Lenders Catch A Break: CFPB Won’t Enforce TRID Right Away

Posted by Patrick Barnard on June 03, 2015 No Comments
Categories : Residential Mortgage

The Consumer Financial Protection Bureau (CFPB) has reportedly agreed to delay enforcement of its new TILA-RESPA Integrated Disclosures rules that take effect on Aug. 1 – provided that lenders found to be in violation have made a good faith effort to comply with the complex set of rules.

In a post on the CFPB's blog on Wednesday, Diane Thompson, managing counsel in the office of regulations, reports that the bureau has sent a letter to Congress responding to concerns raised by a bipartisan coalition and by the industry that the new rules will likely result in problems for lenders, mainly because lenders won't have the opportunity to start using the new disclosures before Aug. 1.

‘This complicated and extensive rule is likely to cause challenges during implementation, which is currently scheduled for Aug. 1, that could negatively impact consumers,’ the May 20 letter from the coalition of more than 250 members of Congress states. ‘As you know, the housing market is highly seasonal, with August, September and October consistently being some of the busiest months of the year for home sales and settlements. By contrast, January and February are consistently the slowest times of the year for real estate activity. We therefore encourage the bureau to announce and implement a 'grace period' for those seeking to comply in good faith from Aug. 1 to the end of 2015.’

As the letter from the coalition goes on the explain, ‘Understanding how to implement and comply with this regulation will only become clear when the industry gains experience using these new forms and processes in real-life situations.’

It further points out that ‘lenders won't have the ability to fully test their systems and procedures ahead of time, thus increasing the risk of disruptions on Aug. 1.’

In its response letter, the CFPB indicates to members of Congress that the bureau ‘will be sensitive to the progress made by those entities that have been squarely focused on making good-faith efforts to come into compliance with the rule on time,’ Thompson writes in her post.

‘We have spoken with our fellow regulators to clarify this approach,’ she adds. ‘This is consistent with our approach in the implementation of the Title XIV mortgage rules.’

David Stevens, president and CEO of the Mortgage Bankers Association (MBA), on Wednesday issued a statement confirming that the CFPB has implemented an indefinite grace period for enforcement.

‘MBA welcomes the news that the CFPB will recognize the good faith efforts of lenders to comply with TRID by delaying enforcement for a period after the new rules go into effect on Aug. 1,’ Stevens says. ‘After speaking with Richard Cordray, director of the CFPB, I believe the bureau has listened to the input of MBA as well as other stakeholders about how best to enforce TRID. With so many difficulties around integrating systems, the industry needs flexibility to ensure consumers do not incur costs or lose home sales due to unforeseen problems. This enforcement grace period is a win-win for the industry and consumers alike.’

In a separate statement, Frank Keating, president and CEO of the American Bankers Association (ABA), says he appreciates the CFPB's willingness to ‘be sensitive to industry compliance efforts with regard to TRID implementation.’

‘However, we are disappointed that the statement falls well short of a 'hold harmless' period, which the ABA and nearly 300 members of Congress asked for,’ Keating says. ‘While the bureau acknowledged the implementation challenges of this rule, CFPB's decision will only provide limited assurances to bankers in their efforts to comply.

‘The ABA believes it is critical to establish a formal transition period for banks, and strongly advocated for restrained enforcement by providing survey data on vendor readiness to the bureau, sending letters and holding meetings, and providing the sole banking witness at a recent hearing on TRID implementation,’ Keating adds. ‘We extend a special thank you to the members of Congress who sent letters urging Director Cordray to provide an enforcement grace period. We look forward to continuing to work with the CFPB and Congress to ensure consumers' continued access to mortgage credit.’

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