The CFPB has looped back to the TILA-RESPA Integrated Disclosure rule (TRID), also known as Know Before You Owe, which has been effective since October 3, 2015. The CFPB has now published a proposed rule to formalize guidance under TRID and "provide greater clarity and certainty" to the rule's requirements.
Many industry participants have noted that the TRID rule, a comprehensive overhaul that combined two previously separate disclosure regimes, had caused operational and compliance challenges that affected lenders' ability to make loans, as well as investors' ability to purchase loans. Concerns have ranged from the rule's scope, to ambiguity or defects in several of the rule's highly prescriptive and technically precise requirements, which frustrate ability to comply and expose both lenders and secondary purchasers to private liability; to limited regulatory cure provisions; to the lack of clear guidance on how to apply the rule to certain loan products including construction loans and FHA or VA program loans. After considering extensive feedback from market participants, the CFPB has issued limited proposed changes that address some (but not all) of these concerns.
Among the main fixes proposed by the Bureau are:
- Creating a tolerance for the Total of Payments calculation. These tolerance provisions would parallel existing tolerances for the finance charge and disclosures affected by the finance charge. As the proposal states, this change is intended to reduce exposure to extended rescission periods or private liability for minor inaccuracies in the Total of Payments.
- Clarifications explaining how the TRID rules apply to construction loans. This proposed commentary builds on a webinar provided by CFPB staff on March 1, 2016.
- Technical fixes and clarifications to the Cash to Close and Projected Payments tables, escrow account disclosures, rounding provisions, and various other technical provisions.
- Amending the scope of the TRID rule to clarify that it covers loans secured by cooperative units, regardless of whether the cooperative is treated as real property under State law.
- Clarifying how a creditor may provide separate Closing Disclosures to the consumer and the seller to address privacy issues.
- Expanding the exemption for down payment assistance and similar subordinate lien loans often made by housing finance agencies, non-profits, and similar entities.
While these proposed changes are welcome and likely to be well received, the proposal declined to address several critical pain points that have been brought to the agency's attention. In other cases, the proposal offers only limited solutions that do not fully address the concerns raised.
For example:
- The proposal declines to expand regulatory cures available for non-numeric clerical errors to numeric errors. Absent further relief, lenders and assignees can still face liability for typographical errors or mistakes that affect numbers and must rely on post-consummation statutory cures.
- The proposal makes some modifications to the rules of rescission with respect to the Total of Payments calculation, but does not modernize rescission with respect to the Projected Payments table or clarify how errors in the table may affect the rescission period.
- The proposal makes clear that lenders may use corrected Closing Disclosures to reset tolerances for loan costs that increase prior to consummation, but it does not resolve the infamous delayed-closing "black hole." Thus the proposal would leave lenders in the same position they are today with respect to changes that correspond to delayed closings—eating rate lock extension fees and other increases to closing costs.
- The proposal also declined to revisit past policy decisions that have drawn scrutiny, such as the prescribed methodology for disclosing title insurance.
Market participants will have an opportunity to comment and explain why further amendments are needed. The comment period closes on October 18, 2016. We are continuing to review and analyze the Bureau's proposal.