President Biden signed the Building Up Independent Lives and Dreams Act (BUILD Act) into law on January 13, 2021. The BUILD Act addresses housing assistance loan creditors – non-profit, tax-exempt organizations that offer no-interest residential mortgage loans with only bona fide and reasonable fees, primarily for charitable purposes. This new law added a partial exemption to the Truth in Lending Act (TILA)/Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure (TRID) Loan Estimate (LE) and Closing Disclosure (CD) requirements for qualifying transactions. On May 14, the CFPB updated its TRID rule FAQs to address the new partial exemption. The CFPB’s added a section to the FAQs called “Housing Assistance Loans.” The new section consists of five questions that (1) summarize the general rule of TRID applicability; (2) the existing partial exemption for certain mortgage loans; (3) the new partial exemption created under the BUILD Act; (4) what disclosures a housing assistance loan creditor must provide if the creditor claims the new BUILD Act partial exemption; and (5) whether a housing assistance loan creditor can still choose to provide the LE and CD to a partially exempt transaction.
Question 1 reinforces the general rule that TRID applies to closed-end loans secured by real property or a co-op unit. The CFPB’s answer gives a brief history of the consolidation of the disclosure requirements under TRID. The FAQ answer also discusses the general requirement to provide the LE and CD. Question 1 clarifies that a housing assistance loan creditor would be subject to TRID if one of the partial exemptions does not apply.
Question 2 discusses the existing partial exemption from the TRID Rule LE and CD requirements for no-interest, subordinate housing assistance loans that met certain conditions. You can find the complete list of these requirements at https://www.consumerfinance.gov/rules-policy/regulations/1026/3/#h.
Question 3 discusses the BUILD Act’s new partial statutory exemption from the LE and CD requirements for similar transactions. A transaction must meet all of the following criteria to qualify for the BUILD Act partial exemption:
- The loan must be a residential mortgage loan.
- The loan must be offered at a 0 percent interest rate.
- The loan must only have bona fide and reasonable fees.
- The loan must be primarily for charitable purposes and made by an organization described in Internal Revenue Code section 501(c)(3) and exempt from taxation under section 501(a) of that Code.
Question 4 advises that a creditor electing not to provide the LE and CD for a transaction that satisfies the BUILD Act partial exemption must provide the applicant with a Good Faith Estimate and HUD-1 Settlement Statement under RESPA and a traditional disclosure statement under TILA. Creditors relying on the BUILD Act partial exemption also must provide applicants with the Special Information Booklet under RESPA. This is different than the existing partial exemption in § 1026.3(h), which does not require the GFE, HUD-1, or Special Information Booklet.
Question 5 advises that a creditor may elect to disregard the partial exemption and choose to provide the LE and CD.
In updating the TRID rule FAQs, the CFPB seeks to further direct the application of TRID to housing assistance loans covered by the BUILD Act and gives guidance to the disclosures required, both those covered by partial exemptions, and those not. Although potentially a niche part of the residential loan sector, no-interest residential mortgage loans with only bona fide and reasonable fees, primarily for charitable purposes and their disclosures are still governed by TRID and RESPA, and as Question 5 states, disclosing an LE and CD on these loan types then shields the lender from the various exemption requirements. If you have questions or would like to discuss this topic in greater detail, reach out to our hotline staff.