Disclosure of interest rate changes have begun and further indictments proceed August 1, 2015. The Consumer Financial Protection Bureau’s (CFPB) Loan Estimate replaces the current Good Faith Estimate (GFE) and Truth-in Lending Disclosure for loan applications. Many changes have been indicated, but for now we are focusing on points and fees.
Creditors must consider several causes when revealing fees and points. The first factor is origination costs. Points increase interest rates and must be specified. If the charge reduces the interest rate, it is not a point and must be indicated. Regardless if the charge is a portion of the loan amount or not, the point rule applies. The only scenario where a point can be charged is when interest rates fees are reduced. The loan estimate can then portray the charge as points.
The restrictions inhibit creditors from classifying origination fees as points and from profiting consumer tax deductions. Clear and concise terminology must be used to describe charges and services. The new law requires creditors to leave the points line blank on the form if charges do not reduce interest rates. The term “N/A” is no longer accepted.
Creditors must disclose any charges relayed in settlement. For example, if a creditor pays a LLPA to the secondary buyer, charges may have to be divulged. If the consumer is not charged a fee by the creditor and the charge is passed through as interest, no disclosure is necessary. (See § 1026.37(f)).
Any upfront fees have to be revealed. A flat origination charge discharged at closing has to be labeled. If the fee is included in the interest rate and provides the consumer the ability to pay a point and reduce the interest charge then the charge is asserted as a point.
The new laws benefit the consumer by putting strict requirements on the creditor to provide transparent communication about fees and charges to the borrower. If you need clarification regarding the new (CFPB) replacement laws, contact Clear to Close Services (CTCS) today. We are a nationwide Title Processing Partner. Our firm specializes in comprehensive title processing encompassing refinance, sale, purchase, short sale, foreclosure, REO, deed in lieu, relocation, reverse mortgage, and 1031 exchange. Request a call from one of our expert Title Insurance agent’s today. We would love to have you follow us on Facebook.