The Independent Community Bankers of America (ICBA) and 42 affiliated state banking associations are calling on the Consumer Financial Protection Bureau (CFPB) to approve language that allows community banks to test out different consumer construction and construction-to-permanent loan disclosures, which the group describes as “a core offering of community banks in many local communities.”
The proposed template would change the mortgage disclosures required under the Truth in Lending Act (TILA)-Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure (TRID) rules. The group has stated in formal comments and a joint letter that the changes would have potential benefits to both lenders and the consumers they serve.
“ICBA, along with a team of community bankers and technology vendors, collaborated with Bureau staff for over two years to develop these modified TRID disclosures,” the letter, sent by the group to CFPB Director Rohit Chopra, states. “Achieving [these] goals will also help encourage community banks to expand their construction-to-permanent mortgage lending activity, especially in small towns and rural markets.”
In addition, current language regarding TRID disclosures focuses primarily on home purchase and mortgage refinance loans and does not adequately address the unique requirements of construction loans, the ICBA said.
“ICBA and our affiliated state community banking associations urge the CFPB to allow community banks to test updated mortgage disclosures that would improve the process for lenders and borrowers alike,” ICBA President and CEO Rebeca Romero Rainey said in a statement. “The proposed template will provide consumers greater clarity, streamline the process through improved disclosure requirements, and expand access to more affordable homes in rural areas with limited housing supply.”
The proposed template language would modify current loan estimate and closing date disclosure to include construction phase details, cost breakdowns and other disclosures related to construction-to-permanent loan financing, the association said.
“Streamlining the TRID mortgage disclosure process for single-close construction-to-permanent loans would support the use of these loans, save time for lenders, and create cost savings for consumers,” the ICBA said.
One of the goals is for the modified language to spur community banks to pursue additional mortgage lending business in the realm of construction loans, according to formal comments submitted by Ron Haynie, SVP of mortgage finance policy at ICBA.
“We therefore urge the Bureau to approve this proposal and allow ICBA and community bank lenders to undertake a comprehensive test of these new disclosures to validate their use and benefits,” Haynie said in formal comments submitted to Chopra.