Virtually every residential loan originated after August 1, 2015 will be subject to the new rules and forms, including purchase money loans, refinance loans and construction loans. However, there are residential loan transactions exempted from the new rules and the new forms. The exempted loans include reverse mortgages, home equity lines of credit (HELOCs), mobile home–only loans and loans originated by creditors who originate less than five loans in a calendar year.
The most troubling part about the exemptions is the portions of TILA and RESPA governing reverse mortgages and HELOCs are not being replaced or deleted. For those loans creditors must issue a TILA Disclosure and Good Faith Estimate (GFE) to originate the loans and settlement agents must use a 2010 HUD–1 settlement statement to close them.
What happens when a lender originates a first loan using the Loan Estimate and the second loan is a HELOC? Things are about to get interesting! The first loan will have to be closed using the Closing Disclosure and the second loan will have to be closed using a HUD–1 settlement statement.