NEW CLOSING DISCLOSURE – EFFECTIVE 8/1/2015
TILA-RESPA Integrated Disclosures Rule will become effective August 1, 2015. A new rule was issued on 11/20/2013 for “Integrated Mortgage Disclosures”. It replaces the RESPA and TILA disclosures and HUD with one single disclosure as follows:
- Loan Estimate replaces the current GFE and initial TIL (3 pages total)
- Closing Disclosure replaces the current HUD and final TIL (5 pages total)
Implementation Date for the new closing disclosure: 8/1/2015
A NEW LANGUAGE!
WHAT ARE THE NEW TERMS WE WILL BE USING:
Current Term |
New Term 8/1/15 |
|---|---|
| GFE | Loan Estimate |
| HUD | Closing Disclosure |
| Escrow Agent or Closer | Settlement Provider |
| Borrower | Consumer |
| Signing Date | Consummation |
| Lender | Creditor |
| Bucket | Category |
WHAT IS A QUALIFIED MORTGAGE OR CLOSED END MORTGAGE?
QM – Qualified Mortgage = a loan that avoids risky requirements and lenders must assess the borrower’s ability to repay the loan under different guidelines, such as:
- Debt-to-income ratio including mortgage payments must be 43% or less
- No risky features such as negative amortization or interest-only payments
- Points and fees cannot exceed 3% on a loan of $100,000.00 or more
WHAT TRANSACTIONS ARE AFFECTED BY THE NEW RULE?
- New Single Family Residential (1-4 unit) bank loans and refinances.
WILL WE STILL USE THE OLD HUD1 FORM AFTER THE CLOSING DISCLOSURE GOES INTO EFFECT?
Yes, but only for the following transactions:
- Home Equity Line of Credit
- Reverse Mortgage
- Mortgages secured by a Mobile Home
- Loans made by a person who makes 5 or fewer mortgages in a year (see Rule for more detail)
- Certain no-interest loans secured by subordinate liens (see Rule for more detail)
TIPS AND TOOLS
- Loan Estimatereplaces initial Truth in Lending and Good Faith Estimate
- Closing Disclosurereplaces Final Truth in Lending and HUD-1
- New Closing Disclosure must be delivered to consumer three business days prior to signing
- CFPB forms reflect purchasing owner’s title insurance is optional
- Date of consummation means date the borrower becomes legally obligated under the loan
