The biggest win for mortgage lenders in the CFPB’s proposal to clarify certain aspects of its integrated disclosure rule is the apparent closing of what’s known as the TRID’s “black hole.” The black-hole problem stems from the fact that, currently, the integrated disclosure rule requires that the creditor deliver or place in the mail the loan estimate no later than the third “general” business day after receipt of the consumer’s application, and the borrower must receive the final revised LE no later than four business days prior to consummation. Once the closing disclosure has been issued, the LE can no longer be provided. If there is a valid change of circumstance that delays closing and results in a fee change,...

One proposed rule change to the TRID could help the secondary mortgage market; that is, the creation of tolerances for the total of payments. As the proposal noted, the Truth in Lending Act establishes certain tolerances for accuracy in calculating the finance charge and disclosures affected by the finance charge. However, “In light of changes to certain underlying regulatory definitions, the bureau believes it would be helpful to establish tolerances for the total of payments to parallel the existing provisions regarding the finance charge,” the CFPB said. Under the proposed rule, the same tolerances that now apply for the finance charge would also apply to the total of payments. The bureau said it is concerned that, absent the explicit application ...

Another noteworthy part of the CFPB’s TRID 2.0 proposal would extend the applicability of a partial exemption that mainly affects housing finance agencies (HFAs) and nonprofits. The existing rule provides a partial exemption for certain non-interest bearing subordinate-lien transactions that provide downpayment and other homeowner assistance (housing assistance loans). The CFPB said it has learned that the exemption may not be operating as intended. “The bureau has received information that many HFAs are having difficulty finding lenders to partner with in making these loans,” the proposed rule stated. Following the introduction of the TILA/RESPA integrated disclosures, some vendors and loan originator systems no longer support the Real Estate Settlement Procedures Act disclosures. “Although the RESPA disclosures are still required for ...

The CFPB’s proposed changes to its TILA/RESPA Integrated Disclosure rule also would eliminate a degree of uncertainty by applying the rule’s existing disclosure requirements to cooperative units. Under the current rule, coverage of cooperative units depends on whether cooperatives are classified as real property under state law. Because state law sometimes treats cooperatives differently for different purposes, there may be uncertainty and inconsistency among market actors.As a result, the CFPB is proposing to require the provision of the integrated disclosures in transactions involving cooperative units, whether or not such units are classified under state law as real property. This would apply to closed-end credit transactions, other than reverse mortgages. “In at least some states, ownership of a share in ...

The CFPB last week upped the compliance ante for mortgage servicers by finalizing a number of amendments to its 2013 mortgage servicing regulation that will expand consumer protections while requiring more of servicers. The protections address, among other issues, successors in interest and borrowers in bankruptcy. Under the final rule, servicers will be required to provide certain borrowers with foreclosure protections more than once over the life of the loan. As per the CFPB’s existing rules, a mortgage servicer is required to give borrowers certain foreclosure protections, including the right to be evaluated under the bureau’s requirements for options to avoid foreclosure, only once during the life of the loan. The final rule, however, will require that servicers give those ...

Mortgage Industry Waits for PHH Shoe to Drop. The mortgage industry is awaiting a final ruling from the U.S. Court of Appeals for the District of Columbia Circuit in the case of PHH Corp. v. Consumer Financial Protection Bureau, No. 15-cv-01177.

The Consumer Financial Protection Bureau last week released its proposed rule to clarify a number of issues related to its integrated disclosure rule known as TRID – and perhaps the single most significant aspect of the proposal for mortgage investors is what it does not include: any additional provisions to cure loan errors. Some observers believe that could be a negative for the secondary market. On the other hand, the bureau did provide...

As of press time, it’s not clear whether the Consumer Financial Protection Bureau will release its proposed rule clarifying certain aspects of its Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure Rule – TRID – before the end of July, the agency’s original timeframe. Joe Ventrone, vice president and deputy chief for regulatory affairs at the National Association of Realtors, said his organization is now looking at an August release and does not anticipate major changes. “However, the CFPB will put in writing all previous informal guidance [it has] given heretofore,” he said. “I think all the guidance will be important if it gives lenders and vendors comfort against enforcement reprisals.” NAR is...

In a warning to other lenders on the importance of proper vendor oversight, the CFPB recently brought a$10 million enforcement action against Santander Bank, based in Wilmington, DE, because of its allegedly illegal overdraft services practices. Among the practices at issue, the bureau said the bank signed up consumers for overdraft services without their consent. “In some instances, Santander’s telemarketerbriefly described [the bank’s] Account Protector [service] to consumers, then asked for the last four digits of their Social Security numbers, and enrolled them without their consent,” said the CFPB. “In other instances, consumers said they did not want to enroll but requested information about the overdraft service, but the telemarketer enrolled them anyway,” the bureau added. Also, call ...

Non-agency mortgage-backed security issuers and investors were getting more comfortable in recent years with third-party due diligence reviews of less than 100 percent of the mortgages in an MBS due to the exceptionally strong performance of new originations. However, analysts at Morningstar Credit Ratings suggest that most non-agency MBS backed by new mortgages will be subject to full reviews due to uncertainty regarding the CFPB’s integrated-disclosure rule under the Truth in Lending Act and the Real Estate Settlement Procedures Act, otherwise known as TRID. The reviews help identify and cure compliance issues and protect MBS investors from TRID-related losses. “Most post-crisis transactions carry out due diligence on every loan, and we...