The Consumer Financial Protection Bureau (“CFPB”) recently issued 293 pages of proposed changes (the “Amendments”) to the federal mortgage disclosure requirements it propounded in October 2015 commonly known as the TILA/RESPA Integrated Disclosure (“TRID”) or “Know Before You Owe” rule. The changes are many, but the rulemaking is not intended to review policy decisions behind TRID, and does not include major changes “that could involve substantial reprogramming” of industry systems, compliance, and implementation efforts. Instead, the Amendments are designed to formalize CFPB guidance on TRID and facilitate compliance through greater clarity and certainty. However, despite the requests of industry participants, the Amendments do not provide additional clarity and further defined cure provisions for errors made in Loan Estimates or Closing Disclosures.
Know Before You Owe Background
The primary purpose of TRID was to integrate the mortgage loan disclosures required under the Truth in Lending Act and the Real Estate Settlement Procedures Act. Thus, it combined the previously required Good Faith Estimate and early Truth-In-Lending disclosures into a single Loan Estimate form provided to borrowers. It also created a single Closing Disclosure form that replaced the previously required HUD-1 and final Truth-In-Lending forms. The goal was to create a simplified and streamlined disclosure process that allowed borrowers to more easily understand and compare mortgage terms.
As evidenced by industry requests for greater clarity, additional procedures for curing errors, and improved guidance for existing cure provisions; implementation of TRID proved difficult and disruptive. Market participants reported high levels of errors on the Loan Estimate and Closing Disclosure forms. Private investors and secondary market players rejected loans due to TRID violations. While the industry has adapted to some extent, uncertainties remain with respect to private suits from borrowers against lenders and investors.
While the proposed rulemaking is intended to remove some of these uncertainties and provide increased clarity to the mortgage industry, the CFPB has acknowledged that it “does not and cannot address every concern that has been raised to the Bureau.” The major changes highlighted by the CFPB include the following:
- Creation of tolerances for the total of payments – Pre-TRID calculation of total of payments included finance charges. TRID eliminated the specific use of finance charges in such calculations. The Amendments essentially roll-back the TRID approach and make the treatment of the total of payments disclosure consistent or “parallel” to the pre-TRID approach of including finance charges as part of the calculation. The Amendments create new tolerances based on that approach.
- Housing assistance lending – The Amendments clarify that fees and transfer taxes may be charged in connection with housing assistance loans without making such loans ineligible for the Rule’s partial exemption from disclosure requirements.
- Co-ops – The Amendments clarify that loans involving cooperatives are covered by the Rule.
- Privacy and information sharing – The Amendments clarify how a creditor and other market participants may provide disclosure forms and share information with each other while remaining compliant with the disclosure restrictions of the Gramm-Leach-Bliley Act and state laws.
The Amendments also contain “minor changes and technical corrections” regarding affiliate charges, calculating cash to close table (used for transactions without a seller), construction loans, escrow account disclosures and notices, expiration dates for closing costs identified on the Loan Estimate, seller and lender credits, agent responsibilities, written list of providers, property tax and property value estimates, as well as other items.
Comments on the proposed Amendments are due by October 18, 2016.