What is the TILA-RESPA rule about?
The TILA-RESPA rule consolidates four existing disclosures required under TILA and RESPA for closed-end credit transactions secured by real property into two forms: a Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and a Closing Disclosure that must be provided to the consumer at least three business days prior to consummation.
What transactions does the rule cover?
The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property. Credit extended to certain trusts for tax or estate planning purposes is not exempt from the TILA-RESPA rule. However, some specific categories of loans are excluded from the rule. Specifically, the TILA-RESPA rule does not apply to HELOCs, reverse mortgages or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land).
When do lenders have to start following the TILA-RESPA rule and using the new Integrated Disclosures?
The new Integrated Disclosures must be provided by a creditor or mortgage broker that receives an application from a consumer for a closed-end credit transaction secured by real property on or after October 3, 2015.
Creditors will still be required to use the GFE, HUD-1, and Truth-in-Lending forms for applications received prior to October 3, 2015. As the applications received prior to October 3, 2015 are consummated, withdrawn, or cancelled, the use of the GFE, HUD-1, and Truth-in-Lending forms will no longer be used for most mortgage loans.
What transactions are covered by the TILA-RESPA rule?
The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property, but does not apply to:
- Reverse mortgages
- Chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property (i.e., land)
Consistent with the current rules under TILA, the rule also does not apply to loans made by a person or entity that makes five or fewer mortgages in a calendar year and thus is not a creditor. There is also a partial exemption for certain transactions associated with housing assistance loan programs for low- and moderate-income consumers.
However, certain types of loans that are currently subject to TILA but not RESPA are subject to the TILA-RESPA rule’s integrated disclosure requirements, including:
- Construction-only loans
- Loans secured by vacant land or by 25 or more acres
Credit extended to certain trusts for tax or estate planning purposes also are covered by the TILA-RESPA rule.