On Friday, July 29, the Consumer Financial Protection Bureau (CFPB) issued a much-anticipated proposal to amend its TILA-RESPA Integrated Disclosure Rule (TRID), with public comments due October 18, 2016.
TRID, also known as “Know Before You Owe,” was issued pursuant to the Dodd-Frank Act and aims to reform the way consumer mortgage disclosures are constructed, provided, and used. The rule created new disclosure forms to use for most consumer mortgage transactions and imposed new timing and other requirements, replacing other forms and practices that had been in use for many years. Since TRID’s original effective date of Oct. 3, 2015, participants in the mortgage industry have wrestled with implementing compliance with the rule, identifying a number of practical issues that the regulation text does not clearly address.
The CFPB has repeatedly acknowledged the challenges imposed by TRID and has provided numerous outreach and technical assistance tools to the industry, gathering many of them on a central TRID resource page on the CFPB website.
And when CFPB Director Cordray stated in an April 2016 letter to industry groups that the CFPB would be proposing new TRID rules, speculation immediately began as to whether this would be a more fundamental reworking of the rule from the ground up.
It is not.
However, the 293-page proposal does address several areas, including four key matters:
- Tolerances for the Total of Payments: Prior to TRID, under Regulation Z, the total of payments disclosure was determined using the finance charge as part of the calculation. TRID changed the total of payments calculation so that it does not make specific use of the finance charge. The proposal would change TRID to include tolerance provisions for the total of payments that parallel existing tolerances for the finance charge and disclosures affected by the finance charge. This change would make the treatment of the total of payments disclosure consistent with what it was prior to TRID.
- Housing Assistance Lending: TRID gives a partial exemption from disclosure requirements to certain housing assistance loans originated primarily by housing finance agencies. The proposed change would make clear that recording fees and transfer taxes may be charged in connection with those transactions without losing eligibility for the partial exemption. The rule would also exclude recording fees and transfer taxes from the exemption’s limits on costs.
- Uniform Coverage of Cooperatives: The proposal would extend TRID coverage to all cooperative units, whether or not they are treated as “real property” under state law. The current version of TRID covers only transactions secured by real property, as defined under state law. Co-ops are sometimes treated as real property under state law and sometimes as personal property.
- Privacy and Information Sharing: The CFPB states that it has received many questions about sharing disclosures required under TRID with third parties involved in the mortgage transaction, such as sellers and real estate brokers. As the CFPB “understands that it is usual, accepted, and appropriate for creditors and settlement agents to provide a closing disclosure to consumers, sellers, and their real estate brokers or other agents,” the CFPB “is proposing additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.”
The proposal also makes more relatively minor changes and technical corrections on several topics, including: affiliate charges; the calculating cash to close table; construction loans; decimal places and rounding; escrow account disclosures; escrow cancellation notices; expiration dates for the closing costs disclosed on the Loan Estimate; gift funds; the “In 5 Years” calculation; lender and seller credits; lenders’ and settlement agents’ respective responsibilities; the list of service providers; model forms; non-obligor consumers; partial payment policy disclosures; payment ranges on the projected payments table; the payoffs and payments table; payoffs with a purchase loan; post-consummation fees; principal reduction (principal curtailment); disclosure and good-faith determination of property taxes and property value; rate locks; recording fees; simultaneous second-lien loans; the summaries of transactions table; the total interest percentage calculation; trusts; and whether creditors may issue revised Loan Estimates for informational purposes.
While these proposed amendments should provide some needed clarity, the CFPB declined to address a number of issues for which the industry had hoped for clarification, modification, or relief. One notable absence from the proposal is any treatment of cure provisions—what to do about technical violations and errors, including those that surface after a loan has closed. The CFPB explicitly states in the proposal that it is not addressing those issues:
“The Bureau is prioritizing its resources to further facilitate industry’s implementation progress. Therefore, the Bureau is not proposing any revisions that implicate fundamental policy choices, such as the disclosure of simultaneous issuance title insurance premiums, made in the TILA-RESPA Final Rule. The Bureau is also not proposing additional cure provisions.”
In explaining that decision, the CFPB states,
“The Bureau is concerned that further definition of cure provisions would not be practicable without substantially undermining incentives for compliance with the rule. The Bureau believes that further defining cure provisions would be extraordinarily complex. Accordingly, the Bureau is focusing this rulemaking process on facilitating compliance with the TILA-RESPA Rule in an expeditious manner so that all consumers receive disclosures that conform to the requirements of the rule.”
Still, it is not out of the realm of possibility that the CFPB may later propose amended cure provisions, or additional guidance on such issues, or amendments or guidance on any other TRID-related matter. Thus, industry participants should continue to raise their concerns and requests to the CFPB, as the agency does appear to be listening.
Further, any mortgage industry participant or other person potentially affected by TRID should consider submitting comments on this particular proposal by the deadline of October 18, 2016.