Politics & MoneyMortgage

CFPB Director Cordray corrects “serious misunderstanding” about TRID

Plus, 3 circumstances that would allow for closing delays

It will take an act of Congress to delay TILA/RESPA. 

The Aug. 1, 2015 implementation date for the Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure Rule still stands, according to a speech from Consumer Financial Protection Bureau Director Richard Cordray at a National Association of Realtors conference in Washington D.C. on Tuesday.

Since the TRID was finalized in November 2013, rumors spread across the industry about a possible delay, but the Consumer Financial Protection Bureau always shot down the talk.

Back in March, talk quickly spread back after a speech from Steven Antonakes, deputy director of the CFPB, to the Consumer Bankers Association, suggesting that the CFPB could delay the Integrated Disclosure deadline. 

The CFPB extinguished the talk shortly thereafter saying, “We have no plans to delay the deadline on the new mortgage disclosure forms. The industry should be prepared to begin using the new forms for loans with an initial application submitted on or after Aug. 1. The deputy director was pointing out that the Bureau is open to considering new information from stakeholders, not to delaying the deadline.”

In Cordray’s speech on Tuesday he once again addressed the topic and said:

This rule, though dictated by Congress, represents a major undertaking for the industry, requiring close coordination among lenders, settlement agents, vendors, and real estate professionals like you who work every day with homebuyers. We faced the same issues with our first set of mortgage rules, where the law limited us to a 12-month implementation period, yet industry worked hard to make a successful transition on time. 

We learned from that experience, and so from the time this rule was finalized in November 2013, we have focused on supporting industry implementation so the market will be ready when the rule takes effect in August. We also heard extensive input from all parties and opted to provide a 21-month implementation period. All of our hard work with industry is reflected in what we are now hearing, which is that most market players have put themselves in position to be ready by August, and others are getting ready as well. Yet we continue to receive a great deal of input on this issue, and as always we are listening closely in order to consider and assess that input.

But looking at recent survey conducted by Capsilon Corp., 41% of mortgage lenders report that they are not prepared to meet the August 2015 deadline to comply with TRID.

“The survey results clearly indicate that many lenders don’t have the right technology in place to handle the requirements of TILA-RESPA, and are scrambling by hiring more labor to help close the gap, which only drives loan production costs higher,” said Sanjeev Malaney, CEO of Capsilon Corporation.

And the findings get worse.

Surprisingly, only 12% of respondents reported that their companies are “very prepared” to meet the August 2015 TILA-RESPA requirements.

On May 14, the House Financial Services Committee’s subcommittee on Housing and Insurance will hold a hearing entitled “TILA- RESPA Integrated Disclosure: Examining the Costs and Benefits of Changes to the Real Estate Settlement Process.”

And the list of speaking topics includes TRID’s implementation date.

H.R. 2213, introduced by Congressman Steve Pearce, R-N.M., and co-sponsored by Congressman Brad Sherman, D-Calif., prevents enforcement of the integrated disclosure requirements and the filing of any related lawsuit if:

  1. The person has made a good faith effort to comply with the requirements
  2. The conduct alleged to be in violation of the requirements occurred on or before Dec. 31, 2015, thus allowing stakeholders and the CFPB to test the effective operation of the rule.

Cordray also used this speech to address the problems surrounding the three-day requirement.

“The three-day requirement should not interfere with a successful closing, as some have claimed.  In fact, there has been some serious misunderstanding about what kinds of major changes would cause a delay of the closing date, so I want to take a moment to clear that up right now,” said Cordray.

“The timing of the closing date is not going to change based on any problems you discover with the home on the final walk-through, even matters that may change some of the sales terms or require seller’s credits.  On the contrary, we listened carefully to your concerns and limited the reasons for closing delays to only three narrow sets of circumstances,” continued.

Here are the 3 circumstances that would allow for closing delays:

  1. Any increases to the APR by more than one-eighth of a percent for fixed-rate loans or more than one-fourth of a percent for variable-rate loans
  2. The addition of a prepayment penalty
  3. A change in the basic loan product, such as moving from a fixed-rate loan to a variable-rate loan. 

However, Cordray did add a cautionary note, “We recognize that various other things can and do change in the days leading up to the closing, so the rule makes allowances for those ordinary changes without delaying the closing date in ways that neither the buyer nor the seller may be able to accommodate very easily.”

And while this rule is new, it is the not the first time the industry had to drastically adapt to new regulation.

“We recognize that change on this scale is not easy," Cordary said.

"This rule, though dictated by Congress, represents a major undertaking for the industry, requiring close coordination among lenders, settlement agents, vendors, and real estate professionals like you who work every day with homebuyers,” Cordray added. “We faced the same issues with our first set of mortgage rules, where the law limited us to a 12-month implementation period, yet industry worked hard to make a successful transition on time.” 

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