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CFPB Makes Two 'Minor Modifications' to Mortgage Disclosure Rule
Tuesday, January 27, 2015 6:20 AM

The Consumer Financial Protection Bureau announced two "minor modifications" to what are now dubbed the "know before you owe" mortgage disclosure forms. The changes will allow lenders more time to send updated loan estimates after a consumer locks in an interest rate and expand disclosure requirements when a loan involves a new home construction.

"The new 'Know Before You Owe' mortgage forms improve consumer understanding, aid comparison shopping, and help prevent closing table surprises for consumers," said CFPB Director Richard Cordray. "Today's minor changes will make it easier for creditors to comply with the disclosure rules while maintaining these important new consumer protections."

The new rule, which will go into effect Aug. 1, will combine what had been seen as overlapping requirements from the Real Estate Settlement Procedures Act and the Truth in Lending Act into a single, consolidated mortgage disclosure regime.

The CFPB regulation had originally required creditors to provide an updated loan estimate on the same day an interest rate was locked in. But now institutions will have within three business days to provide the updated estimate.

"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," the CFPB said. "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 CFPB also amended the loan estimate form for cases where a mortgage is for new home construction. The form will now include additional space for lenders to inform borrowers that a revised loan estimate for loans involving new construction could take more than 60 days to settle.