Regulatory Advocacy Update: Overview of CFPB’s Proposed ‘Know Before You Owe’

The Dodd-Frank Act directed the Consumer Financial Protection Bureau (CFPB) to combine the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA). To meet this requirement, the CFPB proposed the Know Before You Owe Rule on July 9, 2012. The rule also proposes updates to loan closing procedures, APR calculations, and record-keeping compliance. The complete text of the proposed Know Before You Owe rule can be found here.

Overview of Rule:

  • It’s simpler than the old forms. Consumers can understand and compare different mortgages more effectively and examine their estimated and final terms and costs more easily, helping them make the right decisions for themselves and their families.
  • It highlights information consumers need. Interest rates, monthly payments, the loan amount, and closing costs are all right there on the first page of the CFPB proposed form. Also, the first page explains how the interest rates, payments and loan amount might change over the life of the loan, including the highest they can go. In addition, the forms offer more information about taxes, insurance and other property costs so consumers can better understand the total cost.
  • It’s easier to watch out for risks. The forms provide clear warnings about features some consumers may want to avoid, such as prepayment penalties and an increase in the loan balance (negative amortization). The proposed rule also contains provisions to make estimates more reliable. And because the proposed rule requires lenders to keep electronic copies of the forms they give to consumers, the industry and its regulators will be able to address compliance questions more easily.
  • Consumers have more time to consider choices. Lenders must give the Loan Estimate to consumers within three business days of applying for a loan, and consumers must receive the Closing Disclosure at least three business days before closing on a loan. This will allow consumers to decide whether to go ahead with the loan and whether they are getting what they expected.
  • Limits are imposed on closing cost increases. The proposed rule would restrict circumstances in which consumers can be required to pay more for settlement services than the amount stated on their Loan Estimate.

A fact sheet for the proposed rule can be found here.

The Northwest Credit Union Association (NWCUA) Regulatory Advisory committee has scheduled a meeting to discuss the impact of this rule on credit unions and to outline a regulatory response. The NWCUA will also soon be sending out a more detailed Regulatory Action Request with further information soon.

Although the Association has consistently commented on behalf of credit unions on the CFPB’s proposal, credit unions are encouraged to review the proposal and weigh in directly with the bureau. The CFPB will accept comments through Nov. 6. All submissions must include the agency name and docket number (Docket No. CFPB-2012-0029) or Regulatory Information Number (RIN 3170-AA12) for this rulemaking.


The NWCUA Regulatory Advocacy team works with state and federal regulators to help reduce the regulatory burden on credit unions and protect the credit union movement. The Association encourages members to participate in the regulatory process. If you have any questions on these or any regulatory issues, please contact Director of Regulatory Advocacy John Trull at, or at 503.350.2209.

Posted in Advocacy News, NWCUA.