ALTA Continues Push for Hold-Harmless Period, TRID Fixes

July 9, 2015

ALTA joined the Mortgage Bankers Association (MBA) and National Association (NAR) in sending letters asking the Consumer Financial Protection Bureau to announce a hold-harmless period for enforcement actions against companies working in good-faith to comply with the TILA-RESPA Integrated Disclosures (TRID) rule.

In its letter, ALTA commended the CFPB for delaying implementation until Oct. 3, but said the bureau’s announcement that it would be “sensitive” when considering enforcement actions does not provide clarity on how to comply. Without certainty, service providers are likely to close fewer transactions to ensure compliance with TRID.

“There will be a learning curve as industry professionals adjust to the new requirements,” wrote Michelle Korsmo, ALTA’s chief executive officer. “Although industry has had 21 months to prepare for the new TRID requirements, scenarios will arise that have not yet been contemplated. Industry professionals will need to determine how to resolve these unknown situations while complying with the 1,888-page TRID regulation. To prepare for these inevitable complications, many mortgage lenders and settlement service providers have initiated additional risk-management tactics that may slow the closing process for homebuyers.”

In its letter, NAR asked for a hold-harmless period through at least through 2015. NAR said everyone involved in mortgage closings would benefit if they knew if the CFPB’s sensitivity “will extend for three months, six months, etc.”

Because the Dodd-Frank Act did not propose a specific implementation date for these changes, NAR believes Congress granted the CFPB “considerable flexibility” allowing for the “construction of an initial implementation period that gives industry the appropriate assurances while ensuring the new forms and procedures are implemented effectively ….”

In its letter, the MBA pushed for a six-month period where the CFPB would examine and enforce for good-faith compliance.

“Experience has shown that the TRID rule is far more complicated and wide ranging than any other rule previously issued by the CFPB,” wrote MBA Senior Vice President of Residential Policy and Member Services Pete Mills. “It is causing significant implementation challenges which will increase as the process moves forward and the rule becomes effective. Accordingly…MBA not only strongly supports this change in the implementation date, but also supports making this effective date the start of a temporary ‘good faith’ implementation and enforcement period.”

Since the rule prohibits the use of the new forms until after the rule is effective, many more questions can be expected after the effective date. That will be the first opportunity for service providers to see how the disclosures work in real-life transactions.

In addition to requesting a good-faith period, ALTA also wrote that the CFPB should take this extra time to correct the disclosures by fixing the inaccurate disclosure of title insurance premiums for consumers and remove the “optional” label for owner’s title insurance.”

State law and regulation in the majority of the United States dictates that consumers must pay title insurance rates that are different than how the CFPB requires industry to inaccurately disclose these fees to the consumer.

“Every homebuyer should be well informed about the accurate costs of homeownership—including what they pay for each service during the real estate closing process,” Korsmo wrote. “If the Bureau does not fix this requirement, TRID is likely to fail in achieving its primary purpose of helping consumers understand the costs of their mortgage and real estate transaction.”

Telling a consumer that owner’s title insurance is “optional” will dissuade them from purchasing the same protection that lenders receive from a title insurance policy. The CFPB’s disregard of the protection afforded by an owner’s title insurance policy is a disservice to the consumers they represent.

Other issues raised by MBA in its letter:

  • allow changes to charges on the Closing Disclosure based on changed circumstances and borrower-requested changes if closing is delayed
  • clarify that TRID covers loans on cooperatives
  • delay the effective date of a proposed Home Mortgage Disclosure Act rule until after the TRID dust settles

Other issues raised by NAR in its letter:

  • Clarification if co-branding and distributing CFPB’s “Your Home Loan Toolkit” would be considered thing of value and violate RESPA
  • Clarifying where RESPA and TILA liability apply
  • Clarifying whether real estate agents can receive copies of the Closing Disclosure directly from the lender in order to explain and advance the transaction with their clients
  • Resolving conflicts about title insurance premiums with “simultaneous issue” lender’s and owner’s policies
  • Ensuring that consumers can still choose the agent who closes their transaction without lender interference
  • More information and flexibility on what “bona fide financial emergency” means and related waivers

Contact ALTA at 202-296-3671 or [email protected].