CFPB Proposes Updates to ‘Know Before You Owe’
The Consumer Financial Protection Bureau on Friday proposed updates to its TILA-RESPA Integrated Disclosure rule, also known as Know Before You Owe, intended to formalize guidance in the rule and provide greater clarity and certainty.
“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,” said CFPB Director Richard Cordray. “Our proposed updates will clarify parts of our mortgage disclosure rule to make for a smoother implementation process.”
The proposed changes (http://www.consumerfinance.gov/policy-compliance/rulemaking/rules-under-development/amendments-federal-mortgage-disclosure-requirements-under-truth-lending-act-regulation-z/) would augment implementation of the Know Before You Owe rule, which took effect last October, and help facilitate compliance within the mortgage industry.
Proposed changes include:
—Tolerances for the total of payments: The Bureau is now proposing to include 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.
—Housing assistance lending: 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. The CFPB said 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 is proposing to extend the rule’s coverage to include all cooperative units. With a cooperative, a buyer becomes a shareholder in a corporation that owns the property. The buyer is then entitled to exclusive use of a housing unit in 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.
—Privacy and sharing of information: The rule requires creditors to provide certain mortgage disclosures to the consumer. The Bureau is proposing additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.
Mortgage Banker Association President and CEO David Stevens, CMB, issued the following statement in response to the CFPB proposal:
“MBA appreciates the CFPB’s efforts to update and clarify certain aspects of the ‘Know Before You Owe’ rule. This particular regulation has a big impact on both borrowers and lenders, so it’s important that the Bureau and stakeholders continually reassess the implementation process to ensure its effectiveness. We look forward to commenting on the rule, and continuing to work with the CFPB to gain further clarity in order to improve this and other rules and regulations.”
The CFPB seeks input from a wide range of stakeholders and invites the public to submit written comments on the proposal. Comments are due Oct. 18.
