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CFPB seeks input on alternative mortgage disclosures

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Consumer Protection, Nonbank Financial
Wednesday, March 8, 2023

The Consumer Financial Protection Bureau (CFPB) is seeking public input regarding the consumer disclosures of a loan that finances both the construction and permanent purchase of a home. The request for input comes following an application to the bureau’s trial disclosure program (TDP) from the Independent Community Bankers of America (ICBA).

ICBA is seeking a waiver template under the CFPB’s trial disclosure sandbox that would “provide a foundation for individual lenders to test improvements to the TRID mortgage disclosures used for consumer construction and construction-to-permanent loans.”

ICBA stated in its application the current disclosure regime “was designed primarily for standard home purchase or refinance mortgage transaction and in their current form do not adequately disclose all of the various components of a construction or construction-to-permanent loan.”

The application from ICBA states it is not uncommon in rural communities for first-time homebuyers to build their first home because there are limited existing affordable “starter” homes. The application seeks to adjust the existing mortgage disclosures to facilitate the offering of products that cover both construction and permanent purchase of the home. 

The ICBA, in its application, asserted consumer understanding of construction loans, process, and costs, would be improved by disclosures that it views as more specifically tailored to such loans by offering greater clarity to all related fees and charges.

If this “template” application is approved, individual lenders could apply to enroll in an in-market testing pilot. As indicated in the TDP Policy, however, a template does not provide permission to conduct a trial disclosure program to any party, and it does not bind the CFPB to grant individual applications.

The comment submission period is open until March 29.

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