The Consumer Financial Protection Bureau on Friday updated its "Know Before You Owe" mortgage disclosure rule to provide more clarity to lenders.
The proposed amendments include clarifications on various issues that the bureau said it has provided in informal guidance. The agency has proposed additional tolerance provisions, clarified a partial exemption for housing finance agencies, extended the rule's coverage to all cooperative units, and provided more clarity about privacy and the sharing of information.
But one area the plan did not provide more guidance was regarding how to cure "technical" errors in mortgage disclosures. Lenders had been seeking more details on that issue, but the CFPB said it cannot address every concern raised.
The CFPB stated that it "would not be practicable without substantially undermining incentives for compliance with the rule" and that it "would be extraordinarily complex," said Richard Horn, a former CFPB attorney who helped write the initial disclosure rule, which merged the requirements of the Truth-in-Lending and Real Estate Settlement Procedures acts.
The proposal does not address disclosure of simultaneous issuance of title insurance premiums and cure provisions, said Horn.
Early this year, some investors had refused to purchase loans without further guidance from the CFPB about how to cure technical errors. Because there are hundreds of variables to account for on the disclosure forms, the mortgage industry has claimed that compliance is nearly impossible.
The CFPB's rule, which went into effect on Oct. 3, created new mortgage disclosure forms that are given to consumers when applying for and closing on a mortgage. The new disclosure rule places the responsibility for accuracy and the delivery of disclosures on creditors. The rule was a requirement of the Dodd-Frank Act.
The rule was meant to help consumers understand the total costs of a home loan, but lenders have sought for more guidance on certain issues.
"Our proposed updates will clarify parts of our mortgage disclosure rule to make for a smoother implementation process," CFPB Director Richard Cordray said in a press release.
The proposal is open for public comment until Oct. 18 before final regulations are issued.