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Thursday, January 22, 2015

CFPB Finalizes Changes to “Know Before You Owe” Mortgage Rules

By Outside Counsel, Chrys D. Lemon, McIntyre & Lemon, PLLC

The CFPB finalized two minor modifications to the “Know Before You Owe” mortgage disclosure rules to address, among other things, when consumers will receive updated disclosures after locking in an interest rate.

“For more than 30 years, federal law has generally required that mortgage lenders deliver two different, overlapping disclosures to consumers within three business days after receiving a mortgage application. At the closing stage, federal law again generally requires two forms. All of these forms contain duplicative and sometimes confusing information. . . . In 2013, the CFPB introduced new mortgage disclosure forms that will replace the existing federal forms and help consumers understand their options, choose the deal that’s best for them, and avoid costly surprises at the closing table.

“Under the [finalized] rule . . . , creditors are required to provide a revised Loan Estimate within three business days after a consumer locks in a floating interest rate. The original rule required creditors to provide the revised Loan Estimate on the date the rate is locked. . . . Allowing three business days for the new Loan Estimate will give creditors enough time to provide new disclosures without having to reduce flexibility that consumers may have today in locking their rates.

“The second change being finalized . . . is a minor addition on the Loan Estimate form for loans that involve new home construction. . . .  Today’s change creates a space on the Loan Estimate form where creditors could include language informing consumers that they may receive a revised Loan Estimate for a construction loan that is expected to take more than 60 days to settle.

“The ‘Know Before You Owe’ mortgage disclosure rule, including the changes finalized today, is effective August 1, 2015.”

Read CFPB Press Release, Final Rule