Assumptions – Are Loan Estimates and Closing Disclosures Required?

In Client and Friends Memos, RESPA, TILA by BMG Memorandum

On May 1, 2019, the Consumer Financial Protection Bureau (CFPB) published a Factsheet discussing whether Loan Estimates and Closing Disclosures are required for assumption transactions. The Factsheet is available on the CFPB’s website.

The Factsheet address whether a Loan Estimate and Closing Disclosure are required for an assumption transaction defined by and subject to §1026.20(b) of Regulation Z, which provides, in pertinent part, that “[a]n assumption occurs when a creditor expressly agrees in writing with a subsequent consumer to accept that consumer as a primary obligor on an existing residential mortgage transaction [and] [b]efore the assumption occurs, the creditor shall make new disclosures to the subsequent consumer, based on the remaining obligation.” The Factsheet states that a lender must first determine if the assumption is otherwise within the TRID Rule’s general scope of coverage because a Loan Estimate and Closing Disclosure are only required under the TRID Rule for an assumption transaction: (1) in which a new consumer is being added or substituted as an obligor on an existing consumer credit transaction; (2) that is a closed-end consumer credit transaction secured by real property or a cooperative unit; and (3) that is not a reverse mortgage subject to §1026.33.

 

Full Memorandum