Are you ready for Aug. 1, 2015? That’s the day the Consumer Financial Protection Bureau’s TILA/RESPA Integrated Disclosure Rule goes into effect. The CFPB issued the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) Rule in November 2013 to simplify and improve disclosures consumers receive when applying for and closing on mortgage loans.
The disclosures under TILA and RESPA now provided at the time of application and closing have been integrated and the new disclosures will need to be provided to credit union members for mortgage applications received on or after Aug. 1. The TILA/RESPA rule becomes effective and must be complied with on August 1, 2015 and affects all closed-end consumer transactions secured by real property. Luckily, this rule doesn’t apply to home-equity line of credit agreements.
The TILA/RESPA Integrated Disclosure rule will completely overhaul the way credit unions go about mortgage lending and will likely impact the types of mortgage lending credit unions engage in. TILA/RESPA doesn’t just mean the introduction of two new documents to the mortgage lending process, it directly affects the people, processes, and technology credit unions use to support their lending operations because the regulations require loan disclosures to change dynamically to reflect each borrower’s unique loan features.
The effective date of Aug. 1, 2015 does not allow for a grandfather period.
Additionally, the rule will affect the relationships credit unions have with outside vendors throughout the lending process. Credit unions should begin now conversations about how the rule might change those relationships after Aug. 1, if they haven’t already. The relationships credit unions should be focusing on to prepare for the effective date include their system providers, settlement agents, members, and especially their own staff.
A large part of credit unions being prepared for the rule is understanding when to use the new documents. The effective date of Aug. 1, 2015 does not allow for a grandfather period. Any application received from a member received on or after the effective date must receive the new disclosures. However, if an application is received on July 31, 2015, the current disclosures must be provided until the application is withdrawn or denied or the loan is consummated.
It’s important to plan for this time period and train your staff because the NCUA has already stressed that compliance with TILA/RESPA will be an exam priority after the effective date. The NCUA has recently indicated, informally, that it will look for reasonable and good faith efforts by credit unions to comply with the CFPB’s Integrated Disclosure Rule. This does not protect from potential civil liability under Truth in Lending.
If you are struggling to understand the rule, don’t worry! You’re not alone. In fact, CUNA Mutual Group and LOANLINER Document Solutions have free webinars to start you on the path to complying with TILA/RESPA. The webinars provide an overview of the rule, including the new disclosures, timing requirements, calculations, and the transition period from the current disclosures to the new Loan Estimate and Closing Disclosure. In addition to the Loan Estimate and Closing Disclosure, TILA/RESPA requires two new documents in certain situations: the Escrow Cancellation Notice and the Settlement Service Providers List, which were both addressed in a previous webinar.
If you haven’t started preparing your credit union and your mortgage lending vendors for the rule, now is the time to get started. The webinars are available at www.cunamutual.com/tilarespa and are free to all credit unions.