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ICBA expressed support for the Consumer Financial Protection Bureau’s approval of ICBA’s proposed template to improve mortgage disclosures required under TILA-RESPA Integrated Disclosure rules.
Disclosure Template: Under ICBA’s Trial Mortgage Disclosure Sandbox Template proposal, the bureau would permit community banks to test modified disclosures for consumer construction and construction-to-permanent loans, which are a core offering of community banks in many local communities.
CFPB Process: In a blog post announcing its decision, the CFPB said:
It solicited comments on ICBA’s application in February and approved the template after reviewing public feedback.
Individual lenders can apply for approval to test the alternative disclosures for construction loans.
It will evaluate lender plans to test the disclosures in deciding whether to approve individual lender applications.
ICBA Response: ICBA said the pilot program will help improve mortgage disclosures for both lenders and borrowers. “The proposed template will provide consumers greater clarity, streamline the process through improved disclosure requirements, and expand access to more affordable homes in rural areas with limited housing supply,” ICBA President and CEO Rebeca Romero Rainey said in a national news release.
The Problem: The current TRID disclosure regime focuses on transactions for purchasing a home or refinancing a mortgage loan, so it does not adequately disclose the components of construction loans. While construction loans are often needed in small towns and rural communities, using existing TRID disclosures is confusing, leading some creditors to avoid making these loans due to compliance concerns.
Proposal Details: Developed alongside a group of community bankers, technology vendors Land Gorilla and Wolters Kluwer, and the Community Bankers Association of Illinois, ICBA’s proposal would:
Modify the current Loan Estimate and Closing Disclosure to include improved construction phase details, a construction cost breakdown, and enhanced disclosures regarding the consumer’s permanent loan financing.
Streamline the TRID mortgage disclosure process for single-close construction-to-permanent loans to support the use of these loans, save time for lenders, and create cost savings for consumers.
Outlook: Following the CFPB’s publication of the template, ICBA will work with community bankers interested in testing the new forms. Community bankers who wish to be included in the testing process should contact ICBA Senior Vice President of Housing Finance Policy Ron Haynie at [email protected] for more details.