Finalization of new Truth-in-Lending-Act rules by the Federal Reserve will likely be abandoned — a move mortgage bankers have been lobbying for.
A statement Tuesday indicated the Federal Reserve Board does not expect to finalize three pending rulemakings under Regulation Z, which implements TILA, before Reg Z rulemaking authority is passed on to the Consumer Financial Protection Bureau in July.
The Fed published proposed two rules in August 2009 that would have reformed TILA disclosures for closed-end mortgages and home-equity lines of credit.
A September 2010 proposal changed disclosures for reverse mortgages and right-of-rescission notices. The proposal also included new disclosures for loan modifications, restrictions on advertising practices and reverse-mortgage sales practices. In addition, changes to mortgage servicer obligations were proposed.
More than 5,000 comments were received in response to the proposals.
The CFPB is required under the Dodd-Frank Wall Street Reform and Consumer Protection Act to issue a proposal within 18 months of the rulemaking authority transfer — indicating a January 2013 deadline. In addition to TILA, the new rule will need to address disclosures required under the Real Estate Settlement Procedures Act.
The Fed explained that the public benefit would be questionable in its proceeding with the rulemaking given that the CFPB would be responsible for combining RESPA and TILA disclosures leading to further revisions.
It is also possible, the Fed went on, that the consumer regulator could issue a new rule before the deadline.
The Fed said that adopting in “a piecemeal fashion” the TILA provisions which would carry on after authority is transferred to the CFPA would make it more difficult to be compliant.
The Mortgage Bankers Association called the Fed’s decision “wholly appropriate.”
In a statement from the Washington, D.C.-based trade group, its President and CEO John Courson said MBA has been asking the Fed all along to suspend its Reg Z rulemaking because of the eventual transfer of authority.
“We agree with the board’s analysis that completing these rulemakings, then having the CFPB do its own rulemaking shortly thereafter, would not be in the public’s best interest,” Courson stated. “A series of unnecessarily duplicative rulemakings would have increased confusion, regulatory burden and costs to the very consumers these rules should protect.”
