Are vendors the CFPBÕ next target?

Cordray calls out vendors for TRID implementation issues

Speaking this week at the Mortgage Bankers Associations’ 102nd Annual Convention and Expo, Richard Cordray, the director of the Consumer Financial Protection Bureau, issued a warning that should have one segment of the mortgage finance industry quaking in its proverbial boots.

Towards the end of his speech during the keynote session at MBA Annual, Cordray threw down the gauntlet on vendors, saying that despite having years to prepare for the implementation of the TILA-RESPA Integrated Disclosure Rule, the CFPB has received reports that some vendors were not ready for TRID, and that has the Bureau concerned.

“It has become apparent that the implementation process was not as smooth as we would have hoped,” Cordray said of the implementation of TRID, which went into effect on Oct. 3.

“Quite frankly, I have been disturbed by reports I have been hearing about the vendors on whom so many of you rely,” Cordray told the crowd earlier this week. “Some vendors performed poorly in getting their work done in a timely manner, and they unfairly put many of you on the spot with changes at the last minute or even past the due date.”

Cordray said that the CFPB recognized the “significant systems and operational changes” that the housing industry needed to undertake to prepare for TRID, noting that those changes require “extensive coordination” with third parties.

And the subpar performance of some of those third parties has vendors in the CFPB’s crosshairs.

“It may well be that all of the financial regulators, including the Consumer Bureau, need to devote greater attention to the unsatisfactory performance of these vendors and how they are affecting the financial marketplace,” Cordray said.

Cordray noted the CFPB recognizes that the mortgage industry has already dedicated substantial resources to understand the new rules, adapt their systems, and train personnel for TRID.

Because of those efforts, Cordray said, the CFPB’s examiners will focus on whether industry participants are making “good faith” efforts to comply with the new TRID rules.

“We know that you are just trying to get it right and that there is no particular advantage to playing fast and loose with these disclosures,” Cordray said. “And so we and the other regulators have made clear that our initial examinations for compliance with the rule will be sensitive to the progress you have made.”

Cordray also referenced similar so-called “grace periods” from Fannie Mae, Freddie Mac, and the Federal Housing Administration, all of which announced their own TRID enforcement grace periods in the last several weeks.

Earlier this month, Fannie Mae and Freddie Mac announced their indeterminate grace period for TRID enforcement, citing the “considerable technological and operational changes” the industry went through to become compliant with the new TRID rules.

Later in Cordray’s speech, he referenced a recent compliance bulletin issued by the CFPB on marketing services agreements.

In the bulletin, the CFPB told the mortgage industry that it has “grave concerns” about potential violations of RESPA presented by MSAs.

In his speech at the MBA, Cordray touched on the CFPB’s attitude toward MSAs, and his comments provide insight into how the Bureau operates and why vendors should be worried.

“These bulletins are our way of trying to make crystal clear our expectations,” Cordray told the crowd at MBA Annual. “We intend for everyone to pay careful attention to what we are saying and act accordingly. We do not want to play ‘gotcha’ with industry. We want industry to follow the rules – because that is good for consumers, honest businesses, and the economy as a whole.”

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