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Mortgage industry wants grace period on TRID consumer-disclosure rule

After Aug. 1, the mortgage industry will begin using a new set of forms to disclose to consumers the costs of loans. Other changes are also coming that aim to prevent fees and rates from bouncing around in the hours and minutes before the borrower signs at the closing table.

Although lenders say the new practices could make things clearer for borrowers, the process to change the system has been hugely complicated.  Because the mortgage industry will go live with the new disclosure system without the ability to first test it in real-life situations, lenders are concerned they will incur the wrath of federal regulators when banks and vendors inevitably make mistakes in the first few months of the rollout.

“These rules are complex,” said Ron Haynie, senior vice president of mortgage finance policy at Independent Community Bankers of America. “They are changing the way that the process works in several ways, and it is just ripe for people making errors. It is naturally going to happen. It is not that people intentionally try to do that, but things happen.”

More than a dozen housing and mortgage trade groups, including the Mortgage Bankers Association and American Bankers Association, sent a letter in March asking the Consumer Financial Protection Agency (CFPB) to offer a grace period through 2015 from issuing fines and penalties.

The CFPB formulated the new disclosure system, known as the TILA-RESPA Integrated Disclosure (TRID) rule, as a result of the Dodd-Frank Wall Street and Protection Act. The rule combined required disclosure forms from two federal agencies. Consumers will get essentially the same information, but the new forms are intended to be clearer. Lenders have had nearly two years to prepare.

The rule itself runs about 1,800 pages, but the industry says the CFPB has not yet fully explained some of the fine-grained details. Haynie said bureau staff has chosen to clarify questions orally, providing no follow-up written guidance. The industry, for example, wants the bureau to more fully spell out potential violations and penalties.

In a speech earlier this month, CFPB Deputy Director Steven Antonkakes indicated the bureau might delay the Aug. 1 implementation if vendors aren't ready. A day after his speech, however, a CFPB spokesman clarified his remarks, saying the bureau had no intentions of extending the date, but would be open to suggestions on its enforcement.

Scott Reed, senior vice president of administration at Carrington Mortgage Services, said implementing the new rule has been a challenge even for larger companies.  

“As you start digging into the details and figuring out all the little things that it touches, it actually has become a little more difficult,” Reed said. “It starts in August, so you are doing everything in this mock-test environment, but not in a live environment.  It would be extremely helpful if there was a little bit of a grace period.”

Under the new system, a lender must mail out a detailed loan estimate no later than three business days after the consumer’s application. Lenders are also required to provide a form that discloses the loan costs three business days before the closing, a waiting period that intends to prevent consumers from getting surprise fee and rate hikes at the closing table.

Haynie said this latter provision — that the loan terms must be finalized three days before the closing — could cause delays when borrowers show up at the closing table and want to make adjustments.

“The way that the CFPB has written these rules, you can’t really have any last-minute changes,” Haynie said.


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