ARELLO® (Association of Real Estate License Law Officials) Reprinted courtesy of ARELLO Boundaries magazine
The Consumer Financial Protection Bureau CFPB) recently issued proposed amendments to its TILA-RESPA Integrated Mortgage Disclosure forms and rules, one of which is intended to clarify that lenders are permitted to provide the required Closing Disclosure to real estate agents.
The new disclosures (commonly referred to as “TRID”, but dubbed “Know Before You Owe” by the CFPB) replaced the previous disclosure forms required in all “federally-related” mortgage transactions, including the “HUD-1” settlement statement, with the CFPB’s residential mortgage Loan Estimate and Closing Disclosure forms.
Since the implementation of the TRID rules nearly a year ago, many real estate agents have experienced difficulties in obtaining copies of completed Closing Disclosure forms from lenders. The issue involves lender concerns about potential liabilities arising under the privacy provisions of the federal Graham-Leach-Bliley Act (GLBA), which prohibit lenders from disclosing customers’ “nonpublic personal information” (NPI) to nonaffiliated third parties without providing customers with notice and an opportunity to opt-out of such disclosure.
[The Closing Disclosure has also raised questions in some state real estate regulatory jurisdictions whose licensing laws require brokers to ensure that transaction parties receive a closing statement. [See, Real Estate Bulletin February 2016]
In its proposed rulemaking notice the CFPB acknowledges that prior to implementation of the TRID rules, the Real Estate Settlement Procedures Act and its implementing regulations required settlement agents to issue a HUD-1 form to lenders, borrowers, sellers, and their agents. The CFPB also recognizes that many transaction participants rely on shared information to complete residential transactions; including real estate agents, loan officers, settlement agents and others. Consequently, the CFPB proposes to amend its rules to acknowledge that, in accordance with applicable exceptions to the privacy requirements of the GLBA, it is “usual, appropriate, and accepted” for creditors and settlement agents to provide the combined or separate Closing Disclosure to transaction parties and their real estate brokers or other agents. This will be accomplished by incorporating the CFPB’s previous informal guidance on the subject into the official rule commentaries to clarify that the lender, at its discretion, “may make modifications to the Closing Disclosure form to accommodate the provision of separate Closing Disclosure forms to the consumer and the seller…”. The commentaries will also explain the methods by which creditors can separate buyers’ and sellers’ information for that purpose.
Other changes proposed by the CFPB include:
“Total of Payments” Tolerances: The TRID rules changed the previous “total of payments” disclosure calculation so that it did not make specific use of the finance charge. The CFPB now proposes to include tolerance provisions that return the calculation to what it was prior to implementation of the TRID rules.
Housing Assistance Lending: The CFPB proposes to promote housing assistance by amending the current partial exemption from the disclosure requirements for certain housing assistance loans, to allow charges for recording fees and transfer taxes.
Cooperatives: Currently, the TRID rules only cover transactions secured by real property, as defined under state law. Buyers of units in a cooperative, however, become a shareholder in a corporation that owns the property. Some states treat cooperative units as personal property, while others treat them as real property. The CFPB proposes to extend the TRID rules to cover all cooperative units, thereby simplifying compliance.
The CFPB is seeking public comment on the proposals, which include numerous other technical changes to the disclosure forms and rules. Comments are due Oct. 18, 2016 and may be submitted by several means including electronically via www.regulations.gov.
This article came from the October 2016-Vol47-2 edition of the bulletin.