On February 27, 2023, the CFPB issued a request for public comment regarding consumer disclosures of a loan that finances both a construction phase and the permanent purchase of a home. The proposal seeks to adjust the existing mortgage disclosures to facilitate the offering of construction and construction-to-permanent loans.
Through the CFPB’s Trial Disclosure Sandbox, the Independent Community Bankers of America (ICBA) proposed to test improvements to the TRID mortgage disclosures used for consumer construction and construction-to-permanent loans. According to the ICBA, the current disclosure regime was designed primarily for standard home purchase or refinance mortgage transaction and does not adequately disclose all the various components of a construction or construction-to-permanent loan. Thus, the institution proposed to modify or expand the current Loan Estimate and Closing Disclosure to include improved construction phase details, a construction cost breakdown, and improved disclosures regarding the consumer’s permanent loan financing. The ICBA believes that consumer understanding of construction loans would be improved by disclosures that it views as more specifically tailored to such loans.
The CFPB will accept public comments until March 29, 2023 and if the application is approved, individual lenders can then apply to enroll in an in-market testing pilot.
Read the CFPB’s blog post here.
View the application for construction loan disclosures here.