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2 posts from August 2014


Is Consummation the Same as Closing or Settlement?

The Consumer Financial Protection Bureau’s final rule for the integrated mortgage disclosures says the creditor must provide the Closing Disclosure to the borrower three days prior to the consummation of the transaction.

This may cause issues in the settlement industry as consummation and closing mean different things in different places. Consummation is not same as closing or settlement. (See page 51 of the CFPB's "Small Entity Compliance Guide" for the bureau's discussion on consummation.)

Consummation is the date that a consumer becomes contractually obligated to the creditor on the loan (i.e., the day they sign the note).  This is not when the consumer becomes contractually obligated to a seller on a real estate transaction.

The point in time when a consumer becomes contractually obligated to the creditor on the loan depends on applicable state law (§ 1026.2(a)(13) and Comment 2(a)(13) 1). For states that are escrow states, this could be a different date than the closing.

According to the CFPB, creditors and settlement agents should verify the applicable state laws to determine when consummation will occur, and make sure delivery of the Closing Disclosure occurs at least three business days before this event.

Loans Not Covered by TRID

Implementation of the Consumer Financial Protection Bureau’s integrated mortgage disclosures is Aug. 1, 2015. Note that there is no stagger in the roll out. All mortgage applications prior to Aug. 1, 2015 will use the current Good Faith Estimate, HUD-1 and Truth-in-Lending disclosures. All applications received on or after Aug. 1, 2015 will use the new Loan Estimate and Closing Disclosure.

The integrated mortgage disclosures apply to most consumer mortgages except:

  • Home-equity lines of credit
  • Reverse mortgages
  • Mortgages secured by a mobile home or dwelling not attached to land
  • No-interest second mortgage made for down payment assistance, energy efficiency or foreclosure avoidance
  • Loans made by a creditor who makes five or fewer mortgages in a year

Federal law does not require the use of the HUD-1 or the new Closing Disclosure in all-cash transactions. While some states have laws requiring the use of a state promulgated form in cash transactions, in general the HUD-1, the Closing Disclosure or any other settlement statement can be used in cash transactions.

In addition, federally related mortgage loans generally exclude temporary financing and construction loans.