Richard Cordray: ‘Prophets Of Doom’ Were Wrong About TRID

Posted by Patrick Barnard on December 04, 2015 No Comments
Categories : Residential Mortgage

During the Consumer Federation of America convention held Dec. 3 in Washington, D.C., Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), said the complaints and fears generated by lenders during the run-up to the Oct. 3 implementation of the bureau's new TILA-RESPA Integrated Disclosures (TRID) rules were essentially unfounded, as the new rules have, thus far, caused few problems.

Cordray said the hubbub leading up to implementation was, in some ways, no different from the fears raised during the run-up to the Y2K event on Jan. 1, 2000. Not long after the CFPB introduced the new disclosures rules in 2013, lenders started to bemoan them, saying they would delay closings, cause headaches for home buyers and increase operational costs for lenders. Those increased costs, lenders said, would likely have to passed on to consumers.

Cordray said all of these concerns have, so far, amounted to little or nothing.

‘For all of us engaged in the important work of protecting consumers in the financial marketplace, we know that whenever we consider any new regulatory initiative, we can expect to hear that the ultimate effect will be to add costs that cause consumers to pay more,’ Cordray said, as per a transcript of his speech on the CFPB's website. ‘We are warned that consumers will be priced out of the market. And we routinely hear that the cost of protecting consumers will be to constrict the availability of credit and even to drive some financial service providers out of business altogether.

‘We heard these same arguments when we adopted our ability-to-pay mortgage rule, which defined a new universe of qualified mortgages to help ensure that consumers would not be put into loans that set them up to fail,’ he said.

‘Of course, we should, and we will, make sure that we are mindful of these concerns,’ Cordray added. ‘We can draw up the greatest consumer protections ever devised, but if consumers cannot get access to credit, then there is nothing to protect. You cannot have responsible lending unless you have lending in the first place. But at the same time, we need to be wary of prophets of doom, whose real agenda is to hamstring effective regulation in order to preserve predatory practices.’

Cordray said these same types of fears and concerns came up when the CFPB introduced its ability-to-pay/qualified mortgage rules, which were implemented in January 2014.

‘Some predicted that the mortgage market would be suffocated by the commonsense rules we put in place at the beginning of last year,’ he said. ‘On the contrary, the mortgage market is actually thriving. After our rules took effect last year, the number of home purchase mortgages was up by almost five percent over the prior year, and the trend appears to be accelerating this year.’

He said when TRID – also known as ‘Know Before You Owe’ – was first introduced, ‘some again asserted that its implementation would paralyze the market.’ However, ‘applications for home purchase mortgages were up 22 percent year-over-year in October.’

‘Reports from participants across the market seem to be indicating that implementation of the new rule is going fairly smoothly,’ Cordray added. ‘So, it seems that these anxieties were much like the errant predictions of technological disaster stemming from Y2K, which, of course, never materialized.’

Most mortgage professionals, however, say it is still too soon to say whether TRID will cause problems. Many are waiting to see if problems start popping up for the title companies, which are particularly susceptible to errors and delays in the closing process.

So far, there have been conflicting reports as to whether TRID is delaying closings. Ellie Mae's Origination Insight report for October, for example, shows that the number of days to close for the month was 46 days – unchanged compared with September and in line with the average number of days to close for the year.

RealtyTrac's home sales report for October, however, indicates that the number of days to close has increased since TRID went into effect.

‘Prior to October 2015, housing transactions were normally trending in the neighborhood of 30 to 45 days to close, but new TRID regulations have pushed current housing transactions to 45 to 70 days to close,’ said Michael Mahon, president of HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio, in the RealtyTrac report. ‘These delays are pushing October pending transactions to closings in late November, December, if not January in some instances.’

In what some might consider an unusual twist, David Stevens, president and CEO of the Mortgage Bankers Association – which lobbied the federal government for a formal grace period for enforcement of the new rules – seemed to agree with Cordray's assessment that all of the fears and concerns over TRID were basically akin to a Y2K moment.

‘I think it was a Y2K analogy, where expectations of the worst happening just weren't there,’ Stevens said in a CNBC report on Nov. 23.

‘It is still too early to see if there will be impacts stemming from the Know Before You Owe changes that went into effect just last month,’ said Jonathan Corr, president and CEO of Ellie Mae, in a statement. ‘The time to close loans remained a constant 46 days for yet another month [in October], while the closing rate on purchased loans has stayed above 70 percent. We may begin to see time to close increase in the November data as the new closing disclosures are utilized for the first time.’

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