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New Rule Affects Title Companies, Lenders, Mortgage Brokers and Borrowers As Consumer Financial Protection Bureau Finalizes "Know Before You Owe" Mortgage Forms.

A final regulation that combines mortgage disclosures required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), finalized by the Consumer Financial Protection Bureau (CFPB), was released today. The CFPB combined the current federally required mortgage disclosures into two forms, the loan estimate that estimates the cost of a mortgage and the closing disclosure that details costs at closing. All lenders will be required to use the forms by Aug. 1, 2015. Under the 2010 Dodd-Frank Act, the CFPB was required to propose, though not complete, regulations combining and simplifying a thicket of federal disclosures under the Truth in Lending Act and the Real Estate Settlement Procedures Act. This rule will affect every lender, every title company, and every borrower and property seller.  There are no small creditor carve-outs on this rule, despite their written protests that these regulations are unnecessary and harmful -- given the close relationship small creditors have with their customers.

The final rule also revises the definition of finance charge and alters regulatory tolerances for differences between costs disclosed in the new “loan estimate” and the “closing disclosure.” The final rule does not include an all-inclusive annual percentage rate, or APR.

Class Actions: This final TILA/RESPA disclosures rule will complete the CFPB’s mortgage rulemakings. Most of CFPB’s previous mortgage rules are set to take effect in January. In that interim, lenders, title companies and others in the process will begin testing, analyzing and reporting mortgage data. If experience is a teacher, will Plaintiff’s class action attorneys be doing likewise, looking for any minor irregularity in the transition;  much like efforts to cull HDMA data for lenders ripe for class action treatment?

Enforcement Actions: In terms of enforcement actions, CFPB Director Richard Cordray told lawmakers that the Qualified Mortgage rule will take effect Jan. 10 as planned, but that examinations in the early months of implementation will focus on lenders’ “good faith” efforts to comply. In his testimony to the Senate Banking Committee, Director Cordray was pressed by Republican Senator Coburn about what was meant by “early months”. The Director was unwilling to provide any specificity, stating only that it meant “several months” beyond January.

We will be preparing a Johnson & Bell, LTD Alert on the details on the final rule as well as the interplay between reporting and discoverability.

The Rule is available at http://www.consumerfinance.gov/blog/a-final-rule-that-makes-mortgage-disclosure-better-for-consumers/For more information, please contact:  H. Patrick Morris at 312-984-0244 or morrisp@jbltd.com.