With just four months until the Aug. 1 implementation deadline, it's no surprise that the CFPB's Truth in Lending Act/Real Estate Settlement Procedures Act (TILA-RESPA) integrated mortgage disclosure rule is one of NCUA's supervisory priorities for 2015. With the implementation deadline right around the corner, credit unions are scrambling to ensure all bases are covered for compliance with this 1,900-page final rule and the recent TILA-RESPA amendments on rate locks, new construction loans and placement of the NMLSR ID, which all have the same implementation deadline.
The TILA-RESPA rule requires loan originators who receive an application on or after Aug. 1, 2015, to provide consumers a loan estimate form that combines the initial TILA disclosure and the Good Faith Estimate, no later than three business days after receiving a consumer's mortgage application. The rule also requires loan originators to provide consumers a Closing Disclosure form, which combines the final TILA disclosure and the HUD-1 Settlement Statement, at least three business days prior to consummation of the mortgage. It seems easy enough, but there's more to it, including difficult-to-understand timing and delivery requirements and other practical implementation issues that go beyond the form content requirements.
To ensure timely compliance with the TILA-RESPA rule, it is imperative that credit unions have a plan of action for addressing the many requirements of the rule and also the steps to implement it. A good starting point is assignment of a project manager or implementation team to create and track the compliance plan. In addition, create an implementation map and timeline to organize the requirements and stages of integration, especially since implementation of TILA-RESPA is highly software-dependent and will require credit unions to work closely with vendors to ensure they are on track with integration.
Some other key areas or action steps that a credit union should consider to ensure timely and accurate compliance with the TILA-RESPA rule are outlined below.
Amend policies and procedures to comply with TILA-RESPA requirements.
There are many pieces to this rule, including very strict timing requirements regarding when a credit union is deemed to be in receipt of an application and therefore required to send the Loan Estimate form. These rules will require changes to current lending policies and procedures. Because staff will also need to be trained on changes made, the sooner these policies and procedures are updated, the better.
Determine the products, departments and staff that will be affected by the rule's changes.
Origination, processing, closing and post-closing departments are the most likely to be broadly impacted by the rule. However, there may be other staff and processes that are affected as well, so the implementation team will want to take steps to identify who and what is affected.
Isolate the internal changes necessary for compliance with the rule.
These might include business-process, operational and technology changes. Fully understanding required changes may involve a review of your existing processes and the hardware and software your credit union, settlement service providers or other business partners use. Here, it should be determined that technology platforms utilized by the credit union are working on a version that will support the new Loan Estimate and Closing Disclosure forms.
Read more: Identify impacts on third parties…
Identify impacts on third parties and address accordingly.
Software providers and other vendors, including the credit union's forms providers, may offer compliance solutions to assist with any necessary changes. That said, the credit union will need to coordinate readiness and compliance with those providers it is relying on for compliance and implementation of this rule. The TILA-RESPA rule is very software-dependent, so the credit union will need to stay in close touch with vendors to ensure processes and technology changes meet the credit union's needs within the implementation timeframe. Keep in mind, however, that the responsibility for noncompliance with the TILA-RESPA will fall to the credit union, not the vendor, even if the credit union contracts compliance out to a vendor.
Ascertain training needs.
Loan officers, processors, and closing and compliance staff, among others, will likely need training on the TILA-RESPA rule and the changes made to the credit union's policies and procedures. Training may vary depending on job function and responsibility.
These are just some of the practical implementation steps the credit union should be aware of. What steps your credit union addresses as part of the implementation plan will be highly dependent on your credit union's size and complexity.
The idea is to plan accordingly to ensure you stay on pace with your implementation plan and the fast-approaching deadline. Consequences for noncompliance or inaccuracies can be crippling to your credit union. TILA-RESPA is a time-sensitive regulation that requires intensive understanding, business process and technology changes, and training. While it is pertinent to work towards timely compliance, NCUA recently has afforded some comfort. In response to NAFCU's request, NCUA Chairman Matz responded that NCUA will consider good faith efforts by credit unions to comply with the CFPB's TILA/RESPA integrated mortgage disclosure rule.
While it may seem daunting, NAFCU and its regulatory compliance team are ready to assist you throughout the process. NAFCU also offers a host of resources for credit unions, including Regulatory Compliance School and its 2015 electronic edition of the Credit Union Compliance GPS. The GPS includes over 30 new pages dedicated to the TILA-RESPA Integrated Mortgage Disclosure rule as well as updates on major regulatory changes. For more information on the TILA-RESPA rule, you can also take a look at the TILA-RESPA blog series on NAFCU's compliance blog.
Jiji Bahhur is director of regulatory compliance for NAFCU. She can be reached at 703-842-2202 or [email protected].
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