The Consumer Financial Protection Bureau (CFPB) has addressed the issue of TILA/RESPA Integrated Disclosure Rule, or TRID, implementation. The CFPB issued a response to the Mortgage Bankers Association in an effort to clarify the current industry expectations concerning the new TRID (also known as Know Before You Owe) rule.
Know before you owe
Since the rule’s integration on October 3, 2015, many industry professionals have struggled with the changes. The response from the CFPB to the Mortgage Bankers Association came in the form of a letter from the CFPB’s Director, Richard Corday, to the President and CEO of the Mortgage Bankers Association, David Stevens. In essence, this letter aimed to clarify that loans with minor technical errors should not hold up the mortgage process.
Minor errors to be expected
In an effort to sooth the minds of those fearing repercussions for violating TRID rules, the CFPB stated in their letter, “while complete and accurate use of the Regulation Z forms is the ultimate compliance goal, they recognize that a certain level of minor errors in the early days of implementation are to be expected.”
That is why the bureau and other regulators have made clear that our initial examinations will be squarely focused on whether companies have made good-faith efforts to comply with the rule.” This means loans with minor technical errors should not hold up the mortgage process. They also state the existing law allows lenders the right to cure mistakes after settlement.
Fixing mistakes after settlement
Also, the CFPB reiterates that the TILA itself contains provisions for the corrections of these errors, including the right to allow lenders to cure mistakes after settlement.
TILA has permitted creditors to cure violations, provided the creditor notifies the borrower of the error and makes appropriate adjustments to the account before the creditor receives notice of the violation from the borrower (15 U.S.C 16409b).
Another important thing to note: while the Know Before You Owe mortgage disclosure rule does integrate TILA disclosures with those disclosures required under the RESPA, it do not change the prior, fundamental principles of liability under either TILA or RESPA.
4 things to quell confusion
The letter from the CFPB points to four items directly aimed at clarifying non-high-cost mortgage confusion:
- There is no general TILA assignee liability unless the violation is apparent on the face of the disclosure documents and the assignment is voluntary.
- By statute, TILA limits statutory damages for mortgage disclosures.
- Formatting errors and the like are unlikely to give rise to private liability unless the formatting interferes with the clear and conspicuous disclosure of one of the TILA disclosures listed as doing such.
- The listed disclosures that give rise to statutory and class action damages do not include either the RESPA, or the new Dodd-Frank Act.
No additional liability
Finally, the CFPB also states that secondary market participants that buy loans from originating lenders wouldn’t take on additional liability. Fannie Mae, Freddie Mac, and FHA, which make up a large percentage of the market, have all acknowledged that they will not hold originators responsible for minor errors under TRID for the time being in order to ensure a smooth implementation.
Whether or not the new clarification will halt the call for Congress to pass TRID moratorium legislation has yet to be seen, but the clarification is certainly a very positive step in the right direction.