issued Closing Disclosure Must be received at least (3) business days prior to closing Revised CD Right to inspect CD Must be received at least (3) business days prior to closing if: > APR out of tolerance, add prepayment penalty or product change; > Else, at or before closing for all other changes Changes post closing = Provide within 60 days (30 days to find issue) Consumer may request to view (1) business day prior to consummation TriNovus, LLC, A Temenos Company Waivers Waiting periods (7 business days for LE and 3 business days for CD) may be waived for bona fide personal financial emergency 19

20 FEE TIMING Except for a reasonable credit report fee No other fee may be charged or imposed until consumer receives and indicates an intent to proceed No posted dated check No collecting credit card information to later be charged if intent to proceed X X 20

21 TIMING: E-SIGN APPLICABILITY Electronic delivery of LE and CD Subject to E-SIGN Must complete all components of E-SIGN before sending electronically Notice, consent, and reasonably demonstrate If disclosure subject to E-SIGN, sent electronically without completing E-SIGN, not considered delivered even if consumer prints and sends back to you If disclosure or required document is delivered electronically, mailbox rule applies It is considered delivered 3 business days after you send it just as if you put in snail mail Except Consumer may notify you that disclosure/document was indeed received Closes the time clock for waiting 3, 4, or 7 business days as may be applicable under the timing rules Do not assume applicant will indeed complete E-SIGN; you must still deliver timely 21

22 TIMING: E-SIGN DELIVERY For example If applicant completes E-SIGN on personal tablet while applying in institution, may deliver/ LE Applicant applies on Monday, indicating that they will complete E-SIGN when they get home; you LE Tuesday; applicant actually does not complete E-SIGN until Friday LE is late as it was not delivered within 3 business days of application (Thursday) LE is not all $0 for CD Unlike current (2010) = no cost loan: Subject to regulator penalties ($4,000 per; up to $1million per missed timing) Subject to consumer private right of action / civil liability 22

23 TIMING: INTENT TO PROCEED Must document consumer s intent to proceed Consumer may show his or her intent to proceed in any manner he or she chooses unless your institution s policy requires a specific form/process of communication from consumer to show intent to proceed No model form provided Not subject to E-SIGN Must provide LE first No new or additional intent to proceed for revised LE or CD As long as you verify intent first Be sure to add this step to your Monitoring / Audit schedule, too 23

24 INTENT TO PROCEED Must be documented No model form Documentation could be memo in file or in loan system notes file Best practice recommendation Have a consistent form and process to avoid violations for missing documentation Do not use post-it notes Not subject to E-SIGN 24

25 LOAN ESTIMATE TRID Workshop Finals 25

26 LOAN ESTIMATE Baseline Model Form H-24 = Standard Form Good faith estimate of costs of credit and transaction terms consistent with the best information reasonably available to the creditor at the time disclosed To determine good faith: Look at difference between estimated charges originally provided LE and actual charges paid by or imposed on the consumer Generally, if the charge paid by or imposed on consumer exceeds amount originally disclosed on LE, not in good faith True regardless of whether creditor later discovers technical error, miscalculation, or underestimation of a charge Except falls within Tolerances (all amounts must still be made based on best information available at time LE issued) More on Tolerances and Changed Circumstance later If mortgage broker receives initial application, either creditor or mortgage broker may provide Creditor is responsible for ensuring LE complies with the content and delivery requirements You may not contract away your obligations Be careful on who you rely on They will not be the one sitting in front of your regulator during an exam 26

27 LOAN ESTIMATE H-24(A) Mortgage Loan Transaction Loan Estimate Model Form STANDARD FORMS H-24(B) H-24(C) H-24(D) Mortgage Loan Transaction Loan Estimate Fixed Rate Loan Sample Mortgage Loan Transaction Loan Estimate Interest Only Adjustable Rate Loan Sample Mortgage Loan Transaction Loan Estimate Refinance Sample H-24(E) H-24(F) H-24(G) Mortgage Loan Transaction Loan Estimate Balloon Payment Sample Mortgage Loan Transaction Loan Estimate Negative Amortization Sample Mortgage Loan Transaction Loan Estimate Modification to Loan Estimate for Transaction Not Involving Seller Model Form TriNovus, LLC, A Temenos Company 27

28 LOAN ESTIMATE: PAGE OPTIONS Page 1 Page 2 Page 3 Sales Price (with a Seller) Fixed rate Loan Acceptance vs. Confirm Receipt Estimated Prop. Value (without a Seller, e.g., refi) With Adjustable Payment (AP) Table and Adjustable Interest Rate (AIR) Table Homeowners insurance not required With AP Table only Liability after Foreclosure (refinance loan secured by that property) With AIR Table only Appraisal notice 28

29 THE NEW LOAN ESTIMATE FORM Complete set provided in materials TriNovus, LLC, A Temenos Company 29

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31 LOAN ESTIMATE - PAGE 1 Key sections Heading information Loan Terms Projected Payments Costs at closing CFPB website reference (2) options Sales Price (Seller transaction) Estimated Prop. Value (No Seller) 31

32 LE PAGE 1: HEADING INFORMATION Estimated Prop. Value Line added to show data required 32

33 LE PAGE 1 - HEADING INFORMATION PURCHASE TRANSACTION 1 Examples A 3 1 = Logo okay if fits 2 = SP vs. EPV 3 = Time Zone A = Addenda permitted 2 NON-PURCHASE TRANSACTION (NO SELLER INVOLVED) TriNovus, LLC, A Temenos Company 33