The CFPB has issued a proposed rule with request for public comment containing both substantive amendments and technical corrections (collectively, Proposed Amendments) to the final TILA-RESPA Integrated Disclosure (TRID) rule that became effective on October 3, 2015. In a press release the CFPB advised that the Proposed Amendments are “intended to formalize guidance in the rule, and provide greater clarity and certainty.” Comments are due on or before October 18, 2016. The CFPB is proposing that the final rule based on the proposal would be effective 120 days after publication in the Federal Register, but is expressly requesting comment on the timeframe to implement the Proposed Amendments.
Four of the Proposed Amendments that are highlighted by the CFPB in the press release would (1) create a tolerance for the total of payment calculation; (2) exclude recording fees and transfer taxes from the one percent fee limit that applies to the TRID rule exemption for down payment assistance and similar subordinate lien loans often made by housing finance agencies, non-profits, and similar entities; (3) amend the scope of the TRID rule to cover units in a cooperative, whether or not they are considered real property; (4) clarify how a creditor may provide separate Closing Disclosures to the consumer and the seller through the removal of information that raises privacy concerns.
In addition to the Proposed Amendments highlighted by the CFPB, the proposal would make numerous other changes, including a change that addresses the so-called “black hole” by providing creditors with greater flexibility to use the Closing Disclosure to reset tolerances. Currently, only the Loan Estimate may be used to reset tolerances, subject to an exception that permits a creditor to use a Closing Disclosure to reset tolerances in a limited situation. Essentially, the exception applies when the creditor would not have sufficient time after learning of a change to be able to issue a new Loan Estimate and also satisfy the pre-consummation waiting period requirements under the TRID rule. The exception has proven to be too narrow in many cases, resulting in creditors having to absorb increases in fees or require that the consumer reapply for a loan. To address these unintended consequences, the CFPB proposes to expand the exception to include both (1) the current situation that is based on the timeframe between when a creditor learns of a change requiring revised disclosures and the consummation of the loan, and (2) any situation in which a Closing Disclosure has already been issued.
Other topics addressed by the Proposed Amendments include, among others, affiliate charges, the calculating cash to close table, construction loans, decimal places and rounding, escrow account disclosures, escrow cancellation notices, the treatment of gift funds, the written list of service providers, the distinction between model forms and sample forms, principal reductions, the summaries of transactions table, the total interest percentage calculation, and informational updates to the Loan Estimate.
We are continuing to analyze the Proposed Amendments and will provide a more detailed summary of the proposal in the next edition of the Mortgage Banking Update.