On February 27, 2023, the Consumer Financial Protection Bureau (CFPB) published a blog article regarding efforts by the Independent Community Bankers of America (ICBA) to gain approval for an application regarding consumer disclosures of a loan that provides either construction or construction-permanent financing
In its April 28, 2022 application, the ICBA states it is not uncommon in rural communities for first-time homebuyers to build their first home because there are limited existing affordable “starter” homes.
- The ICBA is seeking a Policy to Encourage Trial Disclosures Program Waiver Template under the CFPB Trial Disclosure Sandbox that would provide a foundation for individual lenders to test improvements to the TRID mortgage disclosures used for consumer construction and construction-to-permanent loans.
- The current disclosure regime was designed primarily for standard home purchase or refinance mortgage transaction and in their current form do not adequately disclose all of the various components of a construction or construction-to-permanent loan. The ICBA is proposing to modify/expand the current Loan Estimate and Closing Disclosure to include improved construction phase detail, construction cost breakdown, and improved disclosure regarding the consumer’s permanent loan financing.
- The ICBA believes that consumer understanding of construction loans would be improved by disclosures that it views as more specifically tailored to such loans.
- If the “template” application is approved, individual lenders can then apply to enroll in an in-market testing pilot. As indicated in its Policy to Encourage Trial Disclosure Programs TDP Policy, however, a template is non-operative, i.e., it does not provide permission to conduct a trial disclosure program to any party, and it does not bind the CFPB to grant individual applications.
Notice: Compliance Resource, LLC is sponsoring a four-part webinar entitled Total TRID Training starting on March 7, 2023. The program provides extensive coverage of the current TRID requirements for construction loans.