CFPB TRID Sec. 4 - What is the partial exemption for certain housing assistance loans for low- and moderate-income consumers?

Compliance > Regulation Z - TILA / TRID Specific > General Info
Q:  What is the partial exemption for certain housing assistance loans for low- and moderate-income consumers?
 
A:  Transactions that satisfy six criteria that are associated with certain housing assistance loans for low- and moderate-income consumers are eligible for an exemption from Regulation Z requirements pertaining to the Loan Estimate, Closing Disclosure, and Special Information Booklet. These transactions are also eligible for an exemption from certain Regulation X disclosure requirements, as applicable. (§ 1026.3(h) and Comment 3(h)-3)
 
To qualify for the partial exemption, the transaction must meet all of the following criteria:
 
  • The transaction is secured by a subordinate-lien.
  • The transaction is for the purpose of down payment, closing costs, or other similar home buyer assistance, such as principal or interest subsidies; property rehabilitation assistance; energy efficiency assistance; or foreclosure avoidance or prevention.
  • The credit contract provides that it does not require the payment of interest.
  • The credit contract provides that repayment of the amount of credit extended is forgiven either incrementally or in whole, at a certain date and subject only to specified ownership and occupancy conditions, such as a requirement that the property be the consumer’s principal dwelling for five years; deferred for a minimum of 20 years after consummation of the transaction; deferred until sale of the property; or deferred until the property securing the transaction is no longer the consumer’s principal dwelling.
  • The total of costs payable by the consumer in connection with the transaction include only recording fees, transfer taxes; a bona fide and reasonable application fee; and a bona fide and reasonable fee for housing counseling services. The application fee and housing counseling services fee must be less than one percent of the loan amount.
  • The creditor provides either the Truth-in-Lending disclosures or the Loan Estimate and Closing Disclosure. Regardless of which disclosures the creditor chooses to provide, the creditor must comply with all Regulation Z requirements pertaining to those disclosures.
 
The requirements that the loan is not conditioned on the payment of interest and that repayment of the loan amount is forgiven or deferred must be reflected in the loan contract. The other requirements for the partial exemption do not need to be reflected in the loan contract. However, Regulation Z requires that the creditor retain evidence of compliance with those provisions. Further, unless the itemization of the amount financed provided to the consumer sufficiently details that the costs payable by the consumer are limited to the allowable costs (and limited amounts of those costs, if applicable), the creditor is required to keep some other written document that establishes its compliance. (Comment 3(h)-2).
 
 
 
This can be found in the CFPB's TILA-RESPA Integrated Disclosure rule compliance guide - http://www.consumerfinance.gov/regulatory-implementation/tila-respa/
 

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