The new integrated disclosures include the Loan Estimate (LE) and the Closing Disclosure (CD).
Before last October, for any residential real estate transaction using mortgage financing you were to have been provided a Truth-in-Lending (TIL) and Good Faith Estimate (GFE) disclosures within three business days of your loan application. In addition to these, no later than three days before closing you, the borrower was to receive the final TIL Disclosure and the HUD-1 Settlement Statement.
These disclosures often proved to be confusing to consumers, especially the TIL with an Annual Percentage Rate that was always different than your actual note rate.
In response, legislators in conjunction with banking lobbyists and a bunch of lawyers drafted what became the Dodd-Frank Act. It directed the Consumer Financial Protection Bureau (CFPB) to combine the four forms into two integrated disclosures, one for the start of the process (the Loan Estimate or LE) and another to be given to you just prior to closing (the Closing Disclosure or CD).
Here’s an insight that the CFPB provided relating to these new integrated disclosures:
“The first new form (the Loan Estimate) is designed to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage for which they are applying. This form will be provided to consumers within three business days after they submit a loan application. The second form (the Closing Disclosure) is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction. This form will be provided to consumers three business days before they close on the loan.
The forms use clear language and design to make it easier for consumers to locate key information, such as interest rate, monthly payments, and costs to close the loan. The forms also provide more information to help consumers decide whether they can afford the loan and to compare the cost of different loan offers, including the cost of the loans over time.
In developing the new Loan Estimate and Closing Disclosure forms, the Bureau has reconciled the differences between the existing forms and combined several other mandated disclosures, such as the appraisal notice under the Equal Credit Opportunity Act and the servicing application disclosure under RESPA. The Bureau also has responded to industry complaints of uncertainty about how to fill out the existing forms by providing detailed instructions on how to complete the new forms. This should reduce the burden on lenders and others in preparing the forms in the future.”
You have to give the industry some credit here because after all the initial wailing and cajoling, we are handling the changes quite well, thank you. This in light of the CFPB’s insistence that there be a hard date change without any phase-in period. One day was the old TIL and GFE, and the next was only the LE and CD.
No one really knew whether the new systems would be able to adequately handle the required changes such as the ability to electronically notify and record the borrower’s receipt of the new disclosures. But, that too now seems to be a forgone conclusion.
Next, find out when your mortgage request technically becomes an application.