Do you still have TRID headaches? This summer, you will have a new opportunity to make them known to your trade association and the Consumer Financial Protection Bureau (CFPB).
By Sue Johnson, strategic alliance consultant
In an April 28 letter sent to mortgage industry trade groups, CFPB Director Richard Cordray announced that the Consumer Finance Protection Bureau (CFPB) will draft a proposed rule that will recommend changes to the sweeping 2015 Truth in Lending-RESPA Integrated Disclosure (TRID) regulation. It expects to meet with industry and consumer groups in late spring and to publish the proposed rule for public comment in late July.
Cordray’s letter is limited in it scope, referring only to the possibility of incorporating some of the CFPB’s previously provided informal guidance into the regulation and of making adjustments that “would be useful for greater certainty and clarity.” But, the question in Washington circles is whether the CFPB can be convinced to consider policy changes to address more substantive TRID issues.
Industry groups from every segment of the mortgage, real estate and settlement service industries already are putting together their wish lists on what kinds of changes they would like to see. Here are some of the issues we can expect to be on these lists, based on their recent correspondence with the CFPB.
- High loan rejection rates sue to investor liability concerns. Mortgage trade groups report that some investors are using strict TRID compliance standards that result in high rejection rates on closed loans due to minor and technical errors. They attribute this to the lack of clear guidance from the CFPB, and say that it eventually could lead to significant liquidity issues in the industry as lenders must sell rejected loans at deep discounts in an undeveloped market. Until now, the CFPB has tried to reassure lenders and investors that “the risk of private liability to investors in negligible for good-faith formatting errors and the like” under TRID and the Truth in Lending Act. But, the industry likely will continue to urge the CFPB to publish official, clarifying guidance that will assuage investor concerns.
- Mortgage originator liability concerns. Mortgage trade groups also are concerned about potential liability despite good faith compliance efforts by lenders. So far, the CFPB merely has reassured the industry that “examiners will be squarely focused on whether companies have made good-faith efforts to come into compliance with the rule.” But, the industry wants further assurances through binding regulatory clarifications.
- Lender ability to revise disclosure for changed circumstances. The Mortgage Bankers Association (MBA) urged the CFPB to allow lenders to adapt to unforeseen changed circumstances, such as a storm of fire necessitating repair or borrower-requested changes caused by last-minute negotiations between the seller and borrower or by additional purchase decisions (e.g., homeowners insurance). Currently, lenders must either start over with a new Loan Estimate or absorb any increased charges under these circumstances. The MBA has suggested that lenders instead be allowed to reset tolerances without having to issue a new Loan Estimate that could cause closing delays.
- Real estate agent access to the Closing Disclosure – not a TRID issue. Many real estate professionals are expressing concerns about not having the same access to the Closing Disclosure that they had to the HUD-1 Settlement Statement. According to a 2016 National Association of REALTORS® (NAR) survey. 54.5 percent of respondents had problems getting the Closing Disclosure. Unfortunately, the CFPB is limited in its ability to address this issue in the TRID rulemaking, since nothing in the TRID rule prevents the sharing of the disclosure. What TRID did do is make lenders responsible for the delivery of the disclosure, and many lenders take the position that the privacy provisions in the Gramm-Leach-Bliley Act restrict them from sharing personally identifiable information with third parties without the consent of the borrower. Title underwriters, which now are subject to vendor management standards, are similarly concerned.
In the absence of an immediate resolution, many firms provide their real estate agents with a standardized American Land Title Association (ALTA) Settlement Statement that itemizes seller and buyer fees in addition to the Closing Disclosure.
AN OPPORTUNITY FOR YOU!
Are your TRID headaches on this list? While this list doesn’t cover all of the issues that industry groups will raise in the upcoming TRID rulemaking, now is the time to contact your trade association (s) to report ongoing problems with TRID that negatively impact your industry and your clients. If you have an affiliated mortgage and/or title company, ask them to contact their trade groups as well. If you have hard data, provide it – the CFPB is a data-driven organization. We don’t know how far the CFPB will go in its rulemaking, but this may very well be your last opportunity to weigh in for a long time. ^
This article originally appeared in the June 2016 issue of the REAL Trends Newsletter is reprinted with permission of REAL Trends, Inc. Copyright 2016
The Minnesota REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.