With only a few days to spare in order to meet its July 2016 target release date, the Consumer Financial Protection Bureau (“CFPB”) finally issued a Notice of Proposed Rulemaking (NPRM) today, proposing a number of amendments to its TILA-RESPA Integrated Disclosure rule (“TRID” or the “Know Before You Owe” rule).
On April 28, 2016, the CFPB issued a letter stating that it would engage in formal rulemaking in order to provide “greater certainty and clarity” to the mortgage industry. (Mayer Brown’s post regarding the April 28 letter can be found here.) Since then, the industry has been anxiously awaiting the proposal to see which of the many issues the CFPB would address. While it may not have touched upon every issue on which the mortgage lending industry has pleaded for guidance, the NPRM is a step in the right direction, indicating that the CFPB understands some of the challenges market participants have faced.
Since the regulations were finalized in November 2013, the CFPB has periodically issued informal guidance through webinars, compliance guides, and sample disclosures. With its current proposal, the CFPB is seeking to memorialize its past guidance, as well as make additional clarifications and technical updates. In the NPRM, the CFPB highlights the following four amendments:
- Tolerances for the Total of Payments Disclosure — The Truth in Lending Act provides certain tolerances when calculating the finance charge and “disclosures affected by the disclosed finance charge.” Prior to TRID, the finance charge was a component of the Total of Payments disclosure. However, TRID changed the Total of Payments calculation so that the finance charge was not specifically used. The current proposal would include a tolerance provision for the Total of Payments that would parallel the tolerance for the finance charge.
- Housing Assistance Lending — TRID currently provides a partial exemption for certain housing assistance loans that are originated primarily by housing finance agencies and non-profits. According to the CFPB, the exemption was not operating as intended, so the CFPB is proposing to clarify that recording fees and transfer taxes may be charged in connection with a housing assistance loan without losing eligibility for the exemption. The proposal also would exclude recording fees and transfer taxes from the exemption’s limits on costs.
- TRID’s Application to Cooperatives — Currently, TRID’s applicability to loans secured by interests in cooperative units depends on whether a cooperative is considered real property under state law. Since some states treat cooperatives as real property, and others deem it personal property, there is not uniform coverage of cooperatives under the regulation. In order to provide more consistency, the CFPB proposes to require the provision of the TRID disclosures in all transactions involving cooperative units, regardless of whether state law classifies the interests as real or personal property.
- Privacy and Information Sharing — The CFPB has received many requests for guidance regarding the sharing of disclosures with sellers, real estate agents, and others involved in the mortgage origination process. In its proposal, the CFPB seeks to add a comment that addresses a creditor’s ability to modify the Closing Disclosure in order to accommodate the provision of separate disclosures to the consumer and seller. The proposal would also add examples where the creditor may choose to provide separate Closing Disclosure forms to the consumer and the seller.
In addition, the CFPB includes a number of “minor changes and technical corrections” in the NPRM.
Mayer Brown’s Legal Update detailing the CFPB’s proposal is coming soon.