The Consumer Financial Protection Bureau (CFPB) has
announced final updates to it
“Know Before You Owe” mortgage disclosure rule which went into effect on
October 3, 2015. The changes are intended
to formalize guidance on the rule and provide greater clarity and certainty.
The amendments finalized on Friday address
a handful of issues within the rule.
- Before implementation of the mortgage disclosure rule
the total of payments disclosure was determined using the finance charge
as part of the calculation. The
rule changed the calculation to not make specific use of that charge. The update will include tolerance provisions
for the total of payments that parallel the tolerances for the finance
charge and disclosures affected by the finance charge.
- The rule gave a partial exemption from disclosure
requirements to certain housing assistance loans, originated primarily by
housing finance agencies. The update clarifys that recording fees and
transfer taxes may be charged in connection with those transactions
without losing eligibility for the partial exemption and excludes those
fees and taxes from the exemption’s limits on costs. CFPB said this should
allow more housing assistance loans to qualify for the partial exemption, encouraging
- Currently, the Know Before You Owe rule is applied only
to transactions secured by real property, as defined under state law. CFPB
is finalizing updates to extend the rule’s coverage to include all cooperative
units, including those treated by state law as personal property. The
Bureau says this change should simplify compliance and ensure that more
consumers benefit from the rule.
- The Bureau has received many questions about sharing
the mortgage disclosures provided to consumers with third parties to the
transaction such as the seller and the real estate brokers. This is usual,
accepted and appropriate and the Bureau is finalizing additional
commentary to clarify how this can be accomplished.
“A mortgage is one of the largest
financial decisions a consumer will ever make, and CFPB’s rules help ensure
consumers have the easy-to-understand information they need before making a
decision that will significantly impact their financial lives,” said CFPB
Director Richard Cordray. “Our updates will clarify parts of our mortgage
disclosure rule to make for a smoother implementation process for lenders and
In addition to the final rule, the
CFPB is issuing a proposal addressing when a creditor may use a Closing
Disclosure, instead of a Loan Estimate, to determine if an estimated closing
cost was disclosed in good faith and within tolerance. This proposal is
and comments will be accepted for 60 days after is publication in the Federal Register.