CFPB Extends Effective Date for new Mortgage Disclosures

On November 16, 2012 CFPB announced that disclosure requirements will be integrated into final mortgage disclosure forms instead of taking automatic effect on January 21, 2013.

This final rule disclosures extension will give the industry extra time to provide certain new disclosures required under the Dodd-Frank Wall Street Reform and Consumer Protection Act in order to allow a more seamless integration with other mortgage disclosures that have been proposed by the Bureau. Per today’s announcement, industry will not be required to provide those disclosures until after the Bureau’s previously proposed mortgage disclosure rules are finalized.

“Considering these disclosures on the same timeline will ensure that consumers receive clear, concise, and consistent information,” said CFPB Director Richard Cordray. “By seeking public comment and conducting consumer-testing for these disclosures together, we can avoid the duplication and inefficiency that existed in the past.”

The Dodd-Frank Act required that the CFPB integrate certain disclosures from the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). For decades, TILA and RESPA have required lenders and settlement agents to give borrowers different, but overlapping disclosure forms in connection with applying for and closing most mortgages loans. This duplication has long been recognized as inefficient and confusing for consumers and industry. In July, the CFPB proposed new Loan Estimate and Closing Disclosure forms after months of qualitative testing and the Bureau’s Know Before You Owe mortgage initiative.

In addition to requiring the integration of TILA-RESPA disclosures, the Dodd-Frank Act also establishes additional new mortgage disclosure requirements, which would automatically take effect on Jan. 21, 2013 unless other action was taken. These new requirements include disclosures on cancellation of escrow accounts, on a consumers’ liability for debt payment after foreclosure, and on the creditor’s policy for accepting partial payment. The CFPB integrated many of these new requirements into the Bureau’s proposed forms that were released in July 2012.

Though no deadline was mandated for finalizing the TILA-RESPA integrated proposal, the Bureau anticipates that the final rules will be published next year.