The National Association of Realtors (NAR) is pushing for reforms to the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosures (TRID) rule, also known as the Know Before You Owe rule.
The bureau announced in April that it would be clarifying its TRID rule come July. It is currently gathering feedback on its proposal to improve the rule through additional verbiage that would bring greater clarity and reduce risk for lenders, Realtors and investors.
In a recent letter to the bureau, NAR asks the CFPB to clarify that lenders can share the closing disclosure (CD) with third parties, including real estate agents, provided that the lender receives a consent form from the consumer.
“Prior to implementation of the Know Before You Owe rule, real estate agents aided their clients by answering questions about the HUD-1 and reviewing terms agreed to in the sales contract, including concessions, escrows, commissions and shares of prorated taxes,” writes Tom Salmone, president of NAR, in his June 7 letter to Richard Cordray, director of the CFPB. “This form was routinely shared with agents in nearly all transactions. Since the rule was implemented, 54.5 percent of real estate professionals who were surveyed now have problems getting access to the CD. Real estate professionals are even more likely to have issues getting access to the CD when settlement is delayed. When real estate professionals do get access to CDs, 50 percent have reported finding missing concessions and incorrect names or addresses, incorrect fees, commissions, and taxes.”
The problem is that “lenders feel the new rule exposes them to additional liability under the Truth in Lending Act (TILA) if they provide real estate professionals with copies of the CD,” Salmone writes. “This is an unintended consequence of the rule that needs clarification from the CFPB.”
To address this problem, NAR recommends that the bureau add language “stating that it is just as acceptable now as it was before Know Before You Owe for a lender to share the CD with third parties if the lender receives a consent form from the consumer as allowed under Regulation P, Privacy of Consumer Financial Information – 12 CFR Part 216.”
“This will help lenders feel more comfortable sharing the CD with third parties when they have a consent form from a borrower,” Salmone says. “This will also help NAR communicate with industry partners that a consent form is permissible and encourage its use.”
NAR is also requesting that the revised rule include additional guidance to lenders about revising the CD to reflect changes in the borrower’s circumstances that might come up pre-closing.
“NAR has received consistent feedback from mortgage lenders who are confused about whether or not changes can be made to the CD once it has been sent to the consumer within certain time frames,” Salmone writes. “What constitutes a valid change in circumstance that can be added to the CD after it has been mailed to the borrower (typically six to seven days before consummation)? When are these changes allowed?
“One common example cited is when a borrower requests a closing delay, which requires a rate lock extension fee after the CD has been issued,” he continues. “Lenders are often absorbing the costs of the extension fee because they are not sure if they can revise a closing disclosure to add this fee once the CD has been sent to the consumer. The bureau tries to address this issue on page 50 of the Small Entity Compliance Guide but only addresses a very specific window of time that occurs between the fourth and third business days from consummation.”
NAR is urging the bureau to clarify whether lenders can re-baseline costs on the CD after it has been mailed to reflect a valid change in circumstance and better define the time frames that are allowed for these changes.
NAR is also asking the CFPB to make changes to the TRID rule that will help allay investor concerns over TRID-related loan defects.
“Some investors are refusing to buy loans with minor errors, even if the error doesn’t negatively impact a consumer or lead to material liability,” Salmone writes. “Lenders can incur huge losses if they sell these loans in the scratch and dent market. This is compounded by the fact that investors are not accepting cures past 60 days, even though investors can take more than 60 days to review and return loans to the lender.”
He adds that NAR is concerned that the high cost of re-manufacturing these “scratch and dent” loans will trickle down to consumers. As such, NAR is urging the CFPB to extend post-consummation timelines from 30 days to 180 days.