Aug 1 2016 18839 1

Dated: 08/01/2016

Views: 220


CFPB to update mortgage disclosure rules

WASHINGTON – July 29, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed updates on Friday to its "Know Before You Owe" mortgage disclosure rule.

CFPB says the changes were proposed to "formalize guidance in the rule and provide greater clarity and certainty."The changes "would augment implementation of the Know Before You Owe rule … and help facilitate compliance within the mortgage industry."

"The Bureau's rules are designed to make sure consumers have the information they need, in a form they can easily understand and use, before making the decision," says CFPB Director Richard Cordray. "Our proposed updates will clarify parts of our mortgage disclosure rule to make for a smoother implementation process."

The "Know Before You Owe" mortgage disclosure rule took effect Oct. 3, 2015. It created new, streamlined forms that consumers receive when applying for and closing on a mortgage. It mandated the time when consumers received the new forms, and it limited changes to the original loan estimate.

In addition to clarifications and technical corrections, the proposed amendments address a handful of other issues within the rule.

Proposed changes

  • Tolerances for the total of payments: Before the "Know Before You Owe" mortgage disclosure rule, the total payments disclosure was determined using the finance charge as part of the calculation; after the new rule, it changed the total payments calculation so that it didn't make specific use of the finance charge. CFPB now proposes tolerance provisions for the total of payments that parallel existing tolerances for the finance charge and disclosures affected by the finance charge. This change would make the treatment of the total of payments disclosure consistent with what it was prior to the "Know Before You Owe" mortgage disclosure rule.

  • Privacy and sharing of information: The rule requires creditors to provide mortgage disclosures to the consumer, but CFPB says it's received many questions about sharing the disclosures with third parties to the transaction, including the seller and real estate brokers. The Bureau says it "understands that it is usual, accepted and appropriate for creditors and settlement agents to provide a closing disclosure to consumers, sellers and their real estate brokers or other agents," and it's "proposing additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller."

  • Housing assistance lending: The rule gave a partial exemption from disclosure requirements to certain housing assistance loans originated primarily by housing finance agencies. The Bureau's proposed update would promote housing assistance lending by clarifying that recording fees and transfer taxes may be charged in connection with those transactions without losing eligibility for the partial exemption. The rule would also exclude recording fees and transfer taxes from the exemption's limits on costs. Through the proposed update, more housing assistance loans would qualify for the partial exemption, which should encourage lenders to partner with housing finance agencies to make these loans.

  • Cooperatives: The Bureau proposes extending the rule's coverage to include all cooperative units. With a cooperative, a buyer becomes a shareholder in a corporation that owns the property and entitled to exclusive use of a housing unit within the property. Currently, the rule only covers transactions secured by real property, as defined under state law. Cooperatives are sometimes treated as personal property under state law and sometimes as real property. By including all cooperatives in the rule, the Bureau would simplify compliance.

The CFPB is currently accepting comments about the proposed changes and invites the public to submit suggestions. Comments are due by Oct. 18, 2016.

A copy of the proposed rules and information about submitting comments is posted on CFPB's website.

© 2016 Florida Realtors®

Related Topics:Mortgages

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