The Consumer Financial Protection Bureau (CFPB) has delayed the implementation of its long-anticipated TILA-RESPA Integrated Disclosure (TRID) rule several times in the past few weeks. Now, a group of community mortgage lenders is pushing for the CFPB to push back the rule’s effective date even further.
Slated to take effect August 1, 2015, TRID, also commonly known as CFPB’s “Know Before You Owe” mortgage regulations, had been postponed twice last month—first to October 1, and then most recently to October 3, 2015 under a proposal from the CFPB late last month.
CFPB’s intention is to give lenders more time to comply and transition with the new disclosure documents required by TRID, but one mortgage lender trade group is requesting the Bureau give additional time for the industry to prepare for the new rules.
This week, the Community Mortgage Lenders of America (CMLA) sent a letter to Monica Jackson at the CFPB’s Office of the Executive Secretary, suggesting that the agency mandate an implementation date for TRID of January 2, 2016.
“From a seasonal standpoint, January is typically the slowest month for loan applications,” states the letter from CMLA Chair Paulina McGrath. “Thus, moving implementation to January will allow lenders and settlement service providers a more gradual implementation of the new disclosures in a lower pressure environment.”
While CMLA commends the CFPB overall for its efforts in making TRID implementation as “smoothly as possible,” the group urges that the CFPB—if it does decide to move forward with the October 3 implementation date—formally adopt an enforcement grace period for both Bureau enforcement actions and private party lawsuits from October 3, 2015 through March 31, 2016.
“Lenders have had time to do the necessary systems changes, personnel education and coordination with settlement service providers,” said McGrath in the letter. “However what they have not had, and will not have, is the opportunity to test any of these items in practice.”
By issuing a formal enforcement grace period, CMLA urges this will assure industry participants that good faith error will not be met with an enforcement action or a private party lawsuit, as there is a realistic likelihood that some lenders may make inadvertent errors in the initial days and weeks following TRID implementation.
Several mortgage industry stakeholders and trade groups have voiced concern over a lack of a formalized “hold harmless period” for lenders striving to comply with the new regulations.
“We recommend an enforcement grace period of finite duration,” McGrath said. “Given the significant changes these TRID disclosures represent to the mortgage origination and closing process, we believe such an enforcement grace period is a very reasonable approach to assure the industry how inadvertent good faith errors will be dealt with in the initial implementation period.”
The issue of lender liability for disclosures under TRID is another area of concern CMLA urges the CFPB to change, as lenders faced separate levels of liability under TILA and RESPA prior to TRID regulations.
Under TILA, a lender faces potential liability of an amount equal to the sum of actual damages; twice the finance charge; and in the case of a class action suite, the lesser of $500,000 or 1% of lender net worth, notes CMLA.
Whereas under RESPA, a lender is exposed to administrative enforcement of actions by state attorneys general for disclosure errors.
By placing all of the TRID regulations within TILA, CMLA states that the CFPB has made lender errors under TRID subject to TILA’s potential penalties and disclosure errors.
CMLA recommends the CFPB combine the disclosures mandated under both statutes into a single disclosure.
“We urge the CFPB to take the necessary steps to subject those disclosures mandated by TILA to the penalties set forth in TILA and to subject the disclosures mandated by RESPA to be subject to the enforcement provisions set out in RESPA,” stated McGrath.
While TRID does not address reverse mortgages directly, the CFPB has stated that it is working separately on revising reverse mortgage disclosures, though it has not disclosed a time frame for implementation, nor has it released drafted documents.
Written by Jason Oliva