Compliance Blog

Written by Dillon Shea, Regulatory Affairs Counsel

Yesterday, the CFPB announced the second half of its initiative to streamline the disclosures required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).  The bureau published draft forms to be provided to borrowers at closing.  For the last several months, the agency has been working on consolidating the TILA and RESPA disclosures that must be provided after application (I will call these forms the application disclosures and the forms released today the settlement disclosures).

You can view the forms here. 

The first page of both sets of draft forms is identical to the first page of the CFPB’s most recent set of draft application disclosures.  The first pages of the application and of the settlement disclosures are identical as that will enable the borrower to compare both sets of disclosures and determine if significant changes were made since receiving the application disclosures. 

The next several pages of both disclosures are substantively similar to the existing HUD-1 disclosure; however, the information is presented in a different fashion.  In addition, the intent of the new format, at least in part, is to clarify for the consumer any payments being made to and from the other parties to the mortgage. 

The final one page of the Hornbeam Bank form and the final two pages of the Ironwood Bank form provide some additional plain English disclosures, many of which are required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). 

Page 5 of the Hornbeam Bank form and page 5 of the Ironwood form require the lender to disclose the “Lender’s Cost of Funds.”  I wrote on this issue previously as it relates to the application disclosures.  The CFPB is well aware that the lending industry has serious doubts about the relevance of this disclosure; however it is required by the Dodd-Frank Act.

The CFPB is planning a process for the settlement disclosures very similar to what was done for the application disclosures.  The first two sets of draft forms are being tested this week in Iowa.  The agency is planning on re-working the forms based on the input it receives and releasing at least four different sets of draft forms before issuing a formal, proposed rule.  New draft forms will be released approximately once a month.

NAFCU will continue to work with the CFPB on this important matter.  If you have questions, thoughts or concerns on these settlement forms, please e-mail me at dshea@nafcu.org and we will pass your comments on to the agency.