30
Texas Association of Builders
July/August 2015
New Disclosures
In 2013, the CFPB passed a rule that
eliminates use of the Good Faith Estimate
(GFE), Truth-in-Lending (TIL) andHUD-
1 for most types of purchase transactions.
For loan applications taken on or after
August 1, 2015, the GFE and initial TIL
will be replaced by the new three-page
Loan Estimate (LE). In addition, the final
TIL and HUD-1 will be replaced by the
new five page Closing Disclosure (CD)
for the buyer/borrower. The Bureau also
created a separate Seller-only disclosure
for privacy purposes.
Home builders have long sought to
streamline the consumer’s home buying
process – which typically includes
obtaining a mortgage. When the new
disclosures are fully implemented, they
will be “new” for all buyers – even the
most sophisticated purchasers who have
come to expect the existing disclosures
that have been in mandated for decades.
Though the new disclosures are supposed
to be easier to understand, builders may
want to ensure that their sales staff or
mortgage partners are fully ready to
comply – and fully prepared to explain the
new disclosures to all of their buyers. Yes,
the new disclosures have been proven to
be easier to understand in CFPB studies,
however, there are some areas that
industry experts believe will need some
extra attention.
NewTimelines
In addition to the new disclosures, the
CFPB will require new timelines for
the disclosures to be provided in the
transaction process. The Loan Estimate
must be provided to the consumer within
three business days of the application.
Of more interest to home builders is that
the Closing Disclosure must be received
by the consumer three full business days
prior to consummation. Coordination
with the lender will be important given
that lenders will typically be delivering
the disclosures.
Given the new timelines for closing,
many in the real estate services field are
recommending that contracts after August
1st be for 45 or 60 days in order to give the
industry time to adjust to the new forms
and processes. In addition, some lenders
are wary of same-day closings given the
need for last-minute changes that might
be difficult to manage under the new rules.
NewVariances
While the Good Faith Estimate and
HUD-1 were modified in 2010 to
further support the concept of limiting
fee increases beyond certain tolerance
thresholds, the new Loan Estimate and
Closing Disclosure take things one step
further by tightening those tolerances,
Over the past four decades, real estate and mortgage professionals have been required to use the Good
Faith Estimate, Truth-in-Lending Statement and HUD-1 settlement statement for their purchase
transactions. The purpose of these required disclosures is to ensure that home buyers know the details
of their newmortgage and the costs involved in the purchase of their newhome. Following the financial
collapse of 2008, it became clear that some consumers were befuddled by themortgage process and did
not fully understand how to shop for loans or the extent of the financial obligations theywere taking on.
With a growing number of consumers facingmortgage-related financial hardships, Washington enacted the Dodd-Frank
Act in 2010 which ushered in our newest regulator – the Consumer Financial Protection Bureau or CFPB. Once
established, the CFPB quickly began to work on one of the Dodd-Frank Act mandates – integrating the disclosures.
By Marvin Stone, CFPB Program Manager | Stewart Senior Vice President, Business Integration
Home Builders and the
CFPB Integrated Disclosures
Feature
