CFPB Loan Disclosure Rules: Know Before You Owe Mortgage Forms The New Requirements and Their Impact on Financial Institutions

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1 CFPB Loan Disclosure Rules: Know Before You Owe Mortgage Forms The New Requirements and Their Impact on Financial Institutions David A. Elliott Partner Richard C. Keller Partner

2 OUTLINE Section 1032(f) of Title X. Scope of the New Requirements. The Loan Estimate Form. The Closing Disclosure/Settlement Disclosure Form. Limits on Closing Costs. The Impact on how the Annual Percentage Rate ( APR ) is Calculated.

3 Section 1032(f) of Title X Sections 1098 and 1100A of the Dodd-Frank Wall Street Reform and Consumer Protection Act direct the CFPB to publish rules and forms that combine certain disclosures which consumers receive in connection with applying for and closing on a mortgage loan under TILA (Reg. Z) and RESPA (Reg. X). The CFPB is amending Regulations X and Z to establish new disclosure requirements and forms in Reg. Z for most closed-end consumer credit transactions secured by real property.

4 Section 1032(f) states: Section 1032(f) of Title X (f) COMBINED MORTGAGE LOAN DISCLOSURE. Not later than 1 year after the designated transfer date, the Bureau shall propose for public comment rules and model disclosures that combine the disclosures required under the Truth in Lending Act and sections 4 and 5 of the Real Estate Settlement Procedures Act of 1974, into a single, integrated disclosure for mortgage loan transactions covered by those laws, unless the Bureau determines that any proposal issued by the Board of Governors and the Secretary of Housing and Urban Development carries out the same purpose. See Dodd-Frank Act sections 1032(f) (12 U.S.C. 5532), 1098, and 1100A ( 111publ203.pdf).

5 The Scope of the New Requirements Loans within the scope of the rule: Most closed-end consumer mortgage loans: Fixed rate loans; Adjustable rate loans; Refinance loans; Balloon payment loans; and Negative amortization loans. Loans outside the scope of the rule: Home equity lines of credit (HELOCs). Reverse mortgages. Mortgage loans secured by a mobile home. Mortgage loans secured by a dwelling not attached to real property. Loans made by a creditor who makes five or fewer mortgages in a year.

6 The Scope of the New Requirements Effective date. The disclosure requirements apply to covered loans (closed-end credit transactions secured by real property) for which the creditor or mortgage broker receives an application on or after August 1, See 12 C.F.R (d)(5), cmt. 1. Exceptions. The new (e)(2), amendments to (a)(1), and the amendments to the commentary to , become effective on August 1, 2015 without respect to whether an application has been received. Id.

7 The Loan Estimate form The Loan Estimate form replaces two current federal forms: 1. The Good Faith Estimate (under RESPA); and 2. The Early Truth-in-Lending disclosure (under TILA).

8 The Loan Estimate form What disclosures are required in the Loan Estimate? The final rule and the Official Interpretations contain detail instructions as to how each line on the Loan Estimate form should be completed. Sample forms for different types of loan products are available. See 12 C.F.R (Appendix H), H-24(A-G) Mortgage Loan Transaction Estimate Model Form(s).

9 The Loan Estimate form General disclosures under (a)(1-13). 1. Form Title. 2. Form purpose. 3. Creditor. 4. Date issued. 5. Applicant(s). 6. Property. 7. Sale price. 8. Loan term. 9. Purpose. i. Purchase; ii. Refinance; iii. Construction; or iv. Home equity loan.

10 The Loan Estimate form General disclosures under (a)(1-13). 10. Product. i. First, feature(s) that may change the periodic payment; and A. Negative amortization; B. Interest only; C. Step payment; D. Balloon payment; and/or E. Seasonal payment. ii. Second, a description of the loan product. A. Adjustable rate; B. Step rate; or C. Fixed rate. Note: If a transaction has more than one of the loan features described in (a)(10)(ii) of this section, the creditor shall disclose only the first applicable feature in the order the features are listed. See (a)(10)(iii).

11 The Loan Estimate form General disclosures under (a)(1-13). 11. Loan type. i. Conventional; ii. FHA; iii. VA; or iv. Other. 12. Loan identification number (Loan ID #). 13. Rate lock.

12 The Loan Estimate form Loan term disclosures under (b)(1-8). 1. Loan amount. 2. Interest rate. 3. Principal and interest payment. 4. Prepayment penalty. 5. Balloon payment. 6. Adjustments after consummation. i. Adjustment in loan amount. ii. Adjustment in interest rate. iii. Increase in periodic payment.

13 The Loan Estimate form Loan term disclosures under (b)(1-8). 7. If applicable, details about the prepayment penalty and balloon payment. i. The maximum amount of the prepayment penalty which may be imposed and the date when the period during which the penalty may be imposed terminates; and ii. The maximum amount of the balloon payment and the due date of such payment. 8. Timing.

14 The Loan Estimate Form Projected payment disclosures under (c)(1-5). 1. Periodic payment or range of payments. 2. Itemization. i. Principal & Interest; ii. Mortgage Insurance; iii. Escrow; and iv. Total Monthly Payment. 3. Subheadings. 4. Taxes, Insurance & Assessments. 5. Calculation of taxes and insurance.

15 The Loan Estimate form Disclosing closing costs pursuant to (d)(1-2). 1. Costs at closing table. i. Closing costs; and ii. Cash to close. 2. Optional alternative table for transactions without a seller. i. The amount calculated in accordance with (h)(2)(iv) ( [c]ash to or from consumer ) of this section (d)(2)(i). ii. A statement of whether the disclosed estimated amount is due from or to the consumer; and iii. A statement referring the consumer to the alternative table disclosed pursuant to paragraph(h)(2)( [o]ptional alternative calculating cash to close table for transactions without a seller. ) of this section (d)(2)(iii).

16 The Loan Estimate form Disclosing a Web site reference pursuant to (e). 1. Web site reference. A statement that the consumer may obtain general information and tools at the Web site of the Bureau, and the link or uniform resource locator address to the Web site:

17 Loan Estimate form Disclosing closing cost details and loan costs pursuant to (f)(1-6). 1. Origination charges. i. % of Loan Amount (Points). ii. Itemization of charges shall not exceed Services you cannot shop for. i. Itemization of amounts shall not exceed Services you can shop for. i. Itemization of amounts shall not exceed Total loan costs. 5. Item descriptions and ordering. i. The order of the disclosure is to begin with % of Loan Amount (Points). 6. Use of addenda. i. The use of an addendum to a form of disclosures prescribed by this section may not be used for items described in paragraph (f)(1) or (2) of this section. Creditors may use Additional Charges in order to comply with the number of lines provided by paragraph (f)(1)(ii) or (2)(ii) of this section.

18 Loan Estimate form Disclosing closing cost details and loan costs pursuant to (f)(1-6). ii. An addendum to a form of disclosures prescribed by this section may be used for items described in paragraphs (f)(3) of this section.

19 Loan Estimate form Disclosing closing cost details and other costs pursuant to (g)(1-8). 1. Taxes and other government fees. i. Recording Fees and Other Taxes. ii. 2. Prepaids. Transfer Taxes. i. Homeowner s Insurance Premium ( months). ii. Mortgage Insurance Premium ( months). iii. Prepaid Interest ( per day for %). iv. Property Taxes ( months). v. If an amount is not charged to the consumer, leave that line blank. vi. A maximum of three additional items may be disclosed under paragraph (g)(2).

20 Loan Estimate form Disclosing closing costs and other costs pursuant to (g)(1-8). 3. Initial escrow payment at closing. i. Homeowner s Insurance per month for mo. ii. Mortgage Insurance per month for mo. iii. Property Taxes per month for mo. iv. If an amount is not charged to the consumer, leave that line blank. v. A maximum of five items may be disclosed under paragraph (g)(3). 4. Other. i. Title. ii. (optional). iii. A maximum of five items may be disclosed under paragraph (g)(4).

21 Loan Estimate form Disclosing closing costs and other costs pursuant to (g)(1-8). 5. Total other costs. 6. Total closing costs. 7. Item descriptions and ordering. 8. Use of addenda.

22 Loan Estimate form Calculating cash to close pursuant to (h)(1-2). 1. For all transactions. i. Total closing costs. ii. Closing costs to be financed. iii. Downpayment and other funds from borrower. iv. Deposit. v. Funds for borrower. vi. Seller Credits. vii. Adjustments and other credits. viii. Estimated Cash to Close. 2. Optional alternative calculating cash to close table for transactions without a seller. i. Loan amount. ii. Total closing costs. iii. Payoffs and payments. iv. Cash to or from consumer. v. Closing costs financed.

23 Loan Estimate form Disclosing an Adjustable Payment (AP) Table pursuant to (i)(1-5). 1. Interest only payments. 2. Optional payments. 3. Step payments. 4. Seasonal payments. 5. Principal and interest payments. i. First Change/Amount ; ii. iii. Subsequent Changes ; and Maximum Payment.

24 Loan Estimate form Disclosing an Adjustable Interest Rate (AIR) Table pursuant to (j)(1-6). 1. Index and margin. 2. Increases in interest rate. 3. Initial interest rate. 4. Minimum and maximum interest rate. 5. Frequency of adjustments. i. First Change ; and ii. Subsequent Changes. 6. Limits on interest rate changes. i. First Change ; and ii. Subsequent Changes.

25 Loan Estimate form Disclosing contact information pursuant to (k)(1-3). 1. The Nationwide Mortgage Licensing System and Registry Identification number (NMLSR ID) (labeled NMLS ID/License ID ) for the creditor (labeled Lender ) and the mortgage broker (labeled Mortgage Broker ), if any. 2. The name and NMLSR ID of the individual loan officer of the creditor and the mortgage broker, if any, who is the primary contact for the consumer. 3. The address and telephone number of the loan officer.

26 Loan Estimate form Disclosing Comparisons pursuant to (l)(1-3). 1. In 5 Years : i. Total you will have paid in principal, interest, mortgage insurance, and loan costs ; and ii. Principal you will have paid off. 2. Annual percentage rate. 3. Total interest percentage ( TIP ). Disclosing other considerations pursuant to (m)(1-7). 1. Appraisal. 2. Assumption. 3. Homeowner s insurance. 4. Late payment. 5. Refinance. 6. Servicing. 7. Liability after foreclosure.

27 Loan Estimate form Disclosing a signature statement pursuant to (n)(1-2). 1. By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or received this form (n)(1). 2. You do not have to accept this loan because you have received this form or signed a loan application (n)(2).

28 Loan Estimate form Form of disclosures pursuant to (o)(1-5). 1. General requirements. i.... clearly and conspicuously in writing, in a form that the consumer may keep. The disclosures also shall be grouped together and segregated from everything else (o)(1)(i). ii. Except as provided by paragraph (o)(5) of this section, the disclosures shall contain only the information required by paragraphs (a) through (n) of this section and shall be made in the same order, and positioned relative to the master headings, headings, subheadings, labels, and similar designations in the same manner, as shown in form H-24, set forth in appendix H to this part (o)(1)(ii).

29 Loan Estimate form Form of disclosures pursuant to (o). 2. Headings and labels. 3. Form. 4. Rounding. i. Nearest dollar. ii. Percentages. 5. Exceptions. i. Unit-period. ii. iii. iv. Translation. Logo or slogan. Business card. v. Administrative information.

30 The Closing Disclosure/Settlement Disclosure Disclosing general information pursuant to (a)(1-5). 1. Form title. 2. Form purpose. 3. Closing information. i. Date issued. ii. iii. iv. Closing date. Disbursement date. Settlement agent. v. File number. vi. vii. Property. Sale price. A. Sale Price where there is a seller. B. Appraised Prop. Value where there is no seller. 4. Transaction information. i. Borrower. ii. Seller. iii. Lender. 5. Loan information. i. Loan term. ii. Purpose. iii. Product. iv. Loan type. v. Loan identification number. vi. Mortgage insurance case number.

31 The Closing Disclosure/Settlement Disclosure Disclosing loan terms pursuant to (b). A separate table that includes the information required by (b). Disclosing projected payments pursuant to (c)(1-2). 1. Projected payments or range of payments. 2. Estimated taxes, insurance, and assessments.

32 The Closing Disclosure/Settlement Disclosure Disclosing closing costs pursuant to (d)(1-2). 1. Costs at closing table. i. Closing Costs. ii. A. A statement that the amount disclosed pursuant to paragraph (d)(1)(i) of this section includes the amounts disclosed pursuant to paragraphs (f)(4), (g)(5), and (h)(3); B. Loan Costs ; C. Other Costs ; D. Lender Credits ; and E. A statement referring the consumer to the tables disclosed pursuant to paragraphs (f) and (g) of this section for details. Cash to Close. A. A statement that the amount disclosed pursuant to paragraph (d)(1)(ii) of this section includes the amount disclosed pursuant to paragraph (d)(1)(i); and B. A statement referring the consumer to the table required pursuant to paragraph (i).

33 The Closing Disclosure/Settlement Disclosure Disclosing closing costs pursuant to (d)(1-2). 2. Alternative table for transactions without a seller ( Cash to Close ). i. The amount calculated under paragraph (e)(5)(ii); ii. A statement of whether the disclosed amount is due from or to the consumer; and iii. A statement referring the consumer to the table required pursuant to paragraph (e).

34 The Closing Disclosure/Settlement Disclosure Disclosures under the alternative calculating cash to close table for transactions without a seller pursuant to (e)(1-6). 1. Loan amount. i. Loan Estimate ; ii. iii. Final ; and Did this change? : A. If the amount disclosed under (e)(1)(ii) is different than the amount disclosed under (e)(1)(i), a statement of that fact and whether this amount increased or decreased. B. If the amount disclosed under (e)(1)(i) is equal to the amount disclosed in (e)(1(ii), a statement of that fact. 2. Total closing costs. i. Loan Estimate ; ii. Final ; and iii. Did this change? :

35 The Closing Disclosure/Settlement Disclosure Disclosures under (e)(1-6). A. If the amount disclosed under (e)(2)(ii) is different than the amount disclosed under (e)(2)(i): 1) A statement of that fact; 2) if the difference in the amounts disclosed under paragraphs (e)(2)(i) and (e)(2)(ii) is attributable to differences in itemized charges that are included in either or both subtotals, a statement that the consumer should see the total loan costs and total other costs subtotals disclosed under paragraphs (f)(4) and (g)(5); and 3) If the increase exceeds the limitations on increases in closing costs under (e)(3), a statement that such increase exceeds the legal limits by the dollar amount of the excess and if any refund is provided pursuant to (f)(2)(v), a statement directing the consumer to the disclosure required under paragraph (h)(3). B. If the amount disclosed under (e)(2)(i) is equal to the amount disclosed under (e)(2)(ii):

36 The Closing Disclosure/Settlement Disclosure Disclosures under (e)(1-6). 3. Closing costs paid before closing. i. Loan Estimate ; ii. iii. Final ; and Did this change? : A. If the amount disclosed under (e)(3)(ii) is different than the amount disclosed under (e)(3)(i), a statement of that fact and a statement that the consumer included the closing costs in the loan amount, which increased the loan amount; or B. If the amount disclosed under (e)(3)(ii) is equal to the amount disclosed under (e)(3)(i),a statement of that fact. 4. Payoffs and payments ( Total Payoffs and Payments ). i. Loan Estimate ; ii. Final ;

37 The Closing Disclosure/Settlement Disclosure Disclosures under (e)(1-6). iii. Did this change? : A. If the amount disclosed under paragraph (e)(4)(ii) is different than the amount disclosed under paragraph (e)(4)(i), a statement of that fact and a reference to the table disclosed under paragraph (t)(5)(vii)(b). B. If the amount disclosed under paragraph (e)(4)(ii) is equal to the amount disclosed under paragraph (e)(4)(i), a statement of that fact. 5. Cash to or from consumer ( Cash to Close ). 6. Closing costs financed.

38 The Closing Disclosure/Settlement Disclosure Disclosing closing cost details and loan costs pursuant to (f)(1-5). 1. Origination charges. 2. Services borrower did not shop for. 3. Services borrower did shop for. 4. Total loan costs. 5. Subtotal of loan costs.

39 The Closing Disclosure/Settlement Disclosure Disclosing closing cost details and other costs pursuant to (g)(1-6). 1. Taxes and other government fees. i. Recording fees; and ii. An itemization of transfer taxes with the name of the government entity assessing the transfer tax. 2. Prepaids. 3. Initial escrow payment at closing. 4. Other. i. Title. ii. (optional). 5. Total other costs. 6. Subtotal of costs.

40 The Closing Disclosure/Settlement Disclosure Disclosing closing cost totals pursuant to (h)(1-4). 1. Total Closing Costs (Borrower-Paid). 2. Closing Costs Subtotals. 3. Lender Credits. 4. Use of the same terminology, descriptions, or prescribed labels as required under

41 1. Total closing costs. The Closing Disclosure/Settlement Disclosure Disclosing calculating cash to close pursuant to (i)(1-9). i. Total Closing Costs as disclosed under (h)(1)(i). ii. iii. The amount. Did this change? : A. If the amount disclosed under paragraph (i)(1)(ii) is different than the amount disclosed under paragraph (i)(1)(i): 1) A statement of that fact; 2) If the difference in the Total Closing Costs is attributable to differences in itemized charges which are included in either or both subtotals, a statement that the consumer should see the total loan costs and total other costs subtotals disclosed under paragraphs (f)(4) and (g)(5). 3) If the increase exceeds the limitations on increases in closing costs under (e)(3),a statement that such increase exceeds the legal limits by the dollar amount of the excess, and if a refund is provided, a statement directing the consumer to the disclosure required under paragraph (h)(3). B. If the amount disclosed under paragraph (i)(1)(ii) is equal to the amount disclosed under paragraph (i)(1)(i), a statement of that fact.

42 The Closing Disclosure/Settlement Disclosure Disclosing calculating cash to close pursuant to (i)(1-9). 2. Closing costs paid before closing. i. $0 ( Closing Costs Paid Before Closing ). ii. iii. Total Closing Costs. Did this change? A. If the amount disclosed under paragraph (i)(2)(ii) is different than the amount disclosed under paragraph (i)(2)(i), a statement of that fact, along with a statement that the consumer paid such amounts prior to consummation of the transaction; or B. If the amount disclosed under paragraph (i)(2)(ii) is equal to the amount disclosed under paragraph (i)(2)(i), a statement of that fact.

43 The Closing Disclosure/Settlement Disclosure Disclosing calculating cash to close pursuant to (i)(1-9). 3. Closing costs financed. i. Closing Costs Financed (Paid from your Loan Amount). ii. iii. The amount. Did this change? A. If the amount disclosed under paragraph (i)(3)(ii) is different than the amount disclosed under paragraph (i)(3)(i), a statement of that fact, along with a statement that the consumer included the closing costs in the loan amount, which increased the loan amount; or B. If the amount disclosed under paragraph (i)(3)(ii) is equal to the amount disclosed under paragraph (i)(3)(i), a statement of that fact.

44 The Closing Disclosure/Settlement Disclosure Disclosing calculating cash to close pursuant to (i)(1-9). 4. Down payment/funds from borrower. i. Down Payment/Funds from Borrower. ii. The amount. A. In a transaction that is a purchase as defined in (a)(9)(i), the amount of the difference between the purchase price of the property and the principal amount of the credit extended, stated as a positive number, labeled Down Payment/Funds from Borrower ; or B. In a transaction other than the type described in paragraph (i)(4)(ii)(a), the Funds from Borrower as determined in accordance with paragraph (i)(6)(iv), labeled Down Payment/Funds from Borrower.

45 The Closing Disclosure/Settlement Disclosure Disclosing calculating cash to close pursuant to (i)(1-9). iii. Did this change? A. If the amount disclosed under paragraph (i)(4)(ii) is different than the amount disclosed under paragraph (i)(4)(i), a statement of that fact, along with a statement that the consumer increased or decreased this payment and that the consumer should see the details disclosed under paragraph (j)(1) or (j)(2); or B. If the amount disclosed under paragraph (i)(4)(ii) is equal to the amount disclosed under paragraph (i)(4)(i), a statement of that fact. 5. Deposit. i. Deposit. ii. The amount.

46 The Closing Disclosure/Settlement Disclosure Disclosing calculating cash to close pursuant to (i)(1-9). iii. Did this change? A. If the amount disclosed under paragraph (i)(5)(ii) is different than the amount disclosed under paragraph (i)(5)(i), a statement of that fact, along with a statement that the consumer increased or decreased this payment, as applicable, and that the consumer should see the details disclosed under paragraph (j)(2)(ii); or B. If the amount disclosed under paragraph (i)(5)(ii) is equal to the amount disclosed under paragraph (i)(5)(i), a statement of that fact.

47 The Closing Disclosure/Settlement Disclosure Disclosing calculating cash to close pursuant to (i)(1-9). 6. Funds for borrower. i. Funds for Borrower. ii. iii. iv. The amount. Did this change? A. If the amount disclosed under paragraph (i)(6)(ii) is different than the amount disclosed under paragraph (i)(6)(i), a statement of that fact, along with a statement that the consumer s available funds from the loan amount have increased or decreased, as applicable; or B. If the amount disclosed under paragraph (i)(6)(ii) is equal to the amount disclosed under paragraph (i)(6)(i), a statement of that fact. Determination of Funds from Borrower.

48 The Closing Disclosure/Settlement Disclosure Disclosing calculating cash to close pursuant to (i)(1-9). 7. Seller Credits i. Seller Credits. ii. iii. The amount. Did this change? A. If the amount disclosed under paragraph (i)(7)(ii) is different than the amount disclosed under paragraph (i)(7)(i), a statement of that fact, along with a statement that the consumer should see the details disclosed under paragraph (j)(2)(v); or B. If the amount disclosed under paragraph (i)(7)(ii) is equal to the amount disclosed under paragraph (i)(7)(i), a statement of that fact.

49 The Closing Disclosure/Settlement Disclosure Disclosing calculating cash to close pursuant to (i)(1-9). 8. Adjustments and other credits. i. Adjustments and Other Credits. ii. iii. The amount. Did this change? A. If the amount disclosed under paragraph (i)(8)(ii) is different than the amount disclosed under paragraph (i)(8)(i), a statement of that fact, along with a statement that the consumer should see the details disclosed under paragraph (j)(1)(v) through (x) and (j)(2)(vi) through (xi); or B. If the amount disclosed under paragraph (i)(8)(ii) is equal to the amount disclosed under paragraph (i)(8)(i), a statement of that fact. 9. Cash to close. i. Cash to Close. ii. The amount.

50 The Closing Disclosure/Settlement Disclosure Disclosing a summary of borrower s transaction pursuant to (j)(1-4). 1. Itemization of amounts due from borrower. i. Due from Borrower at Closing ; ii. iii. iv. Sale Price of Property ; Sale Price of Any Personal Property Included in Sale ; Closing Costs Paid at Closing ; v. A description and the amount of any additional items that seller has paid prior to the real estate closing, but reimbursed by the consumer at the closing, and a description and amount of any other items owed by the consumer at the closing not otherwise disclosed pursuant to paragraph (f), (g), or (j).

51 The Closing Disclosure/Settlement Disclosure Disclosing a summary of borrower s transaction pursuant to (j)(1-4). vi. vii. viii. ix. Adjustments for Items Paid by Seller in Advance ; City/Town Taxes ; County Taxes ; Assessments ; and x. A description and amount of any additional items paid by seller prior to the real estate closing which are due from the consumer at the closing.

52 The Closing Disclosure/Settlement Disclosure 2. Itemization of amounts already paid by or on behalf of borrower. i. Paid Already by or on Behalf of Borrower at Closing ; ii. iii. iv. Deposit ; Loan Amount ; Existing Loan(s) Assumed or Taken Subject to ; v. Seller Credit ; vi. vii. viii. ix. Other Credits ; Adjustments for Items Unpaid by Seller ; City/Town Taxes ; County Taxes ; x. Assessments ; and xi. Disclosing a summary of borrower s transaction pursuant to (j)(1-4). A description and amount of any additional items which have not yet been paid and which the consumer is expected to pay after closing, but which are attributable in part to a period of time prior to the real estate closing.

53 The Closing Disclosure/Settlement Disclosure Disclosing a summary of borrower s transaction pursuant to (j)(1-4). 3. Calculation of borrower s transaction. i. Total Due from Borrower at Closing ; ii. Total Paid Already by or on Behalf of Borrower at Closing ; and iii. Cash to Close. 4. Items paid outside of closing funds. i. Paid Outside of Closing. ii. Closing funds means funds collected and disbursed at real estate closing.

54 The Closing Disclosure/Settlement Disclosure 1. Itemization of amounts due to seller. i. Due to Seller at Closing ; ii. iii. Disclosing a summary of seller s transaction pursuant to (k)(1-4). Sale Price of Property ; Sale Price of Any Personal Property Included in Sale ; iv. A description and the amount of other items paid to the seller by the consumer pursuant to the contract of sale or other agreement, such as charges that were not disclosed pursuant to on the Loan Estimate or items paid by the seller prior to the real estate closing but reimbursed by the consumer at the real estate closing (k)(1)(iv). v. Adjustments for Items Paid by Seller in Advance ; vi. City/Town Taxes ; vii. County Taxes ; viii. Assessments ; and ix. A description and the amount of additional items paid by the seller prior to the real estate closing that are reimbursed by the consumer at the real estate closing (k)(1)(ix).

55 The Closing Disclosure/Settlement Disclosure Disclosing a summary of seller s transaction pursuant to (k)(1-4). 2. Itemization of amounts due from seller. i. Due from Seller at Closing ; ii. Excess Deposit ; iii. Closing Costs Paid at Closing ; iv. Existing Loan(s) Assumed or Taken Subject to ; v. Payoff of First Mortgage Loan ; vi. Payoff of Second Mortgage Loan ; vii. Seller Credit ; viii. A description and amount of any and all other obligations required to be paid by the seller at the real estate closing, including any lienrelated payoffs, fees, or obligations ; ix. Adjustments for Items Unpaid by Seller ; x. City/Town Taxes ; xi. County Taxes ; xii. Assessments ; and xiii. A description and the amount of any additional items which have not yet been paid and which the consumer is expected to pay after the real estate closing, but which are attributable in part to a period of time prior to the real estate closing (k)(2)(xiii).

56 The Closing Disclosure/Settlement Disclosure Disclosing a summary of seller s transaction pursuant to (k)(1-4). 3. Calculation of seller s transaction. i. Total Due to Seller at Closing ; ii. Total Due from Seller at Closing ; and iii. Cash. 4. Items paid outside of closing funds. i. Paid Outside of Closing or P.O.C. and include a statement of the party making the statement. ii. Closing funds.

57 The Closing Disclosure/Settlement Disclosure Loan disclosures pursuant to (l)(1-7). 1. Assumption. 2. Demand feature. 3. Late payment. 4. Negative amortization. 5. Partial payment policy. 6. Security interest. 7. Escrow account.

58 The Closing Disclosure/Settlement Disclosure Disclosing an adjustable payment table pursuant to (m). The table required to be disclosed by (i). Disclosing an adjustable interest rate table pursuant to (n). The table required to be disclosed by (j).

59 The Closing Disclosure/Settlement Disclosure Disclosing loan calculations pursuant to (o). 1. Total of payments. 2. Finance charge ( The dollar amount the loan will cost you ). The finance charge is treated as accurate if the amount disclosed as the finance charge: i. Is understated by no more than $100; or ii. Is greater than the amount required to be disclosed. iii. Amount financed. 3. Annual percentage rate. 4. Total interest percentage.

60 The Closing Disclosure/Settlement Disclosure Other disclosures pursuant to (p). 1. Appraisal. 2. Contract details. 3. Liability after foreclosure. 4. Refinance. 5. Tax deductions.

61 The Closing Disclosure/Settlement Disclosure Notice of questions pursuant to (q). 1. A statement directing the consumer to use the contact information disclosed under paragraph (r) of this section if the consumer has any questions about the disclosures required pursuant to (f). 2. A reference to the Bureau s Web site: and 3. A prominent question mark.

62 The Closing Disclosure/Settlement Disclosure Disclosing contact information pursuant to (r). 1. Name of the person; 2. Address; 3. Nationwide Mortgage Licensing System & Registry (NMLSR ID); 4. Name of the person who is the primary contact for the consumer with the person identified in paragraph (r)(1), labeled Contact. 5. NMLSR ID, labeled Contact NMLS ID ; 6. address for the person identified in paragraph (r)(4); and 7. Telephone number for the person identified in paragraph (r)(4).

63 The Closing Disclosure/Settlement Disclosure Disclosing a signature statement pursuant to (s). 1. Signature statement. Form of disclosures pursuant to (t). 1. General requirements. i. clearly and conspicuously in writing, in a form that the consumer may keep (t)(1)(i). 2. Headings and labels. 3. Form. 4. Rounding. i. Nearest dollar. ii. Percentages. iii. Loan amount.

64 The Closing Disclosure/Settlement Disclosure Form of disclosures pursuant to (t). 5. Exceptions. i. Unit-period. ii. Lender credits. iii. Administrative information. iv. Closing cost details. v. Separation of consumer and seller information. vi. Modified version of the form for a seller or third-party. vii. Transaction without a seller. viii. Translation. ix. Customary recitals and information.

65 Limits on Closing Costs The final rule restricts the circumstances in which consumers can be required to pay more for settlement services the various services required to complete a loan, such as appraisals, inspections, etc. than the amount stated on their Loan Estimate form. Unless an exception applies, charges for the following services cannot increase: 1. The creditor s or mortgage broker s charges for its own services; 2. Charges for services provided by an affiliate of the creditor or mortgage broker; and 3. Charges for services for which the creditor or mortgage broker does not permit the consumer to shop.

66 Limits on Closing Costs Charges for other services can increase, but generally not by more than 10%, unless an exception applies. The exceptions include, for example, situations when: 1. The consumer asks for a change; 2. The consumer chooses a service provider that was not identified by the creditor; 3. Information provided at application was inaccurate or becomes inaccurate; or 4. The Loan Estimate expires.

67 Impact on Calculating the Annual Percentage Rate ( APR ) Accuracy of the annual percentage rate pursuant to (a). Under subsection (a)(4), [i]f the annual percentage rate disclosed in a transaction secured by real property or a dwelling varies from the actual rate determined in accordance with paragraph (a)(1) of this section, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, the disclosed annual percentage rate shall also be considered accurate if: i. The rate results from the disclosed finance charge; and

68 Impact on Calculating the Annual Percentage Rate ( APR ) Accuracy of the annual percentage rate pursuant to (a). ii. (A) the disclosed finance charge would be considered accurate under (d)(1) or (o)(2), as applicable; or (B) for purposes of rescission, if the disclosed finance charge would be considered accurate under (g) or (h), whichever applies (a)(4). Under subsection (a)(5), [i]n a transaction secured by real property or a dwelling, in addition to the tolerances applicable under paragraphs (a)(2) and (3) of this section, if the disclosed finance charge is calculated incorrectly but is considered accurate under (d)(1) or (o)(2), as applicable, or (g) or (h), the disclosed annual percentage rate shall be considered accurate[.] (a)(5).

69 QUESTIONS? David A. Elliott, Esq. Richard C. Keller, Esq.