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Most Read Contributor in United States, August 2017
Nearly two years after the TILA-RESPA Integrated Disclosure
("TRID") rule went into effect (on October 3, 2015) and
one year after the Consumer Financial Protection Bureau
("CFPB") closed a comment period on a Notice of Proposed
Rulemaking ("NPRM") to adjust and clarify the rule, the
CFPB's modified TRID rule was published in the Federal
Register on August 11, 2017 (the "2017 TRID Rule" or
"2017 Rule"). An accompanying Detailed Summary of Changes and Clarifications
was released on August 30, 2017.
The 2017 TRID Rule is effective October 10, 2017, and provides
approximately one year for industry participants to comply.
Specifically, compliance is required as to all aspects of TRID
where an application is received for a covered loan on or after
October 1, 2018. For transactions where an application is received
before October 1, 2018, but consummation occurs after that date,
compliance is still required with respect to escrow closing notices
and partial payment disclosures. An optional compliance period
between October 10, 2017, and October 1, 2018, allows for, among
other things, phased-in compliance.
The CFPB's Detailed Summary sets out the clarifications,
confirmations, and changes reflected in the modified rule. For
example, the 2017 Rule puts a finer point on what information must
be disclosed on Loan Estimates and Closing Disclosures, clarifies
how certain figures and dates should be calculated for those
disclosures, confirms that TRID applies to all cooperative housing
units (regardless of whether the state in which the housing unit is
located treats cooperatives as real property or personal property),
and sets out adjusted exemption criteria for certain housing
assistance loans.
The 2017 TRID Rule, however, falls short of meaningfully
addressing certain of the significant concerns voiced by industry
participants during the comment period. Specifically, though
industry trade groups and others sought guidance on the standard
for assignee liability for TRID violations and specific TRID cure
provisions and bona fide error defenses, the 2017 Rule does not
touch on any of those topics.
Instead, the 2017 Rule attempts to clarify the applicable good
faith tolerances set out in the rule. In its current form, TRID
provides for a zero tolerance policy such that a Loan Estimate is
not made in good faith if the charges ultimately paid by the
customer, as listed in the Closing Disclosure, exceed the amount
set out in the Loan Estimate by any margin. This is subject to
certain exceptions, such as a 10% cumulative tolerance for
increases in charges for third-party services and recording fees.
The 2017 Rule attempts to clarify precisely how these tolerances
apply and what categories of charges fall into the zero tolerance
policy or its exceptions.
These clarifications may offer some modicum of comfort to
creditors and assignees, but absent direct guidance on standards of
liability and clearly defined cure and defense mechanisms specific
to TRID, the threat of liability and litigation for TRID disclosure
and tolerance violations still looms. TILA, from which certain of
TRID's provisions derive, provides for a private right of
action, statutory damages, and the recovery of attorneys' fees
for successful plaintiffs. See 15 U.S.C. § 1640(a).
As such, the threat of liability is real for industry participants
doing their best to comply with a seemingly ever-changing TRID.
On that front, Congress is already taking the 2017 TRID Rule to
task. On September 7, 2017, the TRID Improvement Act of 2017 was
discussed during a hearing held by the Financial Institutions and
Consumer Credit Subcommittee of the House Financial Services
Committee. The bill has not yet been formally introduced but the discussion draft focuses on creditors'
ability to correct violations under the existing TILA cure
mechanisms, which the CFPB has previously indicated should apply to
TRID. SeeDecember 29, 2015 Letter from CFPB Director
Richard Cordray to the Mortgage Bankers Association. The draft
bill seeks to expand TILA's 60-day cure period to provide
creditors with 210 days to cure good faith violations. The
discussion draft also contains a yet-to-be-drafted section titled
"Guidance on Creditor Liability for Bona Fide Errors."
These proposed changes take direct aim at the cure and liability
issues raised during the comment period that ultimately went
unaddressed in the 2017 TRID Rule.
We will continue to monitor the progress of the TRID Improvement
Act of 2017 and any developing TRID litigation. We would encourage
industry stakeholders to engage with Congress on the draft
legislation. In the meantime, industry participants should focus on
compliance with the 2017 TRID Rule.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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