The Consumer Financial Protection Bureau today will issue a final rule requiring lenders to use two new mortgage disclosure forms that combine and streamline disclosure requirements under the Truth in Lending Act and Real Estate Settlement Procedures Act. At this time the CFPB as released two summaries – one on the final rule and one on the testing they conducted.
ABIA and our members have worked with the CFPB to share our view that the "all-in" annual percentage rate (APR) should not include add-on or ancillary products such as title insurance, credit insurance and debt protection fees. Although the final rule is not yet posted, the summaries and press reports indicate that the CFPB did not adopt the all-in APR.
According the the CFPB's summary of the testing they conducted:
Definition of the APR: The CFPB had proposed to include more items in the annual percentage rate (APR) such as the title insurance costs and appraisal fees. But after reviewing public comments, the CFPB is not finalizing this provision but will continue to study the issue. According to public feedback, such a change might have affected the types of loans available to consumers. In the CFPB’s study of the issue, which will be conducted in connection with its five-year review of this final rule, the CFPB will look at consumer understanding of the APR and finance charge disclosures, and make improvements to those disclosures if necessary.
About the new disclosure forms:
The forms include a new, three-page “Loan Estimate” that must be given to borrowers within three business days of applying for a loan and that replaces the early Truth in Lending statement and the Good Faith Estimate. The form includes information on the mortgage’s key features, costs and risks.
At least three business days before closing on the loan, consumers would be required to receive a new, five-page “Closing Disclosure” form that provides details on all costs associated with the loan. This form replaces the final Truth in Lending statement and the HUD-1 form.
ABIA and ABA will analyze the final rule as soon as it is available, which is expected at noon today. The rule takes effect Aug. 1, 2015.
Read the summary/factsheet about the “Know Before You Owe” mortgage disclosures.
Read the summary/factsheet about the testing process by the CFPB.
If you would like to learn more about ABIA's work with CFPB to educate them about the bank-insurance industry or join our CFPB Task Force, please contact us and visit our website.