In a recent letter to the Consumer Financial Protection Bureau, more than 100 bankers from across the country called on the bureau to revise the TILA-RESPA Integrated Disclosure rule to exempt single-family residential construction loans from onerous disclosure requirements that have created confusion for consumers and caused many banks to exit the market. Prior to the implementation of the TRID rule, single-family residential construction loans were exempt from RESPA-related regulation because they were classified as temporary construction loans. However, under TRID, these loans are now subject to the same extensive cost and term disclosures as 30-year mortgages.
“The application of the TRID disclosures to single-family construction loans for owners/borrowers generates new requirements for multiple disclosures throughout the underwriting and construction process,” the bankers explained. “These are often preliminary, and therefore don’t reflect the true final loan terms that apply to the finance of the residential property, resulting in confusion—not clarity—for the borrower.”
In addition to calling for revisions to TRID, bankers urged the CFPB to reduce liability enforcement until such revisions can be crafted and implemented. They also asked the bureau to consider adopting a more straightforward disclosure process for single-family construction loans that would allow banks to provide borrowers with information about the loan amount, interest amount, term of loan and funding and disbursement schedule in any format they choose. “This type of disclosure should give the lender flexibility . . . as well as provide the borrower with clear and concise details about the fundamental aspects of the construction loan.”