The Consumer Financial Protection Bureau will convene a Small Business Review Panel to monitor the effects that the new mortgage disclosure form will have on small mortgage lending firms.
Under the Small Business Regulatory Enforcement Fairness Act, the CFPB must sometimes form and chair a 15- to 20-member panel of small business owners that are directly impacted by the proposed rules. They must include representatives from the Small Business Administration and the Office of Management and Budget and issue a report within 60 days on their findings and alternatives. (The CFPB has issued a fact sheet on this process.)
The Bureau began its Know Before You Owe mortgage disclosure form project in May 2011. The project integrates two federal mortgage loan disclosure forms – the Truth in Lending and RESPA disclosures – into a single form. The intent is to make loan origination simpler with lower costs and risks for borrowers. The panel will play the part of determining if the new forms reduce the burdens on lenders as well.
The Bureau also is considering other proposals for the mortgage process. The Small Business Review Panel’s feedback will weigh in on these proposals. For instance, three days after application consumers receive a mortgage estimate that discloses the terms and costs of the loan. The Bureau is considering a requirement that would add a disclaimer to these mortgage estimates that informs consumers that this preliminary estimate is not the loan estimate required by law.
The Bureau also is considering a rule intended to make the loan estimates required by law more reliable for consumers. Right now the regulations state that the actual cost of the loan cannot be higher than the estimate, without valid circumstances. The new rule would require the same limitation for the cost of services provided by the lender’s affiliates or other companies the consumer is required by the lender to use.
The CFPB also is considering a requirement that the consumer must receive the mortgage settlement disclosure with the loan’s final terms and all costs at least three business days before closing. Currently, consumers may not be aware of all the costs of the loan until as late as the day of closing. The intent is that consumers will know how much they will owe, and all other costs, before closing day.