CFPB Approves First Step for Mortgage Disclosures Project

The Consumer Finance Protection Bureau (CFPB) has approved an application that marks the first step in a pilot project for construction loan disclosures.

The Independent Community Bankers of America (ICBA) submitted the application for a Trial Disclosure Program Waiver Template to increase the availability of affordable single-close construction-to-permanent loans.

A single-close construction-to-permanent loan is a loan transaction that combines a construction phase loan with a permanent mortgage loan once the home is built and employs a single closing and single set of closing costs.

The current TILA-RESPA Integrated Disclosure (TRID) regime only focuses on transactions for purchasing a home or refinancing a mortgage loan. ICBA argued this does not adequately disclose all the components of construction loans.

The now-approved program allows CFPB to authorize parameters for in-market testing of alternatives to required disclosures, which will inform the need for possible regulatory change.

In its application, ICBA is to test certain adjustments to the existing mortgage disclosures in the context of construction loans.

It noted that many first-time homebuyers in rural areas build their homes rather than buy existing ones and, as a result, the challenges of using the current disclosures in the construction loan context may impact rural areas more acutely.

Individual lenders can apply for approval to test the alternative disclosures for construction loans.

Rebeca Romero Rainey, ICBA President and CEO, said: “The proposed template will provide consumers greater clarity, streamline the process through improved disclosure requirements, and expand access to more affordable homes in rural areas with limited housing supply.”