On May 1, 2019, the CFPB issued a Factsheet on the applicability of the TILA-RESPA Integrated Disclosure Rule (“TRID Rule”) to assumptions of mortgage. Specifically, the Factsheet addresses whether the Loan Estimate (“LE”) and Closing Disclosure (“CD”), required under the TRID Rule, must be provided to a consumer in a transaction.
The Factsheet includes both a flow chart and a narrative discussion. The flowchart provides a quick reference that highlights the major questions to be answered when determining if a LE and CD are required. The narrative discussion provides general information that may be useful when determining if an LE and CD are required, including information related to each of the major questions set forth in the flowchart.
Importantly, the Factsheet clarifies that assumption transaction under TILA’s Regulation Z (12 CFR § 1026.20(b)), does not occur when a successor in interest takes on a debt obligation that is secured by a dwelling in which the successor previously acquired an interest. This clarification is particularly important, for example, to servicers that require successor in interest to assume the mortgage loan as part of entering into a loan modification agreement. The Factsheet acknowledges that although such a transaction may be referred to as “assumption”, it is not an assumption within the meaning of TILA and thus does not trigger the requirement to provide the TRID Rule LE and CD.
The Factsheet also provides general information and an example on the extent of disclosures required in the LE and CD in assumption transaction. It also reminds that in certain circumstances even if the transaction does not trigger the requirement to provide an LE and CD, it may trigger other disclosure requirements under TILA or RESPA, for example, 12 CFR §§ 1024.5(b)(5); 6; 7; 8; 10; and 33(a) and 12 CFR § 1026.18.
One caveat concerning the Factsheet, is that it is questionable whether the CFPB regards it as authoritative guidance even for the extent of the information it provides. The Factsheet specifically states that it is not a substitute for reviewing TILA and RESPA and respective regulations and official interpretation, which are the definitive information regarding their requirements.
If you have any questions regarding assumption transactions or the Factsheet, please reach out to Solomon Maman.
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