TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure forms Nuts & Bolts Fayetteville Regional Association of REALTORS® June 23, 2015

Disclaimer There is no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. The presentation is for informational purposes only and is not and may not be construed as legal advice. You should consult with an attorney prior to embarking upon any specific course of action.

Implementation Delayed  Last Wednesday the Consumer Financial Protection Bureau delayed the TILA-RESPA Integrated Disclosure rule until October 1, The delay resulted from the failure of the CFPB to notify Congress of the new within the time required under the Congressional Review Act.

Overview Changes to Loan Forms and Processes are coming  What  New Loan Estimate and Closing Disclosure Forms  New 3 business day delivery rules  Lender charged with legal liability  When  Effective for all loans on or after October 1, 2015 Except Equity Lines, Reverse Mortgages, Mobile Homes  Why  Dodd-Frank mandates combination of TILA, GFE and HUD-1.  How  Consumer Financial Protection Bureau (CFPB) created.  Serious fines can be applied  Who  Loan Estimate – Lender or Mortgage Broker  Closing Disclosure – Lender or Settlement Agent

Overview Changes to Loan Forms and Processes are coming  New  Lender - Creditor  Borrower – Consumer  Tolerance – Variance  Closing - Consummation  Probable Impacts  CFPB erred on side of CONSUMER PROTECTION versus CONVENIENCE  Longer closing cycle  Delays in closings – not seen as bad thing by CFPB  Disruption  Higher costs

Loan Estimate (LE) Overview  Effective for loans originated on or after October 1, 2015  3-page form combines TILA and GFE  Based on unverified information from consumer  Have to be provided to consumer within 3 business days after submission  Provides summary of key loan terms and estimates of loan and closing costs  Designed to mimic the Closing Disclosure Form.  Identifies tolerances

 The CFPB essentially has turned the Loan Estimate into an “exact” loan estimate by expanding the categories in which fees can’t change.  Unless an exception applies, charges of the following services cannot increase:  The lender’s charges for its own services.  Charges for services provided by an affiliate of the lender.  Charges for services for services for which the lender does not permit the consumer to shop.  Charges for other services can increase, but generally not by more than 10 percent.  (Charges for services recommended by the lender that were in the 10 percent bucket are now in the zero-variation bucket.) Variances – the new Tolerances

Closing Disclosure Overview  Replaces final TIL and HUD-1  5 pages that detail the disclosure of closing costs and loan terms.  Received by the consumer 3 business days before consummation  New Closing Disclosure required if change in rate by 1/8%, a change in loan product, or a prepayment penalty added.  Line numbers from HUD are eliminated  Different versions for purchase and refinances and for seller  Lender is responsible for the accuracy of the forms

Three-Day Closing Disclosure Rule  Disclosure forms must be received by consumer three business days before consummation.  The three-day period is measured by days, not hours. Thus, disclosures must be delivered three days before closing, and not 72 hours prior to closing. If a federal holiday falls in the three-day period, add a day for disclosure delivery.  Delivery Options In person: A disclosure is deemed received by the consumer the day it is delivered in person. Mail/Fed-Ex/courier: A lender or settlement agent can presume the consumer received the disclosure three business days after mailing. Can be rebutted by evidence the consumer received earlier. Same presumption as postal mail.  Mail Box Rule – Safe Harbor

ALTA Settlement Statement  New Closing Disclosure from does not meet state requirements that accurate costs for seller and homebuyer are shown.  Requires settlement providers to inaccurately disclose the costs of title insurance to the consumer.  To bring standardization to the industry, ALTA developed model Settlement Statements for title insurance and settlement companies to use.  Four versions include combined, buyer/borrower, seller, and cash)  Document is signed by borrower at closing

What Are Lenders Doing?  National lenders dealing with CFPB for years.  Wells, BOA and Chase have announced that they will be responsible for the forms and the delivery.  Proposed Process Flow  Engage the settlement agent 10 days prior to closing.  Generate and send Closing Disclosure six business days prior to scheduled closing.  Require that all changes to the loan and fee data be submitted through Closing Insight prior to signing.  Closing Insight/ Simplifile portals  Regional and local lenders will develop their own procedures

What Should Realtors Be Doing Now?  Recognize that the Closing Disclosure will fundamentally change the closing process and ultimately impact their clients.  Learn as much as you can about the new rules and prepare for the changes in the transaction process well ahead of time.  Meet with lenders you trust to learn more about the new rules.  Develop a process for Realtor to receive a copy of the Closing Disclosure Forms. (Lenders will only send to borrower.)  Make sure your closing partners are vetted and verified for Best Practices by your lenders and meet with them to discuss the new disclosures and their preparations for the new regulatory environment.  Learn the lingo – CFPB, consummation, NPI, Best Practices, etc.  You will need to change your scheduling calendar to accommodate the additional days needed between delivery of documents, receipt of documents and closing date.

What Should Realtors Be Doing Now?  Educate the sellers on the importance of following contract terms – leave the appliances, etc.  You will need to get the borrower paid invoices to the settlement agent well in advance of the three day delivery requirement.  Consider policy of having two “walk-through” inspections – one several weeks early and then one at the end.  Consider policy restricting “back to back” closings.  Consider policy on addressing “informal closings” in the parking lot where buyer and seller agree to resolve small issues away from closing table for fear of closing delay.  Consider changes in Purchase Contract to:  Protect the Seller in the event the Buyer’s lender delays the closing.  Ensure that the Buyer understands and is protected with Owners Title Insurance.  Extend the contract expiration dates back to at least 60 days.  Proceed with changing current processes to accommodate new dates.  Begin training now.

Questions? David Allred Cunningham & Company Mortgage Bankers Tony Chavonne Single Source Real Estate Services