The Consumer Financial Protection Bureau (CFPB [1]) made good on the promise it made in the spring regarding a proposal to update the Know Before You Owe Mortgage Rule, a.k.a. the TILA-RESPA Integrated Disclosure Rule (TRID).
On Friday, the Bureau issued the long-awaited proposal to amend the controversial mortgage rule [2] which went into effect on October 3, 2015. The goal of the proposed rule is to provide more clarity and certainty to help facilitate compliance within the mortgage industry.
“Getting a mortgage is one of the most important financial choices a consumer will ever make. The Bureau’s rules are designed to make sure consumers have the information they need, in a form they can easily understand and use, before making the decision,” said CFPB Director Richard Cordray. “Our proposed updates will clarify parts of our mortgage disclosure rule to make for a smoother implementation process.”
TRID created new, streamlined forms that consumers receive when applying for and closing on a mortgage. The original TRID rule established requirements as to when the consumer receives the new forms and also limits changes to the original loan estimate. The rule caused no small amount of consternation among mortgage lenders to worked feverishly to be compliant in time for the effective date.
“Our proposed updates will clarify parts of our mortgage disclosure rule to make for a smoother implementation process.”
Richard Cordray, CFPB Director
In late April, Cordray wrote a letter to financial industry trades and their members [3] recognizing the “operational challenges” the industry is experiencing as a result of TRID implementation and said that the Bureau was considering making some “adjustments” in the regulation text to provide greater certainty and clarity.
The proposed changes to TRID announced by the CFPB on Friday include:
- Tolerances for the total of payments—Prior to TRID, the total of payments disclosure was determined using the finance charge as part of the calculation. The total of payments calculation was changed under TRID so that it no longer used the finance charge. Under the amendment proposed Friday, tolerance provisions would be included for the total of payments that parallel existing tolerances for the finance charge and disclosures affected by the finance charge—making the treatment of the total payments disclosure consistent with what it was pre-TRID.
- Housing assistance lending—TRID originally included a partial exemption from disclosure requirements for housing assistance loans originated by housing finance agencies. The proposed amendment clarifies that recording fees and transfer taxes may be charged in those transactions without losing eligibility for the exemption. The CFPB’s goal is to promote housing assistance lending, since more housing assistance loans would qualify for the partial exemption—thus encouraging more lenders to partner with housing finance agencies.
- Cooperatives—The proposal extends TRID’s coverage to include all cooperative units, thus simplifying compliance. In a cooperative situation, the buyer becomes a shareholder in a corporation that owns the property, and the buyer is entitled to exclusive use of the housing unit within the property. TRID currently only covers transactions secured by real property; cooperatives are sometimes considered real property and sometimes considered personal property. The proposal would include all cooperatives in the rule, and not just real property.
- Privacy and sharing of information—Currently, TRID requires lenders to provide consumers with certain mortgage disclosures. The CPPB is proposing additional commentary to clarify how a lender may provide separate disclosure forms to the consumer and the seller.
Stakeholders are encouraged to submit written comments on the proposal. Comments are due on October 18, 2016.
Click here [4] to view the full proposal from the CFPB.