The Consumer Financial Protection Bureau (CFPB) issued a final rule postponing the effective date for all provisions of the TILA-RESPA Final Rule and Amendments to October 3, 2015. “TILA” stands for Truth in Lending Act and “RESPA” stands for Real Estate Settlement Procedures Act. This new regulation promulgated by the CFPB is often described as the “Know Before You Owe” mortgage disclosure rule, also known as TRID (an amalgam of TILA and RESPA). TRID is aimed toward making mortgages more transparent and easier to understand for consumers, but there will definitely be a learning curve for consumers and professionals in the real estate industry.
In addition to notifying the industry of the delay in the full effect date, the CFPB made two technical changes to the TILA-RESPA Final Rule that were not in the proposed rule. Specifically, the final rule amends § 1026.38(i)(8)(ii) and (iii)(A) to include, in the amount disclosed as “Final” for Adjustments and Other Credits, the amount disclosed under § 1026.38(j)(1)(iii) for certain personal property sales in order to conform the calculation of Adjustments and Other Credits on the Closing Disclosure and Loan Estimate, according to an article published by Marc Patterson on JDSupra. The final rule also attempts to conform the disclosure of a borrower’s cash to close by amending § 1026.38(j)(1)(iv) to include, in the amount disclosed as Closing Costs Paid at Closing, lender credits disclosed under § 1026.38(h)(3).
Richard Cordray, Director of the CFPB, stated that the additional time provided by the new October 3, 2015 effective date will help consumers and providers whose families are likely busy with the transition to the new school year. Director Cordray also stated that the CFPB did not want to unduly burden creditors who had limited time to fully test all of their systems and system components to ensure that each system works with the others in an effective manner due to some technical errors discovered by the CFPB.
New CFPB Regulation Ignored Industry Requests for Grace Period or Dual Compliance
Many companies in the real estate industry and members of Congress requested either a formal grace period or a dual compliance period. The CFPB is not making such accommodations. Director Cordray did state that the CFPB’s “oversight of the implementation of the Rule will be sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with the rule on time.” In plain terms, that statement means if the industry suffers significantly because of this new regulation, the CFPB may reconsider whether a grace period and/or dual compliance makes sense.
Closings Will Be Greatly Impacted
The TRID rules apply to loan applications received after October 1, 2015. This means there is not much time for the industry to get fully prepared and that there may be issues with real estate closings in the coming months. According to the National Association of Realtors, if 10 percent of transactions experience closing issues due to TRID, that is as many as 40,000 transactions a month, according to inman.com.
Consult with an Experienced Business Attorney Today
You need to prepare yourself and your clients for what is to come under the new TRID regime. This means reviewing your current procedures to ensure your company is in compliance. Business attorney Kristina Reed is here to help. Contact her today to discuss your business and how she can help clarify and guide you through the legal maze associated with new CFPB regulations.