Pub. 4 2015 Issue 5

July 2015 33 l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s Closing Disclosure The Closing Disclosure provides the actual cost and terms of the loan to the borrower and must be received by the borrower no later than three business days before closing. Certain changes require a new three-business-day waiting period and updated Closing Disclosure. These include a prepayment penalty being added, the annual percentage rate (APR) becoming inaccurate or the loan product changing. Changes that fall outside of these scenarios do not require a revised Closing Disclosure for the borrower. Certain instances may require a creditor to issue a revised Closing Disclosure after the loan closes. These include the correction of non-numerical errors or a refund due to tolerance violations. Note: The definition of business days for the Closing Disclosure is Monday through Saturday, excluding federal holidays. Definition of an Application This final rule also changes the definition of an application from the current definition in the Real Estate Settlement Procedures Act (RESPA). Under the new definition, an application will be deemed received when the creditor has collected the borrower’s name, income, Social Security number to obtain a credit report, property address, property value estimate and the desired mortgage loan amount. The new definition eliminates the catch- all phrase “any other information deemed necessary by the loan originator” in RESPA. Exceptions to the Loan Estimate & Closing Disclosure Not all closed-end consumer credit transactions secured by real property require the use of the Loan Estimate and Closing Disclosure. However, if a loan is exempt from the new requirements but covered under the current disclosure rules, the creditor must provide the necessary disclosures under the old rules; no changes are required for applications taken on or after October 3, 2015. Exempt transaction types include: • Open-end credit, i.e., home equity lines of credit • Reverse mortgages • Mortgages secured by a dwelling not attached to real property, i.e., mobile home or houseboat • Lenders that made five or fewer mortgage loans in the preceding calendar year, unless they made more than one Home Ownership and Equity Protection Act loan in any 12-month period Are You Ready? October 3 is quickly approaching—is your financial institution ready? Financial institutions should contact vendors to ensure the required changes will be made to necessary software and forms. Institutions also should work internally to guarantee a smooth transition for applications submitted on or after October 3, 2015. This article is for general information purposes only and is not to be considered as legal advice. This information was written by qualified, experienced BKD professionals, but applying this information to your particular situation requires careful consideration of your specific facts and circumstances. Consult your BKD advisor or legal counsel before acting on any matter covered in this update. Article reprinted with permission from BKD, LLP, bkd.com. All rights reserved. Billy is a member of BKD National Financial Services Group. He has more than 10 years of banking com- pliance experience, primarily with lending, depos- it and Bank Secrecy Act/Anti-Money Laundering regulations. Before joining BKD, Billy managed fair and responsible lending compliance for the consumer credit department of a $127 billion regional bank. His duties included working with the management teams of multiple business channels to identify, mitigate, monitor and report compliance risk. Billy also has experience managing and submitting the annual Home Mortgage Disclosure Act regulatory filing. He has managed this process for several organizations, from community banks to large complex global financial institutions. In addition, he has been responsible for privacy management and oversaw the implementation of the privacy model form on multiple credit card portfolios containing more than 50 million active customers. He serves on the American Heart Association Executive Leadership Committee, Rockhurst University Leadership Studies Advisory Board and Missouri Bankers Association Associate Member Committee. He received his Certified Regulatory Compliance Manager (CRCM) certi- fication from the Institute of Certified Bankers in 2008. Billy is a 1999 graduate of Missouri State University, Springfield, with a B.S. degree in finance, and a 2002 graduate of Rockhurst University, Kansas City, Missouri, with an M.B.A. degree with a double emphasis in finance and management.