CFPB Finalizes Minor Changes to “Know Before You Owe” Mortgage Rules
By Anna DeSimone, President
Changes Address Mortgage Disclosures After Locking Interest Rates and Information on Construction Loans
January 20, 2014, the Consumer Financial Protection Bureau (CFPB) finalized two minor modifications to the “Know Before You Owe” mortgage disclosure rules. The changes finalized January 20th which were proposed in October 2014, address when consumers will receive updated disclosures after locking in an interest rate, and how consumers receive information regarding certain construction loans.
Under the rule, creditors are required to provide a revised Loan Estimate within three business days after a consumer locks in a floating interest rate. The original rule required creditors to provide the revised Loan Estimate on the date the rate is locked. After hearing feedback from stakeholders, the Bureau determined that the short turnaround could potentially pose challenges for creditors that currently allow consumers to lock interest rates late in the day or after business hours. That could result in creditors only allowing consumers to lock interest rates during business hours or even early in the day. Allowing three business days for the new Loan Estimate will give creditors enough time to provide new disclosures without having to reduce flexibility that consumers may have today in locking their rates.
The second change being finalized is a minor addition on the Loan Estimate form for loans that involve new home construction. These construction loans often take longer to settle than other loans, and the estimated charges can change. This change creates a space on the Loan Estimate form where creditors could include language informing consumers that they may receive a revised Loan Estimate for a construction loan that is expected to take more than 60 days to settle.
The “Know Before You Owe” mortgage disclosure rule, including the changes finalized as of January 20, is effective August 1, 2015. The CFPB does not anticipate that these minor modifications will affect the industry’s ability to come into compliance with the rules within the 20 month implementation period.
The CFPB has online implementation resources available, including compliance guides, sample Loan Estimate and Closing Disclosure forms, and a calendar showing timing requirements based on a sample real estate transaction.
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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