The Consumer Financial Protection Bureau ("CFPB") on Friday, July 29th, released proposed amendments to its rule mandating use of the TILA-RESPA Integrated Disclosures in mortgage transactions (the "TRID Rule," often referred to by the CFPB as the "Know Before You Owe Disclosure Rule"). While the CFPB expressly declined to define further procedures for curing errors made in loan estimates and closing disclosures, a primary subject of industry demand for clarification, the proposed amendments will facilitate compliance in other ways by incorporating past guidance and making additional clarifications and technical updates.

Primary components of the proposed amendments to the TRID Rule include:

  • Tolerances for Total of Payments Disclosures: The proposal would apply the same tolerances for accuracy in the disclosure of the total of payments over the life of the loan that already apply to the finance charge, thus making the treatment consistent with what it was prior to the TRID rule and potentially reducing lender liability.
  • TRID Application to Cooperatives: The TRID Rule currently covers only transactions secured by real property as defined under state law, which sometimes treat co-op units as real property and sometimes as personal property. The proposal would extend the TRID Rule's coverage to all loans secured by interests in co-op units, thereby removing inconsistency and simplifying compliance.
  • Privacy and Sharing of Information: The CFPB has received many requests for guidance regarding the sharing of mortgage closing disclosures with sellers, real estate brokers and agents, and others in the mortgage origination process. The proposal would allow for the sharing of disclosures with these parties, and also provide for lenders to provide separate closing disclosure forms to the borrower and the seller if they choose.
  • Housing Assistance Lending: The TRID rule gives a partial exemption for certain housing assistance loans originated primarily by housing finance agencies. To encourage lender partnership with housing finance agencies, the CFPB proposes to clarify that they can charge recording fees and transfer taxes in connection with housing assistance loans without losing exemption eligibility, and can exclude recording fees and transfer taxes from the exemption's limits on costs.
  • "Black Hole":  Lenders have complained of the "black hole" problem, when a borrower pushes back a loan's closing date after the final closing disclosures have been made, thus potentially forcing the lender to absorb any increased costs. The proposal would allow the lender to use the closing disclosure to reflect changes in costs that otherwise would require issuing a revised estimate.

The proposal also contains a number of other technical corrections and changes to address practical problems in implementation of the rules.

The notice and comment period on the proposed amendments is now open, and closes on October 18. While the CFPB is highly likely to adopt the proposed amendments even without receiving another outpouring of industry support, companies should assess their continuing challenges in implementing the TRID Rule and submit proposals for additional specific, narrow amendments well-supported by data and reasoned analysis. There is still a significant possibility that the CFPB will incorporate in the TRID Rule other informal guidance and additional clarifications.

As to the problem of liability for technical errors in TRID compliance and its negative impact on the sale of mortgage loans in the secondary market, the lessening of market furor in the last several months over these challenges no doubt contributed to the CFPB's determination to announce now its decision not to define further procedures for curing such errors. Given its desire to ensure that lenders continue to prioritize all aspects of TRID compliance before borrowers sign their mortgage agreements, the CFPB likely will continue to point industry to the Truth in Lending Act for cures of technical violations, rather than adopting additional cure procedures. Accordingly, any comments advocating for such procedures should be narrowly tailored, with concrete evidence documenting the continuing difficulty of selling even loans where the lender can document that disclosures were made in compliance with the TRID Rule.

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