The Consumer Financial Protection Bureau’s new “Know Before You Owe” mortgage disclosure rule is designed to prevent surprises at the closing table, but with increased transparency come concerns over borrower and seller privacy. The TILA RESPA Integrated Disclosure Rule (TRID) took effect October 3, 2015 and replaces four previous disclosure forms with just two, the Loan Estimate and the Closing Disclosure. The latter form contains a summary of the mortgage transaction, including personal details about the borrower and seller.
To address worries that the exposure of Non-public Personal Information (NPPI) contained in the Closing Disclosure could violate borrower and seller privacy, TRID allows the settlement agent to prepare two different forms for the parties, omitting the seller’s personal information from the borrower’s form and vice versa. While the CFPB has gone as far as providing model seller-only and borrower-only forms, preparing separate Closing Disclosures is not mandatory, highlighting fears that NPPI could be inadvertently disclosed.
In a separate issue also stemming from privacy concerns, some lenders remain hesitant to share the Closing Disclosure with real estate professionals without first obtaining consent from the borrower, believing that privacy laws might restrict the sharing of NPPI between the two parties.
A bill which would provide the mortgage industry with a four-month grace period regarding TRID compliance is currently making its way through Congress. Regardless of the outcome of the bill, Closing Disclosures are now a permanent part of the mortgage process and borrowers, sellers, and lenders all need to take steps to avoid the potential exposure of NPPI during the mortgage lending process.