CFPB's new Loan Estimate Form will pack a punch
TILA-RESPA violators could face fines of $1 million a day
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CFPB RESPA/TILA Rule Reference: 5.1, Page 21-22, CFPB Detailed Summary of the Rule
Beginning in May 2011, the Consumer Financial Protection Bureau set out to understand how changes to the layout and content of mortgage forms might create a more informed consumer, and they initiated an industry research project to gather opinions and to test new approaches for these documents.
In particular, the CFPB sought to reconcile and combine the Good Faith Estimate (GFE), required by RESPA, and the Initial Truth in Lending Disclosure (TIL), required by TILA, which was necessary because these forms sometimes had conflicting information. With an integrated Loan Estimate, the goal was to reduce that confusion by placing all estimated costs and an overview of consumer obligations into one place.Other goals of integrating the disclosures include facilitating more comparable loan shopping and to prevent surprises at the closing table.
The disclosure form changes are not just cosmetic — the requirements around producing and delivering this paperwork will fundamentally change mortgage operations.
The greatest impact of the new Loan Estimate is that it must be provided within three days of consumer application, and the definition of “application” has been narrowly defined as when the lender receives the following information from a consumer:
• The consumer’s name
• The consumer’s income
• The consumer’s social security number (to obtain a credit report)
• The property address
• An estimate of the value of the property
• The loan amount sought
Under the new rules, which take effect in August 2015, lenders’ failure to meet these tight estimate deadlines could result in unprecedented fine amounts. For example, lenders whose delays are found to be caused “knowingly” could face civil penalties as high as $1,000,000 per day. Even an unintentional TILA-RESPA violation could result in a fine of $5,000 per day.
Because the penalties for noncompliance are higher than ever, and the new rules ask lenders to generate work products faster than ever, the stakes couldn’t be greater for every member of the mortgage industry to develop a plan to manage the operational changes required by the new integrated disclosures, including the Loan Estimate Form.
We elaborate more on how this impacts business, and how technology solutions mitigate that impact, in the knowledge article titled "A look at the business impacts of the Loan Estimate form" in the TILA-RESPA Knowledge Center.
All information and views expressed or implied are provided without warranty and are only the opinion of Pavaso, Inc. Each participant should seek legal representation for legal interpretation of the ruling and the CFPB directly for final instruction and interpretation. The final rule can be found here.