Understanding the New TILA-RESPA Disclosures
Effective date is August 1, 2015 TILA-RESPA disclosures will be integrated into two new forms: the “Loan Estimate” and the “Closing Disclosure.”
The TILA-RESPA rule consolidates four existing disclosures required under TILA and RESPA for closed-end credit transactions secured by real property into two new forms: the “Loan Estimate” and the “Closing Disclosure.”
First, the Loan Estimate combines the Good Faith Estimate (GFE) and the initial Truth-in-Lending disclosure. The Loan Estimate must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application. Second, the Closing Disclosure combines the HUD-1 and final Truth-in-Lending disclosure. It is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction.
The Closing Disclosure must be provided to consumers at least three business days before consummation of the loan. Certain changes to the Closing Disclosure prior to closing require may require a new waiting period. These include an APR that becomes inaccurate; the loan product changes; or a prepayment is added.
The new Integrated Disclosures must be provided by a creditor or mortgage broker that receives an application from a consumer for a closed-end credit transaction secured by real property on or after August 1, 2015.
Creditors will still be required to use the GFE, HUD-1, and Truth-in-Lending forms for applications received prior to August 1, 2015. As the applications received prior to August 1, 2015 are consummated, withdrawn, or cancelled, the use of the GFE, HUD-1, and Truth-in-Lending forms will no longer be used for most mortgage loans.
The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property. However, the TILA-RESPA rule does not apply to HELOCs, reverse mortgages or mortgages secured by a mobile home or by a dwelling that is not attached to real property.
The creditor must retain copies of the Closing Disclosure (and all documents related to the Closing Disclosure) for five years after consummation. However, the Escrow Closing Notice and the Post-Consummation Partial Payment Policy disclosure need only be retained for two years. For all other evidence of compliance with the TILA-RESPA rule creditors must maintain records for three years after consummation of the transaction.
For further information see the CFPB’s “TILA-RESPA Integrated Disclosure rule: Small entity compliance guide”