CBA & ABA Comment Letter re Proposed Revisions to Know Before You Owe

October 18, 2016


Monica Jackson

Office of the Executive Secretary

Consumer Financial Protection Bureau

1700 G Street NW., Washington, DC 20552



Re: Request for Comment on Proposed Amendments to Federal Mortgage Disclosure Requirements Under the Truth in Lending Act (Reg. Z), Docket No. CFPB–2016–0038



Dear Ms. Jackson:


The American Bankers Association1 and the Consumer Bankers Association2 (the Associations) appreciate the opportunity to submit this comment in response to the Consumer Financial Protection Bureau’s (Bureau or CFPB) request for comment on proposed revisions to the Federal mortgage disclosure requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act, as implemented in Regulation Z.  (TILA-RESPA Integration Rule, Know Before You Owe, or KBYO).3    The proposed rule sets forth multiple amendments to existing regulations and memorializes informal guidance and clarifications issued by the Bureau since the KBYO rule was finalized in December 2013.


The Associations appreciate the Bureau’s attention to correcting, clarifying and technically amending provisions of the TILA-RESPA Integration Rule.  Since the KBYO rule was issued, the Associations have communicated that these regulations raise significant implementation concerns as they are extremely complex and contain high-liability provisions that are often unclear and require official CFPB interpretation to appropriately resolve.  We therefore commend the Bureau for responding to our top concerns, and appreciate the Bureau’s current efforts to assist our industry in our ongoing compliance efforts.


Overview of Comments


The following list summarizes the Association’s more important comments on the KBYO proposed changes:


1. CFPB should form an internal Task Force dedicated to mortgage regulatory matters that will engage with industry stakeholders to identify compliance and legal problems with KBYO (and other mortgage rules, as appropriate). Any issue identified by the group can be immediately analyzed and assessed in terms of the need for rulemaking and/or guidance publication.


2. CFPB should formally extended the current “Good Faith Compliance” examination policy until the end of the compliance deadlines for the current proposed rules.


3. Bankers continue to be affected by uncertainties regarding the liabilities under KBYO, and the Bureau should publish a description of specific statutory provisions relied upon to implement KBYO disclosures.  In addition, the applicability of statutory cure provisions should be clarified.


4. The current status of the KBYO sample forms as model forms under TILA facilitates proper implementation and affords regulatory protection to lenders.  The Bureau should retain the model form status of the sample forms and accord them binding safe harbor status.


5. The Associations support the Bureau’s proposal to allow a creditor to use a corrected CD to reset applicable good faith tolerances when there are fewer than four business days remaining before consummation or when the Closing Disclosure has already been issued. This provision must be made applicable in instances involving fee changes due to interest rate variations


6. The Bureau should clarify that fee corrections on the LE aimed at resetting the estimates for tolerance purposes must be provided on revised LEs, but that absent an intent to reset tolerances, all other appurtenant corrections are deemed “informational” and do not need to be continually updated on all revised LEs.


7. The Bureau should clarify that the disclosure advising on the date of expiration of estimated closing costs may be entirely removed from the LE disclosure after the customer’s intent to proceed has been received by the bank.  This ensures that blank spaces on the LE will not confuse consumers.


8. The Bureau should clarify the disclosure treatment of loan costs in Total of Payments where such costs are financed by the consumer.


9. CFPB should retain the current application of the 10% tolerance in instances where the creditor fails to provide a written list of providers.


10. With respect to construction financing (and other loans with respect to payoffs generally), the Bureau should avoid consumer confusion by requiring the disclosure of payoffs and construction costs as payoffs in Summaries of Transactions, and in the Adjustments and Other Credits row of the “calculating-cash-to-close” table.  In addition, the Bureau should not require the provision of a permanent loan LE when the consumer applies only for a construction-only loan.  More importantly, given the nature and variations inherent in construction lending, the Bureau should exclude construction loans from KBYO  coverage altogether.


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