CFPB’s Announcement Exposes Consummation Confusion

June 4, 2015 at 9:09 am Leave a comment

Those of you hoping for a reprieve from the August 1st start date for the CFPB’s new integrated disclosures  got one-third of a loaf yesterday: In a letter to Congress and a blog post the Bureau That Never Sleeps explained that  it “will be sensitive to the progress made by those entities that have been squarely focused on making good-faith efforts to come into compliance with the rule on time.”

Given the frenzy to which the CFPB was responding,  this announcement is the  equivalent of  “Dam the torpedoes full speed ahead.”

That being said the CFPB’s blog post exposed for all to see a serious problem with the regulations that has to be clarified if they are going to be properly implemented.  In yesterday’s Blog Post the Bureau explained that “One of the important requirements of the rule means that you’ll receive your new, easier-to-use closing document, the Closing Disclosure, three business days before closing. This will give you more time to understand your mortgage terms and costs, so that you know before you owe.” (My underline).

The problem is that  this  is not what the regulation says.  Effective August 1,  creditors shall ensure that consumers receive the required disclosures “no later than three business days beforeconsummation.”12 C.F.R. § 1026.19.  Consummation is defined in state law. (

Why does this matter? Because in NYS there is case law suggesting that consummation occurs  when a lender and borrower exchange signed mortgage commitment letters. Murphy v. Empire of Am., FSA, 746 F.2d 931 (2d Cir. 1984);  Zelazny v. Pilgrim Funding Corp., 41 Misc. 2d 176, 244 N.Y.S.2d 810 (Dist. Ct. 1963). If  these cases conclusively settle the question of when consummation occurs , then  the  CFPB’s regulations  require NY members to receive closing documents three  days before receiving  commitment letters.  In other words,  weeks before your member signs a note and owns her house you will have to send out final disclosures.  To me this sounds like a mess and certainly not what the CFPB intended, but it is what it is.

Now I’m not saying that these cases make it unequivocally clear when consummation occurs in New York State.  For instance Murphy  involved a federal court interpreting consummation for purposes of the Right of Rescission and Zelazny was decided  before TILA was enacted.  But there are attorneys who will tell you these cases are spot on. Anyone planning on doing mortgages in New York State in August should  be aware  that this interpretation is out there and use their best judgment about how to comply with the integrated disclosure requirements..

In the meantime the Association is reaching out to New York State.  All  this confusion would be avoided  if the DFS was to promulgate a regulation, or the legislature was to pass legislation explaining that, for purposes of closing disclosures, consummation means closing.  Better yet, the CFPB could explain that for purposes of the integrated disclosure regulations, consummation occurs at closing when the note is signed.

Entry filed under: Mortgage Lending, New York State. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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