Less than a day after the White House threatened to veto legislation that would give lenders a hold-harmless period on implementation of new integrated disclosures, the House of Representatives passed the bill.
H.R. 3192, the Homebuyers Assistance Act, was previously passed by the House Financial Services Committee by a vote of 45 to 13.
The bill would extend the effective date of the Integrated Disclosure Rule under the Truth in Lending Act and Real Estate Settlement Procedures Act until Feb. 1, 2016, and hold lenders harmless until that time from liability for violations as long as they make a good faith effort to comply.
Such relief is needed, according to Mortgage Bankers Association President and Chief Executive Officer David Stevens.
He explained in a written statement that
the safe harbor language provided by the Consumer Financial Protection Bureau doesn’t mean that other investors, warehouse lenders and buyers of mortgage servicing rights as well as other state and federal regulators or private attorneys will accept errors in the implementation of TRID.
“Getting absolute clarity here for a few months while all of industry tests this implementation is critical,” Stevens said. “We are already aware of lenders pulling back various products from their offering line up due to system readiness concerns. These include in some cases some bond programs, renovation, 203-(k), second lien, construction perm and more.”
Stevens noted that some technology vendors this week
submitted new software updates after identifying errors.
He explained that a clear legal safe harbor would minimize the disruption from this massive undertaking, “while anything short of that won’t.”
Although the only current risk is the initial Loan Estimate, which
can be re-drawn in the event of an error, the Closing Disclosure — which won’t come into play until the weeks ahead — presents far more risk.
“If lenders cannot produce these due to some system failure, then prospective homeowners will be the ones who pay the price,” Stevens said. “This is why we support this legal delay of four months as do almost all trade groups that represent the real estate finance process. It’s not a big deal for anyone to give the delay, but its a huge risk to families should they be caught in a technological snafu that might delay a closing.”
But the Obama administration said yesterday that it strongly opposes the legislation, which was introduced by Rep. French Hill (R-Arkansas) and Rep. Brad Sherman (D-California).
“If the president were presented with H.R. 3192, his senior advisors would recommend that he veto the bill,” a statement of administration policy said.
Despite the administration’s threat, the House Wednesday passed the legislation by a
vote of 303-121 — indicating strong bipartisan support.
“This is a straightforward measure that will provide our title companies, bankers and others in the industry who are earnestly trying to comply with the TRID rule the confidence and certainty needed to properly transition into this new closing regime,” Hill said in a written statement following the vote. “I am happy members on both sides of the aisle were able to come together and move legislation that will prevent costly market disruptions and delays for American homebuyers.”
In order to make it to the president’s desk, the Senate will also need to pass legislation.
“Whether the bill can clear the Senate, on its own or as part of other legislation, is unclear,” a statement from the National Association of Federal Credit Unions said. “Sen. Tim Scott, (R-South Carolina), has meanwhile introduced a companion bill as S. 1711.”
Rep. Hill added, “I strongly urge the Senate to act immediately so we can shelter from punishment those acting in good faith to meet the criteria of this 1,888-page rule.”
