CFPB Amends “Know Before You Owe” Rule

The Consumer Financial Protection Bureau (CFPB) has finalized an amendment to its Know Before You Owe mortgage disclosure rule. In a statement on Thursday, the Bureau said that the new amendment addresses when mortgage lenders with a valid justification could pass on increased closing costs to consumers and disclose them on a Closing Disclosure.

The amendment comes after CFPB received feedback from the industry that it needed clarification on when creditors could pass on increased costs to consumers. When the rule took effect on October 3, 2015, it had imposed a timing restriction on when the creditor could use a Closing Disclosure to communicate closing cost increases to the consumer. This restriction could prevent a creditor from charging the consumer for those cost increases despite a valid reason for doing so, such as a changed circumstance or borrower request.

Through this new amendment, which was proposed by the Bureau in July 2017 after getting feedback from lenders on it, the timing restriction will be removed.

CFPB said that the final rule would take effect 30 days after publication in the Federal Register.

The Know Before You Owe mortgage disclosure rule took effect on October 3, 2015, and through this rule, CFPB created new Loan Estimate and Closing Disclosure forms that consumers receive when applying for and closing on a mortgage loan.

The amendment comes after the recent introduction of a bipartisan bill in the Congress to regulate CFPB rulemaking. The bill called the Give Useful Information to Define Effective Compliance Act or HR 5534 is meant to regulate how CFPB provides rules and guidance. The proposed bill, which was introduced by Senators Sean Duffy (R-Wisconsin) and Ed Perlmutter (D-Colorado) would require the CFPB director to issue necessary or appropriate guidance to carry out the purpose of laws it is responsible for, including facilitating compliance.