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CFPB Addresses Industry's TRID Concerns

Cordray issues letter to MBA

Dec. 30, 2015

By Mortgage Daily staff



The Consumer Financial Protection Bureau has issued a letter allaying concerns of mortgage bankers about potential liability and actions by regulators for errors in implementing the integrated disclosure rule.

CFPB Director Richard Cordray wrote a letter Tuesday to Mortgage Bankers Association President and Chief Executive Officer David H. Stevens in response to a Dec. 21 letter from the group's leader.

MBA reached out to the CFPB because of member concerns over liability for violations of the Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure rule that went live on Oct. 3.

Cordray acknowledged the difficulty faced by the industry in implementing the rule and addressed the bureau's stance on how it will initially handle regulation.

"That is why the bureau and the other regulators have made clear that our initial examinations for compliance with the rule will be sensitive to the progress [the] industry has made," Cordray wrote. "In particular, our examiners will be squarely focused on whether companies have made good faith efforts to come into compliance with the rule.

"All of the regulators have indicated that their examinations for compliance in the first few months of implementing the new rule will be corrective and diagnostic, rather than punitive."

The director noted that in order to avoid disrupting the secondary market, the Federal Housing Finance Agency, Federal National Mortgage Association, Federal Home Loan Mortgage Corp. and Federal Housing Administration have all clarified that they won't conduct routine post-purchase loan file reviews for technical compliance.

In addition, the agencies don't intend to exercise contractual remedies for noncompliance with TRID as long as the lender is making good faith efforts to comply. The remedies that won't be sought include repurchases.

Cordray explained that a corrected Closing Disclosure can be issued after closing to correct non-numerical clerical errors. It can also be utilized "as a component of curing any violations of the monetary tolerance limits, if they exist."

"As a general matter, consistent with existing Truth in Lending Act principles, liability for statutory and class action damages would be assessed with reference to the final closing disclosure issued, not to the loan estimate, meaning that a corrected closing disclosure could, in many cases, forestall any such private liability," Cordray said.

The letter went on to clarify that there isn't a general TILA assignee liability except when the violation is apparent on the face of the disclosures and the assignment is voluntary.

He explained that statutory damages are limited by TILA to failure to provide a closed-set of disclosures.

Cordray additionally clarified that formatting errors are unlikely to give rise to private liability unless the formatting interferes with the clear and conspicuous disclosure of one of the TILA disclosures.

Another industry concern, investor rejection of loans, was addressed by the director.

"The bureau believes that if investors were to reject loans on the basis of formatting and other minor errors, as you indicate has been occurring, they would be rejecting loans for reasons unrelated to potential liability associated with the Know Before You Owe mortgage disclosures," the letter stated. "Such decisions may be an overreaction to the initial implementation of the new rule, and our assessment is that these concerns will dissipate as the industry gains experience with closings, loan purchases and examinations."

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