MADISON, Wis. – The largest-ever mortgage lending regulatory compliance change is taking place with the CFPB’s new TILA/RESPA Integrated Disclosure Rule, and credit unions need to be prepared for it.
That was the warning issued during CUNA Mutual’s Discovery Conference today.
“Don’t underestimate the amount of staff education and training that will be needed,” said Theresa Reinke, LOANLINER compliance consultant for CUNA Mutual Group. “The TILA/RESPA Integrated Disclosure Rule will completely overhaul the way credit unions go about mortgage lending and will likely impact the types of mortgage lending credit unions engage in because it redefines disclosures for first mortgages and closed-end home equity loans.”
The CFPB issued the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) Rule in November 2013 with a goal of simplifying disclosures consumers receive when applying for and closing on mortgage loans.
“Overall, TILA/RESPA will directly affect the people, processes and technology credit unions use to support their lending operations because the regulations require loan disclosures to change dynamically to reflect each borrower’s unique loan features,” said Reinke. “Specifically, the rule will impact credit unions’ relationships with their system providers and, most importantly, their members and their own staff.”
The TILA/RESPA rule becomes effective and must be complied with by Aug. 1, 2015.
No Grandfather Clause
Reinke noted there is no grandfather clause in the Integrated Disclosure Rule and any application taken on or before July 31, 2015 must use the old disclosures and continue with those through the closing of the loan. Any application taken on or after Aug. 1, 2015 must use the new disclosures, meaning a period of overlap during which CUs will be running “dual systems.”
The new Loan Estimate replaces the Initial TILA Disclosure and the RESPA Good Faith Estimate, which is provided three business days after the lender receives an application. Then, the Closing Disclosure replaces the Final TILA Disclosure and HUD-1 Settlement Statement, which is provided three business days before closing.
Reinke reminded audience members that the new disclosures are not merely replacing or combining the existing disclosures. The new documents will have new data elements, calculations, and restrictions, and incorporate dynamic elements based on loan type, loan feature, and loan purpose.
CUNA Mutual advised that to be fully prepared, credit unions must start making and documenting business decisions regarding the type of lending programs offered, and fees and services charged, and must update systems where needed.
Additional resources can be found at www.consumerfinance.gov/regulations, and for CUNA Mutual Group LOANLINER customers at