On Tuesday, July 21, 2015, the Consumer Financial Protection Bureau (CFPB) finalized a rule that delays the effective date of the Truth in Lending Act and Real Estate Settlement Procedures Act rules integrating certain residential mortgage disclosures (TRID Rule) until Saturday, October 3, 2015. While the CFPB was subject to significant pressure from the mortgage industry recently to delay the effective date, or at least to provide a grace period for enforcement of the rule while new systems were designed and tested, the CFPB indicated that changing the effective date from August 1, 2015 to October 3, 2015 was due to an administrative error on the CFPB’s part.  

If you are in the mortgage industry, or even remotely connected to it, you are likely aware of the TRID Rule, at least generally. The TRID Rule is one of the most substantial changes to the residential mortgage disclosure scheme since the Truth in Lending Act and the Real Estate Settlement Procedures Act were signed into law in 1968 and 1974, respectively. As such, the CFPB, to its credit, has provided an implementation window of almost two years for the mortgage industry to get systems, policies and procedures introduced, tested and finalized before the TRID rule is effective. However, the talking point that the industry had almost two years to get this implemented implies that the mortgage industry just had to read a rule and flip a switch, at least that’s how it comes off when listening to some CFPB staff.  

First, the industry had to digest the hundreds of pages of preamble and regulation that comprises the TRID Rule. Second, technology vendors had to read and digest the TRID Rule and figure out how to build the basic technology. Then, the vendors had to go out and try to sell the basic technology to the thousands of mortgage companies in the U.S. Then, the technology vendors had to build specifics into each program for each client that had something unique to input. Then, the system had to be tested for accuracy and compliance. Then, the loan originators and others using these new systems had to get trained on them. Finally, each company’s policies, procedures and practices had to be updated and reviewed for regulatory compliance. All this in an industry with thousands of mortgage companies and a handful of technology providers serving it. Yes, that would take two years.  

Unfortunately for the mortgage industry, implementation is not over on October 3, 2015. The rubber meets the road when the rule is effective and the mortgage industry is required to comply. Once the rule is effective and the tide goes out, the CFPB will get to see who is standing on the beach with an al fresco situation.  

The CFPB’s final rule can be found here

Practice Tips

  • Mortgage companies should plan on October 3rd, 2015 as the final TRID Rule effective date. 
  • Problems and technical glitches will happen – expect them and develop a plan to deal with them. 
  • Document implementation efforts. If the CFPB comes knocking, a well-documented implementation plan demonstrates good-faith efforts to comply, which is always helpful.