CFPB to relax TRID enforcement actions

Answers questions on cure provisions for violations of the rule

After a recent letter to the Consumer Financial Protection Bureau, the Mortgage Bankers Association released a response from CFPB Director Richard Cordray that should bring some much-needed clarity to the industry on the current expectations for lenders in implementing the new TILA-RESPA Integrated Disclosure rule — also known as Know Before You Owe.

Since the rule went into effect on Oct. 3, the industry has reported a lot of mixed reviews on how they are dealing with the changes.

CFPB Director Richard Cordray compared the October implementation of the CFPB’s new TRID rules to Y2K, telling the Consumer Federation of America Financial Services Conference that the housing industry’s concerns about TRID are looking like they were much ado about nothing.

Meanwhile, many people who operate within the mortgage industry on a daily basis do not share that opinion.

Here are a few interviews with community lenders that say TRID is far worse than anyone thought.

Recently, in order to move the Homebuyers Assistance Act, H.R. 3192, along, Rep. French Hill, R-Ark. and 21 other members of Congress sent a letter to Speaker of the House Paul Ryan, Majority Leader Kevin McCarthy and House Appropriations Committee Chairman Hal Rogers urging them to add the provisions of H.R. 3192 to any year-end spending legislation. But this failed to happen.

The bill provides a four-month grace period for businesses that are working in good faith to comply with the TILA-RESPA Integrated Disclosure rule from the Consumer Financial Protection Bureau.

This new letter to David Stevens, president and CEO of the MBA, aims to helps answer many of the major concerns lenders have that Stevens brought to his attention.

For starters, the letters states:

We recognize that the mortgage industry needs to make significant systems and operation changes to adjust to the new requirements and that implementation requires extensive coordination with third parties…As with any change of this scale, despite the best efforts, there inevitable will be inadvertent errors in the early days. That is why the Bureau and the other regulators have made clear that out initial examination for compliance with the new rule will be sensitive to the progress industry has made. In particular, our examiners will be squarely focused on whether companies have made good faith efforts to come into compliance with the rule. All of the regulators have indicated that their examinations for compliance in the first few months of implementing the new rule will be corrective ad diagnostic, rather than punitive.

The letter also addressed the industry’s concern over cure provisions for violations to the rule.

In response, Cordray said:

Your letter asks about cure provisions for violations of the rule.  The Know Before You Owe mortgage disclosure rule provides for the issuance of a corrected closing disclosure, even after closing.  This can be used, for example, to correct non-numerical clerical errors or as a component of curing any violations of the monetary tolerance limits, if they exist.  As a general matter, consistent with existing Truth in Lending Act (TILA) principles, liability for statutory and class action damages would be assessed with reference to the final closing disclosure issued, not to the loan estimate, meaning that a corrected closing disclosure could, in many cases, forestall any such private liability.

In addition, the letter acknowledged lenders' concerns with investors saying:

Accordingly, the bureau believes that if investors were to reject loans on the basis of formatting and other minor errors, as you indicate has been occurring, they would be rejecting loans for reasons unrelated to potential liability associated with the Know Before You Owe mortgage disclosures. Such decisions may be an overreaction to the initial implementation of the new rule, an our assessment is that these concerns will dissipate as the industry gain experience with closing, loan purchases and examinations.

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