Lenders Still Hopeful for CFPB Disclosure Delay

If mortgage lenders can't get the Consumer Financial Protection Bureau to back off its planned Aug. 1 integrated mortgage disclosures implementation deadline, they're at least hoping to get some leniency while they adjust to the new process.

Lenders got their hopes up after CFPB Deputy Director Steven Antonakes suggested a delay wasn't completely off the table during comments at a recent banking industry conference, but an agency spokesperson squashed the notion in a follow-up statement.

A number of lenders and service providers said they'll be ready to start using the new Loan Estimate (which replaces the current Good Faith Estimate and upfront Truth-in-Lending Act disclosures) and Closing Disclosure (which replaces the current HUD-1 settlement statement and final TILA forms) by Aug. 1, they'd still prefer a delay or possibly a phasing in of the new disclosures.

"We recognize the need for the industry to be prepared for the Aug. 1 date, but in the event that there are significant readiness gaps, a grace period for those that are working diligently to implement this complex rule would insure that the housing market does not incur needless interruption to business," said Bill Cosgrove, chairman of the Mortgage Bankers Association and CEO of Union Home Mortgage in Strongsville, Ohio.

Lower-than-expected interest rates have kept mortgage lenders busy the past few months, and that's pushed preparation for the integrated disclosures to the backburner.

"While [Antonakes' comment] looks like a false alarm, any delay would be good as everyone could use some time to get it right. Volumes have been too high to commit the time needed to perfect the process," said Brian Koss, executive vice president of Mortgage Network, headquartered in Danvers, Mass.

"Many vendors are still working out the technology glitches and the title world is very behind on this," he added.

Title and settlement services vendors are also concerned about a hard implementation deadline. Even though adoption of the American Land Title Association's list of best practices for closing agents is voluntary, most firms are looking to show they are in compliance.

That's because if an agent is in compliance with the ALTA guidelines, "they should be able to handle any deadline whether it is sooner or later. However, when you think about the smaller software companies, the smaller banks, the smaller [title] agencies, they might need a little more time," explained Rafael Castellanos, president of the New York State Land Title Association, adding larger companies have the financial resources to more quickly adopt to the disclosure changes.

And in New York, title agents have been dealt a double-whammy: the state has finally implemented a licensing requirement and they have been dealing meeting those conditions, Castellanos said.

The question is what the CFPB will do to ensure the closing process goes smoothly under the new format. There are outstanding questions regarding what changes at the closing table will trigger a full redisclosure and new three-day waiting period, said Castellanos, the managing partner of New York-based title agency Expert Title.

"That is the point in time we are going to need [CFPB's] guidance and how flexible will they be at that moment in time, which we don't know," he continued.

For example, many customers of San Francisco-based technology vendor Roostify and their settlement partners still do not know how they will meet the Aug. 1 implementation date, "in part because they are still working with their LOS providers who are still developing their own solutions," said the firm's CEO Rajesh Bhat.

"A delay would certainly be welcomed by the industry, but even a defined phase-in/safe harbor period would go a long way to easing concerns. What is clear that the industry still has a lot of work to do in order to be ready for it," he continued.