ALTA Encouraged by CFPB Statement on TRID Hold-Harmless Period

October 1, 2015

ALTA was encouraged by comments Consumer Financial Protection Bureau (CFPB) Director Richard Cordray made during testimony before the House of Representatives Financial Services Committee on Sept. 29.

During the testimony, Cordray reiterated comments he made during previous testimony that the bureau’s enforcement actions would be “diagnostic not punitive.”  

“We appreciate Director Cordray once again recognizing the need for a hold-harmless period for companies that make a good-faith effort to comply with the TILA-RESPA Integrated Disclosures (TRID) regulation,” said Diane Evans NTP, ALTA president. “We are encouraged by Director Cordray’s statement that any enforcement action on TRID would be diagnostic and not punitive during the first few months of implementation. We look forward to additional guidance from the CFPB as we approach the October 3 TRID implementation date.

“ALTA knows its members are ready for implementation of this regulation. However, we know from previous regulation implementations that there will be a learning curve and unforeseen issues once the new forms are used in real homebuyer transactions,” Evans added.

Cordray said that companies making good-faith efforts to comply with the regulation will have "some period of months" to work out any problems.

"There will be time for them to work to get it right. They don't have to be perfect the first day," Cordray said. The CFPB director stopped short of saying the bureau would announce a formal hold-harmless period.

“An official hold-harmless period would help ensure our industry can adapt their business processes and continue to meet homebuyer’s needs as we transition to using the forms in actual real estate transactions,” Evans said.

Until the CFPB issues formal guidance, ALTA members will continue to support legislative action, such as H.R. 3192 sponsored by Reps. French Hill (R-Ark.) and Brad Sherman (D-Calif.). This legislation would extend a hold-harmless period until Feb. 1, 2016. Without certainty on how the rule would be enforced, service providers would have been likely to close fewer transactions to ensure compliance with TRID. Members of ALTA’s Title Action Network also reached out to the CFPB over the past year asking for a hold-harmless period as well.

Earlier this year, the CFPB outlined items it will examine in regard to TRID compliance. Among other things, the bureau will:

  • assess whether mortgage personnel are knowledgeable about TRID’s requirements
  • review the procedures used to ensure compliance when changes such as interest rates, service charges, computation methods and software programs occur
  • determine that the appropriate consumer disclosures are provided by required deadlines
  • review accuracy of fees charged
  • ensure fees follow description, labeling and ordering requirements
  • review any affiliated business arrangements with settlement service providers
  • identify persons or entities to which the institution refers settlement services business in connection with a federally related mortgage transaction. The CFPB will identify the types of service provided, determine if fees were paid and whether any feed paid or received were for services actually performed
  • examine how escrow funds are handled and accounts are maintained, among many other procedures. 

Although ALTA asked for an official hold-harmless period, 92 percent of title professionals surveyed in April reported that they were prepared for TRID implementation.

Meanwhile, the American Bankers Association (ABA) issued a memorandum warning that many of its members face significant issues ahead of the implementation date. According to the ABA, the most pressing issue is delivery of updates to loan origination systems (LOS).

“In a few instances, these systems will not be delivered until after compliance deadlines have passed. Other banks state that only portions of the systems needed for full compliance have arrived, with other installments to be delivered later,” according to the ABA. “Only 60 percent of bank report having received production versions of systems by September 1.”

In addition, banks have also reported to the ABA that there are considerable “errors and malfunctions” with their software.

“In order to be deemed ‘ready’ for TRID compliance, systems must possess capabilities to generate the required disclosures in compliant format, generate the required calculations accurately, provide adequate instructions for input of required data on costs and fees, and provide the necessary integration functions vis-à-vis other vendor systems,” the ABA wrote in its memorandum. “Even when systems are delivered in a timely fashion, critical elements of TRID compliance programs are often not completely operational, or are malfunctioning.”

The ABA also provided three examples of regulatory concerns not addressed by the CFPB:

  • The disclosure methodology for single-closing construction-to-permanent loans is not adequately addressed in the regulation, and some banks are therefore eliminating that product in the interim to remove regulatory risk.
  • Lenders have expressed concerns that official explanations in one portion of the regulatory text may state that property insurance is not subject to cost tolerances, and in another portion the rule describes such insurance as subject to tolerance. 
  • The regulations are silent as to how to treat tolerance calculations in instances where consumers exercise their option to shop for their own services.

Contact ALTA at 202-296-3671 or