TILA-RESPA rule given "grace" period before enforcement by CFPB
Earlier this week, the federal consumer watch dog, the Consumer Financial Protection Bureau (CFPB) announced a grace period for enforcement of the TILA-RESPA Integrated Disclosure (TRID) regulation that will affect how numerous real estate closings are performed. Although a definite testing or "grace" period was not stated and is currently open-ended, the Mortgage Bankers Association believes it is likely to last at least until the end of 2015.
Recent REALTOR®’ efforts to get clarification into new truth in lending rules, and insight into the delays these changes might cause for consumers, appear to have paid off. Letters from both the House and Senate, led by Kentucky Representative Andy Barr, and signed by over 275 other members of Congress including all six of Kentucky's U.S. House delegation, provided enough concern over the August 1 deadline that the CFPB took notice.
There are a few major points to consider with the TRID regulation as it stands:
1. The "grace" period does not delay the deadline.
But exactly how long is the grace period? The CFPB did not officially delay the August 1 deadline for compliance, however, the CFPB says it will work with lenders who have made a good-faith effort to comply and ease the transition into the new rules. Apparently, though, it might not be through the end of the year as Congress suggested in their letters. Richard Cordray, director of the Consumer Financial Protection Bureau, did say the agency will be sensitive to progress made by those working to meet the new requirements since lenders were not able to test their systems prior to the deadline.
2. The CFPB has a number of resources available for lenders (and others in the industry) to review in preparation of the deadline.
According to the CFPB, there have been many steps taken, and more to come, that support the implementation of the rule throughout the industry. Many of these are highlighted in the CFPB response letter to Congress and a fact sheet for consumers is posted on the CFPB website that outlines what the rule means to closings.
3. The biggest concern for consumers and real estate professionals are the triggers that re-start a three-day period allowed for the review of documents.
First, if the lender increased the annual percentage rate by more than 1/8 of a percentage point on a fixed rate loan or 1/4 of a percentage point on an adjustable rate loan (decreases in APR would not trigger a delay); second, if the lender adds a prepayment penalty; or, third, if the lender changes the loan product, (for example from a fixed rate loan to an adjustable loan.)
The triggers for the three-day review are a key concern, especially for consumers, since they could cause additional closing delays. The worry was that even small deviations in information provided might start a chain reaction of delays.
Even though the announcement from the CFPB is a net win but less than what some Members of Congress requested, the added clarity was a welcome first step forward according to NAR President Chris Polychron.
In a statement released by NAR, Polychron said "the action announced by the CFPB is a welcome first step toward clarifying the changes coming to real estate closings August 1. NAR appreciates the 'sensitivity' offered by the CFPB to companies making a good-faith effort to comply with the new TILA-RESPA Integrated Disclosure regulation. We will continue to work with the CFPB to minimize any possible market disruptions or uncertainty when the rule takes effect, to address any implementation issues and minimize costly closing delays for home buyers and sellers during the busiest transaction season for real estate."