RESPA-TILA Disclosure Change Announcement; No Exemption for Small Lenders

One day before a scheduled Consumer Financial Protection Bureau (CFPB) "field hearing" in Boston, Bloomberg is reporting that its Director, Richard Cordray. will use the occasion to unveil the long-awaited new mortgage disclosure form.  Bloomberg says CPPB will not provide a carve-out exempting small lenders from using the form.

The supposedly simplified form has been on the drawing boards since before CFPB was formed and is intended to replace forms mandated by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).  A simplified format for these disclosures was first suggested by Elizabeth Warren in 2011 and was among the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act which consolidated responsibilities for the disclosures from two separate agencies into CFPB. 

According to the Bloomberg's Carter Dougherty, use of the new form would begin on August 1, 2015.  Like the forms it will replace, it will contain information on interest rates, monthly payments and closing costs but will present them in a less cluttered format and with key points highlighted.    

Dougherty quotes Camden Fine, president of the Independent Community Bankers of America as saying he had been told by Bureau officials that they were "not inclined" to exempt small lenders from the rule which Fine called a regulatory burden.  Small lenders are not exempted from the current disclosure requirements but they have maintained that their close relationships within their communities make a new form unnecessary.

The form will be the latest in a series of new regulations required by Dodd-Frank and implemented primarily by CFPB that affect loan originators, lenders, and servicers.  Many of the regulations go into effect in January 2014 and small lenders in particular have complained that individually and in the aggregate they present a significant burden for community banks and other small lenders.  Many of the spokespeople for this group have said that the regulations could drive some such institutions out of the mortgage business.

Tomorrow's field hearing will feature remarks by Cordray and testimony from consumer groups, industry representatives, and members of the public.  In announcing the hearing CFPB said it "is possible this hearing will be used by the CFPB to announce the issuance of the TILA-RESPA integrated disclosures final rule."