Impact of updates to the CFPB “Know Before You Owe” mortgage disclosure rule

Posted by John Graetz, Advisory principal, Deloitte & Touche LLP on August 12, 2016

The Consumer Financial Protection Bureau’s (CFPB) “Know Before You Owe” mortgage disclosure rule became effective in October 2015.  During the implementation of the rule, financial institutions encountered scenarios where the path to compliance was complex and resulted in uncertainty on the part of lenders and vendors, as well as additional costs due to revised disclosures.  On July 29, 2016, the CFPB proposed1 updates intended to formalize guidance on the rule and provide greater clarity and certainty in four key areas as follows:

  • Tolerances for the total of payments – When the “Know Before You Owe” rule was published, it changed the way lenders calculated the total of payments by not including the finance charge as part of the calculation. The amendments to the rule will revert back to the previous treatment, where the total payments disclosure was calculated using the finance charge as part of the equation.
  • Housing assistance lending – A new proposal is intended to encourage lenders to partner with Housing Finance Agencies to provide more housing assistance loans. The proposal allows more housing assistance loans to qualify for a partial exemption from disclosure requirements while still charging recording fees and transfer taxes.
  • Cooperatives – All co-ops would be covered under the “Know Before You Owe” rule. The previous rule required lenders to comply with “Know Before You Owe” when a co-op was considered to be real property, but not when a state considered a co-op to be personal property.
  • Privacy and sharing information – The new rule allows for closing disclosures to be provided to relevant third parties, such as the seller and real estate brokers.

Although the banking industry viewed the proposed amendments favorably, as they addressed several industry concerns; the CFPB has not yet addressed the following questions areas:

  • The CFPB did not provide additional guidance on how lenders correct technical errors, an issue that has held up the sale of loans to secondary market participants.  According to a recent press report,2 the CFPB has previously communicated that it does not intend to propose additional provisions to cure technical errors made by financial institutions and instead directed the mortgage industry to refer to the cure guidance in the Truth in Lending Act.
  • The equired calculation for title insurance fees on mortgage disclosures remains inaccurate.  The mortgage industry has raised concerns that, even after a year of TRID implementation, consumers continue to receive potentially unclear information regarding title insurance costs.

The proposed amendments are open for public comment until October 18, 2016, during which time respondents may also suggest that the CFPB address areas not covered by the proposal.  Further updates and clarity are expected, and the industry is hopeful that the CFPB has taken steps in the right direction.

Change and ambiguity relative to regulatory implementation is challenging by nature, and Deloitte Advisory’s Regulatory and Compliance group is positioned to support financial institutions through the future “Know Before You Owe” implementation.  We can assist with all phases of the assessment and implementation, including development of an action plan, change management, or transactional testing.

1Bureau of Consumer Financial Protection, “Amendments to Federal Mortgage Disclosure Requirements under the Truth in Lending Act (Regulation Z), (July 29, 2016), available at
2American Banker, “CFPB Punt on TRID Errors, But Offers Plenty More for Lenders,” (July 29, 2016), available at


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