With only a few days to spare in order to meet its July 2016 target release date, the Consumer Financial Protection Bureau (“CFPB”) finally issued a Notice of Proposed Rulemaking (NPRM) today, proposing a number of amendments to its TILA-RESPA Integrated Disclosure rule (“TRID” or the “Know Before You Owe” rule).

On April 28, 2016, the CFPB issued a letter stating that it would engage in formal rulemaking in order to provide “greater certainty and clarity” to the mortgage industry. (Mayer Brown’s post regarding the April 28 letter can be found here.)  Since then, the industry has been anxiously awaiting the proposal to see which of the many issues the CFPB would address.  While it may not have touched upon every issue on which the mortgage lending industry has pleaded for guidance, the NPRM is a step in the right direction, indicating that the CFPB understands some of the challenges market participants have faced.

Since the regulations were finalized in November 2013, the CFPB has periodically issued informal guidance through webinars, compliance guides, and sample disclosures.  With its current proposal, the CFPB is seeking to memorialize its past guidance, as well as make additional clarifications and technical updates.  In the NPRM, the CFPB highlights the following four amendments:

  • Tolerances for the Total of Payments Disclosure — The Truth in Lending Act provides certain tolerances when calculating the finance charge and “disclosures affected by the disclosed finance charge.”  Prior to TRID, the finance charge was a component of the Total of Payments disclosure.  However, TRID changed  the Total of Payments calculation so that the finance charge was not specifically used.  The current proposal would include a tolerance provision for the Total of Payments that would parallel the tolerance for the finance charge.
  • Housing Assistance Lending — TRID currently provides a partial exemption for certain housing assistance loans that are originated primarily by housing finance agencies and non-profits.  According to the CFPB, the exemption was not operating as intended, so the CFPB is proposing to clarify that recording fees and transfer taxes may be charged in connection with a housing assistance loan without losing eligibility for the exemption.  The proposal also would exclude recording fees and transfer taxes from the exemption’s limits on costs.
  • TRID’s Application to Cooperatives — Currently, TRID’s applicability to loans secured by interests in cooperative units depends on whether a cooperative is considered real property under state law.  Since some states treat cooperatives as real property, and others deem it personal property, there is not uniform coverage of cooperatives under the regulation.  In order to provide more consistency, the CFPB proposes to require the provision of the TRID disclosures in all transactions involving cooperative units, regardless of whether state law classifies the interests as real or personal property.
  • Privacy and Information Sharing — The CFPB has received many requests for guidance regarding the sharing of disclosures with sellers, real estate agents, and others involved in the mortgage origination process.  In its proposal, the CFPB seeks to add a comment that addresses a creditor’s ability to modify the Closing Disclosure in order to accommodate the provision of separate disclosures to the consumer and seller.  The proposal would also add examples where the creditor may choose to provide separate Closing Disclosure forms to the consumer and the seller.

In addition, the CFPB includes a number of “minor changes and technical corrections” in the NPRM.

Mayer Brown’s Legal Update detailing the CFPB’s proposal is coming soon.

On May 12, 2016, the Consumer Financial Protection Bureau (“CFPB”) published annotated model forms (“TILA Mapping Forms”) for the Loan Estimate and Closing Disclosure.  The CFPB intends those annotations to indicate the statutory requirements in Chapter 2 of the Truth in Lending Act (“TILA”) on which it relied in implementing specific portions of those forms.  Unfortunately, the Mapping Forms are subject to such extensive disclaimers that the CFPB might as well have issued them over Snapchat – this “guidance” could disappear at any time.

The TILA-RESPA Integrated Disclosure/Know Before You Owe Rule (“TRID”) implements portions of the Real Estate Settlement Procedures Act (“RESPA”), TILA, and the Dodd-Frank Act.  Civil liability for violations of TRID is governed by the underlying statutes.  To the extent the CFPB promulgated a particular TRID requirement solely under RESPA or the Dodd-Frank Act, a consumer generally would not have a private right of action for a violation of the requirement.  However, a creditor – and in some circumstances, an assignee – is more likely to be subject to liability when a TRID violation involves a requirement the CFPB promulgated in whole or in part to implement Chapter 2 of TILA (also sometimes referred to as Part B of TILA).

The TRID Rule and its Commentary do not, however, address the extent to which a creditor or assignee may be held civilly liable for any particular TRID violation.  In the rule’s preamble, the CFPB briefly mentions the statutory authority on which it relied in connection with each TRID requirement, but that preamble discussion is often ambiguous, difficult to parse, and occasionally even contradictory.  The CFPB apparently published the TILA Mapping Forms yesterday in response to industry requests for clearer guidance.  While the Mapping Forms are helpful, they do not resolve all of the complicated TRID liability issues that creditors and assignees continue to face.  Perhaps most importantly, the Mapping Forms are subject to a general disclaimer that they do not represent the CFPB’s legal interpretation, guidance, or advice.  They also do not purport to bind the agency or create any enforceable rights, benefits, or defenses that can be asserted by any party, in any manner.  The CFPB declined to state what the Forms do represent, if anything. Continue Reading Guidance by Snapchat? CFPB Issues TRID Forms with Mapping Citations

The Consumer Financial Protection Bureau (CFPB or Bureau) has come under criticism recently for its heavy handed approach to regulation, including “regulation by enforcement”. Perhaps partially in response to those criticisms, and certainly in response to a January 2016 industry trade group request to the CFPB to publish unofficial guidance in the Federal Register, the CFPB issued a letter to the residential mortgage lending industry on April 28, 2016.  In that letter the Bureau acknowledged there are “operational challenges” with the TILA / RESPA Integrated Disclosure rule (commonly known as TRID or Know Before You Owe).  The Bureau promises to engage in formal rulemaking in late July of 2016, to propose changes to TRID that will provide “greater certainty and clarity” to the mortgage industry.

In what might qualify as understatements of the year, CFPB Director Cordray said he recognizes that “incorporating some of the Bureau’s existing informal guidance whether through webinar, compliance guide, or otherwise, into the regulation text and commentary would be helpful” and that “there are places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity.”  This is in stark contrast to remarks Director Cordray has previously made in which he resisted formalizing the informal guidance and amending TRID to address ambiguities.

Since its October 3, 2015 effective date, TRID has posed a number of issues for the mortgage banking industry. One hurdle involved coordinating implementation with all interested parties, such as mortgage brokers and correspondents, title companies, loan origination system software vendors, and other vendors.  Exacerbating the implementation issues was TRID’s ambiguity in a number of areas, and its outright failure to address many issues.  For example, the mortgage industry has struggled with issues such as how minor or technical errors may be corrected (such as alignment or shading of forms, rounding errors, check boxes that are improperly completed on the Loan Estimate, and data fields on the Loan Estimate that are not subject to either tolerances or redisclosures), and what penalties, if any, attach to those errors.   Equally problematic has been uncertainty as to the conditions under which a Closing Disclosure may be cured, how to account for lender credits, disclosure of title insurance premiums, and disclosure of construction loans.

This lack of clarity has caused significant problems in the secondary market, particularly with the jumbo loan market. Because of the issues noted above and other issues, secondary market investors are often unwilling to purchase loans with minor technical violations, or with issues as to which the TRID rule is unclear.

While Director Cordray did not offer any details of what changes the CFPB might propose, the industry is hopeful the rulemaking will address the above noted issues and other issues the industry has pointed out to the CFPB. Director Cordray has promised that the Office of Financial Institutions, together with the CFPB’s Regulations and Markets teams, will hold one or two meetings in late May or early June before the Bureau issues its Notice of Proposed Rule Making (NPRM), to discuss issues with the industry.  This will hopefully be an opportunity for the industry to offer input before the proposed rule is issued.