CFPB Releases Factsheet Regarding Applicability of Loan Estimates and Closing Disclosures for Assumption Transactions

On May 1, 2019, the CFPB released a factsheet addressing whether a Loan Estimate and Closing Disclosure are required under the TRID Rule for certain assumption transactions.  Specifically, the factsheet clarifies whether such disclosures are required for a transaction: (1) in which a new consumer is being added or substituted as an obligor on an existing consumer credit transaction; (2) that is a closed-end consumer credit transaction secured by real property or a cooperative unit; and (3) that is not a reverse mortgage.

The factsheet contains two parts: (1) a flowchart, which can be used as a quick reference guide to ascertain whether a Loan Estimate and Closing Disclosure are required for assumption transactions; and (2) a narrative discussion, which provides general information that may be useful when determining if a Loan Estimate and Closing Disclosure are required, including information related to the questions set forth in the flowchart.

In the factsheet, the CFPB states that in order for a transaction to be considered an “assumption,” as that term is defined in 12 C.F.R. § 1026.20(b), the transaction must generally meet the following three elements: (1) include the creditor’s express acceptance of the new consumer as a primary obligor; (2) include the creditor’s express acceptance in a written agreement; and (3) be a residential mortgage transaction as to the new consumer.  Note that if the transaction is an assumption under 12 C.F.R. § 1026.20(b), then the creditor must provide a Loan Estimate and Closing Disclosure based on the remaining obligation, unless the transaction is otherwise exempt from the requirements to provide a Loan Estimate and Closing Disclosure.