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A Realtor’s Guide to… What you need to know before 10.03.2015

A Realtor’s Guide to… What you need to know before 10.03.2015

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Page 1: A Realtor’s Guide to… What you need to know before 10.03.2015

A Realtor’s Guide to…

What you need to know before10.03.2015

Page 2: A Realtor’s Guide to… What you need to know before 10.03.2015

CFPBChallenged to combine FOUR familiar disclosures.

INITIA

L

FINAL

Page 3: A Realtor’s Guide to… What you need to know before 10.03.2015

• Credit Cards• Mortgages• Bank Accounts & Services• Credit Reporting• Money Transfers• Debt Collection• And More

What does the CFPB regulate?

Page 4: A Realtor’s Guide to… What you need to know before 10.03.2015

Relief Available (Sec 1055) Rescission or reformation of contracts Refund of monies or return of real property Disgorgement or compensation for unjust enrichment Payment of damages Public notification of violation Limits on activities or functions Civil penalties against businesses or individuals not

complying with the law: Up to $5,000/day If reckless, up to $25,000/day If knowingly, up to $1,000,000/day

Protecting Consumers…

Page 5: A Realtor’s Guide to… What you need to know before 10.03.2015

Notable fines include: Ally Bank $80 Million JP Morgan Chase $309 Million American Express $59 Million

Remember that the CFPB oversees RESPA. It is possible for the CFPB to reach outside of the banking and lending environment for fines and penalties.

Protecting Consumers cont’d…

Page 6: A Realtor’s Guide to… What you need to know before 10.03.2015

Lending Ecosystem

Page 7: A Realtor’s Guide to… What you need to know before 10.03.2015

TILA/RESPA Integrated Disclosures (TRID) 1888 Page Rule Governed by the Truth-in-lending Act (TILA) and Real Estate Settlement

Procedures Act (RESPA) TILA provides different accuracy expectations and enforcement provisions

than RESPA, as well as some differences in definitions, with associated risks and penalties for the lender that are much more severe than RESPA.

The new forms put all loan information onto a level playing field for “easy reading” for the consumer. Eliminate costs and risks buried in the fine print. Elimination of confusing points and fees. Elimination of last-minute closing shocks.

The creditor is responsible for delivering the Closing Disclosure to the consumer. Creditors may use settlement agents to provide the Closing Disclosure,

provided they comply with the final rule.

What you need to know by 10.03.2015

Page 8: A Realtor’s Guide to… What you need to know before 10.03.2015

TRID continued… Loan Estimate (LE)

Replaces GFE and Initial TIL 3 Pages long Delivery to Consumer within 3 days of Loan Application

Closing Disclosure Form (CD or CDF) Replaces HUD-1 and Final TIL 5 Pages long Delivery to consumer 3 days prior to closing Lender must receive both the buyer and seller sides Realtors and Sellers will not be provided a copy of the buyers’ CDF unless by

buyer due to NPI associated with the loan terms ALTA is creating a “Settlement Statement or Disbursement Authorization” form

template for Settlement Agents to prepare as one combined form with a statement signed by Seller, Buyer, and Settlement Agent validating it as “true and accurate” reflection of the terms of the transaction.

What you need to know by 10.03.2015

Page 9: A Realtor’s Guide to… What you need to know before 10.03.2015

6 items of information required to complete Loan Application

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; and The mortgage loan amount sought.

NOTE: This new definition of application is similar to the current definition under Regulation X (§ 1024.2(b)). The Bureau has revised the definition of application to remove the seventh “catch-all” element of the current definition under Regulation X, that is, “any other information deemed necessary by the loan originator.”

Loan Application

Page 10: A Realtor’s Guide to… What you need to know before 10.03.2015

Hand delivery: In person delivery to consumer. (i.e. deliver CDF on Monday, close on Thursday)

US Mail: assumed receipt 3 days after placed in mail

Email: with receipt confirmed by consumer after approval to use email method of delivery (if not, assumed 3 days to open email)

Overnight Delivery: with consumer confirmed receipt

Delivery Options §1026.19(f)(1)

Page 11: A Realtor’s Guide to… What you need to know before 10.03.2015

There are some compliance concerns if the lender chooses a delivery method other than “Hand Delivery” or “US Mail”.

Protection of NPI or NPPI (Non-Public Information and Non-Public Personal Information)

Risk to lender to document confirmation of receipt was actually received from borrower(s) required to receive the form within the timing requirements under the rule

Most lenders are choosing to implement processes to document delivery by US Mail or Hand Delivery

Delivery Option Concerns

Page 12: A Realtor’s Guide to… What you need to know before 10.03.2015

Waiver §1026.19(f)(1)(iv)

Consumer may waive waiting period if they have a bona fide personal financial emergency. Must be in writing by consumer and not pre-typed form

provided by lender. Lender compliance departments will most likely take

the conservative approach to NOT WAIVE when reviewing request for waiver

No waiver afforded for Seller’s financial emergency. Purposely narrow definition by example: an imminent sale

of consumer’s home at foreclosure for refinances transactions. Bureau chose not to expand definition.

Page 13: A Realtor’s Guide to… What you need to know before 10.03.2015

Re-disclosure Requirements

If the creditor makes any of the following changes between the time the Closing Disclosure form is given and consummation, a new Closing Disclosure must be delivered to the borrower and a new waiting period must commence:

Requiring additional 3-day review period

Inaccurate APR Change in loan product Prepayment penalty added

Page 14: A Realtor’s Guide to… What you need to know before 10.03.2015

Delivery Period Examples

If the delivery of the Closing Disclosure is by any means other than “hand delivery,” a three day delivery period is added.

The three day delivery period expires on third day or upon receipt of signed confirmation by ALL borrowers.

Then the three day waiting period starts.

Page 15: A Realtor’s Guide to… What you need to know before 10.03.2015

Delivery Period Examples

The waiting period is based on business days of Monday through Saturday, excluding Sunday and federal holidays.If the settlement agent or lender hands the Closing Disclosure to the borrower on a Monday, the soonestthe transaction can close is Thursday.

Page 16: A Realtor’s Guide to… What you need to know before 10.03.2015

Most close-ended loans originated after August 1, 2015 will be subject to the new rules and forms.

Purchase money Refinance 25 acre Vacant Land Construction-only Timeshare

Loan Types Affected

Page 17: A Realtor’s Guide to… What you need to know before 10.03.2015

Close-ended loans not subject to the new rule Reverse Mortgages Home Equity Line of Credit (HELOCs) Chattel-dwelling/Mobile Home-only loans Creditors who originate less than 5 loans in a calendar year

The portions of TILA and RESPA governing reverse mortgages are not being replaced or deleted. For these loans: Creditors must issue a TILA disclosure and Good Faith Estimate Settlement agents must use a 2010 HUD-1 settlement

statement to close

Exempted Transactions

Page 18: A Realtor’s Guide to… What you need to know before 10.03.2015

TRID Terminology

New Terminology

Consummation is defined as the day the borrower becomes legally obligated under the loan, which would be the date of signing, even if the loan has a rescission period under TILA’s Regulation Z.

It is anticipated lenders will send out the Closing Disclosure prior to delivering loan documents to the settlement agent for signing.

Page 19: A Realtor’s Guide to… What you need to know before 10.03.2015

Loan Estimate

The creditor can only reissue a Loan Estimate based on six events which qualify as a “Changed Circumstance:”

Information provided by consumer inaccurate Extraordinary event Discovery of new info specific to consumer or

transaction Revision requested by consumer On day of locking rate After 10-day expiration

*Disclosure required within 3 days of knowledge but not on same day as Closing Disclosure

Page 20: A Realtor’s Guide to… What you need to know before 10.03.2015

How will this affect our industry?

Lenders are more likely to prepare their own Closing Disclosure earlier and mail it out far in advance of the actual closing.

Statement to explain the closing costs at signing. Sellers will know if closing will occur.

Lenders are requiring final information 10 days prior to closing

The rule doesn’t cover sellers therefor sellers may not receive final figures until day of closing as the final numbers come through to the Settlement Agent

Page 21: A Realtor’s Guide to… What you need to know before 10.03.2015

Nationally - NAR, MBA, ABA & ALTA Industry Publications

RESPA-TILA-TALK.com CFPB.gov

5 page Executive Summary Small Business Compliance

Guide – great 89 pages What it Means for Service

Providers summary Sign up for Emails

Resources and References

Page 22: A Realtor’s Guide to… What you need to know before 10.03.2015

1. Example of Closing Disclosure2. RESPA/TILA article by Waco

CEO, Patrick Curry3. TRID Resources4. Link for TRID Questions5. Stay engaged in the

conversation#wacoisready AND #wacoknows

WACO IS READYwww.wacotitle.com