Pub. 5 2014 Issue 2

www.wvbankers.org 24 West Virginia Banker B efore we buy into that description, let’s take a deeper dive into exactly what changes are found buried within the 1,888 pages of explanations, require- ments and model disclosures. The CFPB received over 3,000 comments when the rule was first proposed. The CFPB expected this type of reaction be- cause of the significant changes. The new requirements not only affect two major regulations, they also affect the entire res- idential real estate industry. The CFPB re- sponded to the comments by adding over 750 pages to the regulation, bringing the total to 1,888 pages for this amendment alone. Of course the agency is justifying these changes by stating that the actual regulatory changes only accounts for 70 pages, bringing the total to 279 pages in length. By any standard, that is a lot of information to digest and implement. Ah, I digress. Let’s put these facts out of our mind and move on to what this actually means to us as bankers. The purpose of the rule is to improve the way consumers get loan information whey they apply for and close on a mortgage loan. The majority of the requirements are about the two required disclosure documents, which are the Loan Estimate (replaces the current GFE, Appraisal No- tice, Servicing Disclosure, ECOA notice and the Early Truth-in-Lending) and the Closing Disclosure (replaces the current HUD and the Final Truth-in-Lending). The rule also contains some key provi- sions about the timing of these disclosures. The purpose of reducing the number of the disclosures to only two is not only to reduce the burden on the lenders and other loan personnel who prepare these forms, but to also simply the forms to be easily understood by the consumer. Before we move on, we would be remiss if we did not also note that the proposed integrated mortgage disclosure rule added some language to the official interpreta- tion of Regulation Z which is seemingly unrelated to integrated disclosures. The CFPB slipped in a fairly big change that may broaden the scope of Regulation Z to expressly include loans to trusts. Section 1026.3(a)(2) of Reg Z specifically exempts extensions of credit “to other than a natural person.” Many compliance specialists often argued that because trusts, are not defined as “natural persons,” a loan to such an entity would be exempt from the regulation. While there has been debate to the contrary, and even some case law suggesting that revocable trusts are still subject to the rule, there was no definitive guidance — until now. The integrated disclosure rule now amends the commentary to section 1026.3(a)(2) and provides, in part that, “Credit extend- ed for consumer purposes to certain trusts is considered to be credit extended to a natural person rather than credit extended to an organization.” (Commentary to 12 CFR 1026.3(a)). The commentary further explains: “Regardless of the capacity or capacities in which the loan documents Compliance Alliance: Integrated Mortgage Disclosures Remember back in 2012 when the CFPB proposed the “Integrated Mortgage Disclosures”? This rule requiring the Know-before–you-Owe disclosures was touted by many as the perfect marriage of TILA and RESPA.