“Know Before You Owe” (TILA-RESPA) Effective 10-3-2015

Important News From DORA

The Consumer Financial Protection Bureau’s (CFPB) “Know Before You Owe” mortgage rule (also known as the TILA-RESPA Integrated Disclosure rule) will be effective October 3, 2015.  This rule consolidates four existing disclosures required under Truth-in-Lending (TILA) and the Real Estate Settlement Procedures Act (RESPA) for transactions secured by real estate into two new forms:

  • The new “Loan Estimate” Form –integrates and replaces the existing RESPA Good Faith Estimate and the initial Truth-in-Lending forms.
  • The new “Closing Disclosure” Form – integrates and replaces the existing RESPA HUD-1 and the final Truth-in-Lending forms.

The new federal rule was promulgated with the intent of consumer protection in mind.  The rule introduces new, easier to use mortgage disclosure forms that clearly lay out the terms of a mortgage for consumers.  The new Loan Estimate and Closing Disclosure mortgage forms help consumers understand their options, choose the deal that’s best for them, and avoid costly surprises at the closing table.

It will be important for all real estate professionals to be familiar with the new forms and processes as mandated under this new rule.  Timely and effective communication among all the parties (mortgage loan originator, listing/buyer’s brokers, buyer/seller and title companies) is key to the successful implementation of the new requirements.  As such, a joint task force made up of inter-industry trade associations was formed to facilitate “best practice” guidance for Colorado real estate professionals.  The “TILA-RESPA Integrated Disclosures Rule Best Practices” guide can be found here.

Additionally, at the July 30, 2015, Board of Mortgage Loan Originators (Board) meeting, the Board held a rule-making hearing and adopted rules with regard to the written disclosure of fees and costs that must be provided to borrowers within 3 business days of a loan application.  The Board updated the Colorado mortgage disclosure rules with the goal of streamlining the process for the consumer and reducing the regulatory burden for the licensed mortgage loan originator.  This included removing duplicative, unnecessary, and at times confusing forms and disclosure requirements.

As a result, the Colorado specific rules follow the federal protocol of disclosure and therefore; mortgage loan originators who fully comply with all the provisions of the TILA-RESPA Integrated Disclosure rule, including utilizing the appropriate federal forms will be in compliance with the written disclosure requirements of section 12-61-914, C.R.S. The updated Board rules will be effective October 3, 2015.  Please visit the Division’s website to review the updated rules: Chapter 1 and Chapter 5.

Inter-Industry Integrated Disclosure Rule Best Practices Guide

MLO Board Rules Chapters 1 & 5 Updated

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