TRID Fixes Don't Go Far Enough, Industry Says

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The Consumer Financial Protection Bureau's proposed changes to new mortgage disclosure requirements do not go far enough, according to many in the industry.

The agency issued a proposal in August that was designed to address industry concerns about its TILA-RESPA integrated disclosure rule, which took effect a year ago.

By and large, banks, credit unions and other lenders say the proposed fixes make sense, including one that would allow institutions to issue a revised Closing Disclosure in situations where the borrower has to delay the settlement.

That measure is meant to fix the so-called black hole problem that occurred when institutions were not able to accommodate additional costs after a delayed closing because it violated a provision of TRID that limited how much fees could change.

CFPB is proposing to allow creditors to use a corrected Closing Disclosure to reset the applicable good-faith tolerances if it is delivered within three business days of receiving a valid reason for a delayed settlement.

Both the American Bankers Association and the Consumer Bankers Association called it a "straightforward approach" to correcting the problem, though they wish the CFPB plan offered more guidelines on exactly what would be allowable.

"The preamble to the proposed rule gave a rather short explanation to what is a significant industry concern," said Rod Alba, a senior vice president for the ABA, in an interview.

Overall, lenders said they wished the CFPB had gone further to clarify outstanding issues. For example, the agency did not address what happens when a rate lock expires after the final disclosures are provided and the interest rate charges change on the loan. Alba noted that there is uncertainty as to whether this solution would apply to fee alterations due to interest rate changes.

Meanwhile, the Mortgage Bankers Association and others are concerned that the CFPB wants to take a harder line and move away from its "diagnostic examination" approach, which recognizes the complexity of the rule changes.

"We urge that the bureau recognize that there will be errors for a period of time following implementation and that mortgage lenders may make errors notwithstanding their best efforts to comply," the MBA said in its comment letter.

The MBA is disappointed that the CFPB didn't address corrections of certain minor errors on the Closing Disclosure.

"Ideally, lenders should be able to rectify minor numerical errors in the Closing Disclosure," said Ken Markison, the regulatory counsel for MBA, in an interview.

"We are not asking for a pass" when it comes to compliance and enforcement, Markison said. "We are asking for a path to correct some errors so the consumer gets the right information."

The Independent Community Bankers of America and MBA also raised concerns about the CFPB's plan to finalize the proposal by April 2017 and require that lenders implement the changes by Oct. 1, 2017.

Six months is not enough time, according to the MBA. Lenders should have at least 12 months to implement the changes and undertake the necessary testing and changes.

ABA and CBA called for "further clarification on several specific provisions as the rulemaking moves forward, and importantly, asked that temporary financing, such as construction loans, be entirely excluded from" TRID coverage.

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