CFPB finalizes rule to fix TRID 'black hole'

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In a big win for the mortgage industry, the Consumer Financial Protection Bureau finalized an amendment to its "know before you owe" mortgage disclosure rule that gives lenders more flexibility to adjust closing cost estimates and pass those increases on to borrowers.

The rule was initially designed to eliminate the sticker shock to borrowers who often faced significantly higher charges at the closing table than what was originally disclosed.

However, the rules created a situation that lenders have called the "black hole," when deadlines for delivering revised upfront and closing disclosures overlapped, forcing mortgage companies to absorb cost increases through no fault of their own.

The amendment, originally proposed last July, is designed to address the black-hole issue, which industry groups told the CFPB was a frequent and costly compliance pain point.

"Creditors may use Closing Disclosures to reflect changes in costs for purposed of determining if an estimated closing cost was disclosed in good faith, regardless of when the Closing Disclosure is provided relative to consummation," the final rule states.

The Dodd-Frank Act directed the CFPB to integrate the loan disclosures required by the Truth in Lending Act and Real Estate Settlement Procedures Act, known as TRID. The disclosure rule took effect on Oct. 3, 2015.

Some industry advocates have expressed concern that the change could create confusion for borrowers and allow lenders to provide closing disclosures early in the homebuying process that may actually be estimates and might not include all of the costs of the mortgage transaction.

The final rule will take effect 30 days after publication in the Federal Register.

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TRID RESPA TILA Originations Compliance Financial regulations Underwriting Disclosures CFPB