Fact sheet attempts to clear ambiguity over TRID disclosures with mortgage assumptions

A fact sheet addressing whether a “Loan Estimate and Closing Disclosure” is required under federal truth-in-lending and settlement procedures disclosures when a mortgage is assumed was published Wednesday by the federal consumer financial protection agency.

The fact sheet – “Are Loan Estimates and Closing Disclosures Required for Assumptions?” – was released by the Consumer Financial Protection Bureau (CFPB), the agency said, to address whether disclosures are required under the Truth-in-Lending Act/Real Estate Settlements Procedures Act Integrated Disclosure Rule (TRID) for three specific types of transactions:

  • when a new consumer is being added or substituted as an obligor on an existing consumer credit transaction;
  • when the transaction is a closed-end consumer credit transaction secured by real property or a cooperative unit; and
  • when this transaction is not a reverse mortgage subject to Regulation Z (Truth in Lending, under 12 CFR 1026.33).

At the outset, the fact sheet asserts that “different industry stakeholders may use the term ‘assumption’ to apply to a variety of transactions.” The bureau indicated that the fact sheet is intended to clear up any ambiguities for certain transactions in which a new consumer is being added or substituted as an obligor on an existing consumer credit transaction.

“The scope is limited in this manner, in part, because Loan Estimates and Closing Disclosures are not required unless a transaction is a closed-end consumer credit transaction that is secured by real property or a cooperative unit and that is not a reverse mortgage subject to sec.1026.33,” the agency wrote – adding a reference to 12 CFR 1026.19 (e) and (f).

The bureau said the fact sheet has two parts: a flowchart and a narrative discussion. The agency termed the flowchart “a quick reference” to highlight major questions to be answered when determining if a loan estimate and closing disclosure is required for the assumption transactions described above.

The narrative discussion, CFPB said, provides general information for determining if a loan estimate and closing disclosure is required, including information related to each of the major questions set forth in the flowchart.

“Reviewing this fact sheet is not a substitute for reviewing the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), Regulation Z, or its official interpretations (also known as the commentary),” CFPB wrote. “These statutes, Regulation Z, and its official interpretations are the definitive sources of information regarding their requirements.”

Factsheet: Are Loan Estimates and Closing Disclosures Required for Assumptions?

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