The Consumer Financial Protection Bureau (CFPB) published final rules to implement the new integrated disclosures on November 20, 2013. The rules complete the Dodd-Frank mandate to combine the disclosures required by the Truth-in-Lending (TILA) and Real Estate Settlement Procedure Acts (RESPA). The regulations, the Official Interpretations and instructions for completing the forms are massive, covering 1,888 pages.
Have you begun the implementation process yet? You have until August 1, 2015 to complete the task, but don’t underestimate the difficulty of learning the rules, explaining them to others and implementing 1, 888 pages of materials. If you haven’t yet reviewed the instructions for completing the new forms, I can promise that you will be shocked at some of the detail involved in proper completion of the forms.

  • The regulation and Commentary use seven pages of instructions to explain how to name the “Product.” Anything less that strict compliance with the rules, a word out of order or the failure to properly abbreviate a term, results in a violation.
  • The rules for rounding dollar amounts and percentages are inconsistent, lengthy, and guaranteed to result in numerous violations.

Can you rely on your loan origination software (LOS) to complete the forms correctly by the mandatory compliance date? Based on reports from numerous financial institutions it is a rare event for LOS providers to deliver an update that contains all of the required changes, that has been thoroughly tested, and performs without any errors by the effective date of a change. If the LOS is not performing as required by the effective date your options are limited.

  • You can shut down mortgage lending until the LOS does function properly;
  • Prepare disclosures manually, a workable, but painful, solution; or
  • Intentionally violate the rule by using out-of-date software.

In the next article in this two-part series we layout a three-step process that assures compliance with the new disclosures.