Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
On October 1, the CFPB released the assessment report required by Section 1022(d) of the Dodd-Frank Act for the TILA-RESPA Integrated Disclosure Rule (TRID), concluding that the TRID Rule “made progress towards several of its goals.” The assessment report was conducted using the Bureau’s own research and external sources. In opening remarks, Director Kraninger noted that the Bureau was “unable to obtain or generate the data necessary” to include a cost-benefit analysis, but documented the benefits and costs when possible. In addition to studying the effectiveness of the TRID Rule, the report also summarized the public comments the Bureau received from its November 2019 request for information (covered by InfoBytes here).
The Bureau issued the TRID Rule in November 2013, and the Rule took effect on October 3, 2015. Among other things, the TRID Rule integrated TILA’s Good Faith Estimate (GFE) and RESPA’s settlement statement (HUD-1), as well as other Dodd-Frank required disclosures, into the “Loan Estimate” and “Closing Disclosure” forms. Key findings of the assessment include:
- The TRID disclosure forms improved borrower abilities to locate key mortgage information, and compare costs and features of different mortgage offers;
- Evidence was mixed as to whether the TRID disclosure forms improved borrower abilities to understand loan estimates and transactions, and the TRID Rule increased consumer shopping for mortgages;
- The median response for one-time costs for lenders of implementing the rule was roughly $146 per mortgage originated in 2015;
- Evidence was unclear regarding ongoing costs for lenders, noting that over the last decade, lenders’ costs have increased steadily, but the data does not show a clear increase from the time the TRID Rule took effect; and
- Purchases and refinances dropped notably (around 14 percent and eight percent, respectively) in the first two months after the effective date, and purchase closing times lengthened by about 13 percent. However, both changes returned to pre-TRID Rule amounts and durations.
Additionally, the Bureau released a Data Point report titled, “How mortgages change before origination,” which details how the terms and costs of a mortgage loan may change during the origination process. The Bureau examined about 50,000 mortgages originated between March 2016 and November 2017, and found, among other things, that (i) APR changes occurred in more than 40 percent of mortgages; (ii) loan amount and the loan to value ratio changed for nearly 25 percent of mortgages; and (iii) interest rate changed for eight percent of mortgages.
On June 9, the CFPB released a factsheet on TRID Title Insurance Disclosures and FAQs regarding lender credits on the total payments disclosure, the optional signature line, and separating consumer and seller information. Highlights of each document include:
- TRID Title Insurance Disclosures. The factsheet discusses the two forms of title insurance commonly purchased in residential transactions—lender’s title insurance and owner’s title insurance. The factsheet breaks down the disclosure rules for each, including, among other things, (i) when and how the costs are required to be disclosed; (ii) specifics regarding simultaneous title insurance; and (iii) differences between state disclosures and TRID disclosures for simultaneous rates. The Bureau also provides detailed disclosure examples for various title insurance scenarios.
- FAQs. The updated FAQs note, among other things, that when providing separate closing disclosures to sellers and consumers, the TRID Rule requires seller-paid loan costs and other costs to be disclosed on page 2 of the consumer’s Closing Disclosure. Additionally, the FAQs provide a breakdown of the Total of Payments disclosure on the Closing Disclosure and discuss when a creditor may require a consumer to sign a Loan Estimate or Closing Disclosure.
On April 29, the CFPB issued an interpretive rule (IR) “clarifying that consumers can exercise their rights to modify or waive certain required waiting periods” in order to allow borrowers impacted by Covid-19 to access mortgage credit faster. The IR states that if, as a result of the Covid-19 pandemic, a mortgage borrower determines that a mortgage transaction must be completed prior to the end of the waiting period for either the TRID Rule or the Regulation Z right of rescission rule, the borrower may waive the waiting period. Further, the IR asserts that the Covid-19 pandemic qualifies as a “changed circumstance” for purposes of certain TRID Rule provisions, permitting the use of revised estimates of settlement charges. In addition, the Bureau issued a frequently asked question that addresses the Equal Credit Opportunity Act Valuations Rule, which states that a first-lien loan borrower may also waive the requirement that a lender provide the borrower with appraisals and valuations at or before settlement of the loan.
- “[L]ender credits include [(i)] payments, such as credits, rebates, and reimbursements, that a creditor provides to a consumer to offset” a consumer’s closing costs paid “as part of the mortgage loan transaction”; and (ii) “premiums in the form of cash” provided by a creditor “to a consumer in exchange for specific acts, such as for accepting a specific interest rate, or as an incentive, such as to attract consumers away from competing creditors.”
- Lender credits can be specific or non-specific. Non-specific lender credits are also known as “general lender credits.” The FAQs provide examples of both types of lender credit, and note that the distinction is important, as the two types of lender credits are disclosed differently on the Closing Disclosure.
- Creditors are not required to disclose “a closing cost and a related lender credit on the Loan Estimate if the creditor” absorbs the cost, but will be required to disclose these costs if they are “offsetting a cost charged to the consumer.”
- Creditors are required to disclose a closing cost and a related lender credit on a Closing Disclosure if they absorb the cost, “even if the consumer will not be charged for the closing cost.”
- To disclose lender credits on a Loan Estimate, creditors must calculate the sum “of all general and specific lender credits.”
- The nature of how lender credits are disclosed on a Closing Disclosure varies based on whether it is a general lender credit or a specific lender credit.
- The nature of how lender credits for a “no-cost loan” are disclosed varies based “on whether [a] creditor is absorbing closing costs as well as whether [it] is offsetting costs for specific settlement services.”
- When disclosing all of the closing costs charged to consumers, creditors must include a corresponding total amount of lender credits.
- Creditors that provide “a lender credit to offset a certain dollar amount of closing costs” without specifying which costs are providing a general lender credit. The FAQs outlines the disclosure process.
- Lender credits can only change in certain circumstances. Regulation Z does not limit increases in lender credits on a Loan Estimate, but a decrease in “lender credits disclosed on [a] Loan Estimate” may “lead to a violation of the good faith disclosure standard” if it is not tied to a triggering event outlined in Regulation Z.
On December 18, the CFPB published two guides to assist with TILA-RESPA Integrated Disclosure Rule (TRID) compliance for construction-only and construction-permanent loans. The Bureau notes that under Regulation Z, “a creditor may treat a construction-permanent loan as either one, combined transaction or as two or more separate transactions.” Disclosure options are (i) one, combined loan estimate along with one, combined closing disclosure; or (ii) two or more loan estimates and two or more closing disclosures for each phase of the construction-permanent loan. Appendix D in both the Combined Guide and the Separate Guide provides methods that may be used for estimating construction phase financing disclosures. As previously covered by InfoBytes, the Bureau previously released FAQs in May concerning the application of TRID to construction loans.
On November 20, the CFPB issued a request for information (RFI) regarding the TILA-RESPA Integrated Disclosures Rule (TRID Rule) assessment, which is required by Section 1022(d) of the Dodd-Frank Act. Section 1022(d) requires the Bureau to conduct an assessment of each “significant rule or order” no later than five years after its effective date. The Bureau issued the TRID Rule in November 2013, and the rule took effect on October 3, 2015. In addition to comments received on this RFI, the Bureau notes that it is also considering the approximately 63 comments already received regarding the TRID Rule from the 2018 series of RFIs issued on the adopted regulations and new rulemakings, as well as the inherited regulations (covered by InfoBytes here and here).
The RFI seeks public feedback on any information relevant to assessing the effectiveness of the TRID Rule, including (i) comments on the feasibility and effectiveness of the assessment plan; (ii) recommendations to improve the assessment plan; (iii) data and information about the benefits, costs, and effectiveness of the TRID Rule; and (iv) recommendations for modifying, expanding, or eliminating the TRID Rule.
Comments must be received within 60 days of publication in the Federal Register.
On July 31, the CFPB released FAQs to assist with TILA-RESPA Integrated Disclosure Rule (TRID Rule) compliance. The five new FAQs relate to providing loan estimates to consumers. Highlights include:
- If a consumer submits the six pieces of information (name, income, social security number, property address, estimate of the value of the property, and loan amount sought) that constitute an application under the TRID Rule, the creditor must ensure that a loan estimate is delivered or placed in the mail within three business days.
- A creditor cannot require the consumer to submit anything other than the six pieces of information that constitute an application under the TRID Rule as a condition to providing a loan estimate.
- A creditor cannot require a consumer to provide verifying documents in order to receive a loan estimate.
- If a consumer submits the six pieces of information that constitute an application, in order to receive a pre-approval or a pre-qualification letter, the creditor must also provide a loan estimate within three business days of receipt.
- A creditor may collection additional information, beyond the six pieces of information that constitute an application, it deems necessary to process a request for a mortgage loan, including a request for a pre-approval or pre-qualification letter.
On May 31, the CFPB released FAQs to assist with TILA-RESPA Integrated Disclosure Rule (TRID) compliance. The two new FAQs relate to the application of TRID to construction loans. Highlights include:
- Most construction-only and construction-permanent loans are covered by TRID as long as such a loan: (i) is made by a creditor as defined in Regulation Z; (ii) is a closed-end, consumer credit transaction; (iii) is secured in full or in part by real property or cooperative unit; (iii) is not a reverse mortgage; and (iv) is not exempt for any reason under Regulation Z.
- There are three special disclosure provisions for construction-only or construction-permanent loans under TRID: (i) Section 1026.17(c)(6) permits a creditor to issue separate or combined disclosures for construction-permanent loans based on whether each phase is treated as a separate transaction; (ii) Appendix D provides methods that may be used for estimating construction phase financing disclosures; and (iii) Section 1026.19(e)(3)(iv)(F) permits creditors, in certain instances involving new construction, to use a revised estimate of a charge for good faith tolerance purposes when settlement will occur more than 60 days after the original Loan Estimate. The Bureau notes that these provisions apply “even if the creditor does not necessarily label the product as construction-only or construction-permanent, so long as the product meets the requirements discussed in each provision.”
On May 1, the CFPB released a factsheet addressing when loan estimates and closing disclosures are required for assumption transactions under the TILA-RESPA Integrated Disclosure Rule (TRID Rule). The factsheet includes a flowchart and a narrative summary to demonstrate when the disclosures would be required. According to the factsheet, as a threshold matter, the new transaction must be within the TRID Rule’s scope of coverage (e.g., the transaction is a closed-end consumer credit transaction secured by real property or a cooperative unit and is not a reverse mortgage subject to § 1026.33). The creditor must then determine if the transaction is an “assumption” as defined in Regulation Z (under § 1026.20(b) an assumption “occurs when a creditor expressly agrees in writing to accept a new consumer as a primary obligor on an existing residential mortgage transaction.”) The factsheet includes three elements the transaction must meet in order to qualify as an assumption under Regulation Z: (i) the creditor must expressly accept the new consumer as a primary obligor; (ii) a written agreement must be executed, which includes the creditor’s express acceptance of the new customer; and (iii) it must be a “residential mortgage transaction” as to the new customer—specifically, the new customer must be financing the acquisition or initial construction of his or her principal dwelling. If the creditor determines the transaction is an assumption, based on the outlined factors, it must provide a loan estimate and closing disclosure required by the TRID Rule, unless the transaction is otherwise exempt from the requirements.
On January 25, the CFPB released FAQs to assist with TILA-RESPA Integrated Disclosure Rule (TRID) compliance. Three of the four FAQs relate to corrected closing disclosures and the three business-day waiting period, while the fourth FAQ relates to the use of model forms. Highlights of the FAQs include:
- Under TRID, a creditor must ensure that a consumer received a corrected Closing Disclosure at least three business days before consummation of the transaction (i) for certain APR changes; (ii) if the loan product information changes; or (iii) if a prepayment penalty has been added to the loan. Any of these changes would trigger a new three business-day waiting period.
- A corrected Closing Disclosure is required under TRID if the APR changes, including if it decreases. If the change in the APR is within applicable tolerances under Regulation Z, the creditor may provide the new Closing Disclosure without triggering a new three business-day waiting period. If the change in the APR is outside applicable tolerances, the creditor must wait three business days before consummation.
- Section 109(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act did not change the timing for consummating transactions if a creditor is required to provide a corrected Closing Disclosure under TRID.
- A creditor is deemed in compliance with the disclosure requirements of TRID if it uses the appropriate model forms provided by the Bureau and properly completes them with accurate content.
- Thomas A. Sporkin to discuss "Managing internal investigations and advanced government defense" at the Securities Enforcement Forum
- Jeffrey P. Naimon to discuss "2021 - A new beginning/what's to come" at the QuestSoft Lending Compliance & Risk Management Virtual Conference
- H Joshua Kotin to discuss "Mortgage servicing in a recession: Early intervention, loss mitigation and more" at the NAFCU Virtual Regulatory Compliance Seminar
- Daniel R. Alonso to discuss "Independent monitoring in the United States" at the World Compliance Association Peru Chapter IV International Conference on Compliance and the Fight Against Corruption
- Jonice Gray Tucker to discuss "Cyber security, incident response, crisis management" at the Legal & Diversity Summit
- Jonice Gray Tucker to discuss "The future of fair lending" at the Mortgage Bankers Association Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Pandemic fallout – Navigating practical operational challenges" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "BSA/AML - Covid impact and regulatory/guidance roundup" at an NAFCU webinar