The National Association of Realtors has questions for the Consumer Financial Protection Bureau about certain aspects of the mortgage closing process that will be affected by new regulations.
A NAR comment letter supports the CFPB’s delay of the effective date of the TILA-RESPA Integrated Disclosures (TRID) rule.
The CFPB released the final TRID rule in November 2013, giving affected industries nearly two years to prepare for the changes, and set an effective date of Aug. 1, 2015. Last month, the bureau announced that it failed to notify both houses of Congress and the Government Accountability Office of the upcoming implementation deadline, and issued a new rule proposing to make Oct. 3 the new deadline.
The TRID rule consolidates four consumer disclosures currently required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into two forms, a Closing Disclosure form and a Loan Estimate form, each of which must be provided to consumers by certain deadlines.
In a three-page comment letter submitted July 6 to the CFPB and published in the Federal Register as part of the formal rule-making process, NAR “applauds the bureau for its acknowledgement of the ‘real-world’ circumstances that make Aug. 1 impractical to start the use of new forms and procedures for mortgage closings.” But on behalf of its more than 1 million members, NAR also said “more official, written guidance is needed in especially sensitive areas of the mortgage closing process.”
“The litigious climate that has consumed the lending industry in the wake of the most recent crisis has made industry participants (and more specifically their counsels and risk managers) extremely cautious,” the association stated in its letter. “Written guidance is necessary for a practice or procedure to be approved more universally and consistently.”
At the top of NAR’s wish list is the “trial implementation period” that it and most other industry trade groups have been requesting for months — even going as far as working with federal legislators to introduce measures to implement an initial “hold harmless” period through “at least” Dec. 31 to give everyone a few months to work out the kinks while the CFPB pulls back its enforcement reins.
At most, the bureau conceded on June 3 that it “will be sensitive to the progress made by those entities that have been squarely focused on making good-faith efforts to come into compliance with the rule on time.” But in announcing this on its blog, consumerfinance.gov, the CFPB didn’t clarify what “sensitive” actually means.
That kind of “leeway” is “appropriate,” NAR said, but the association says it’s still ambiguous.
“It would be helpful to everyone involved in mortgage closings to know whether this ‘sensitivity’ will extend for three months, six months, etc.,” NAR stated in its letter.
NAR suggested that lenders and other settlement service providers should be required to use the new disclosure forms “in good faith,” but not be bound to hold up transactions should the forms and rules create any glitches.
“Lenders should be required to catalog and report these issues or glitches to the CFPB so the CFPB and industry can work together to improve the rule and ensure a positive consumer experience,” NAR suggested.
NAR also included a short list of other potential areas of confusion it would like the CFPB to resolve through written guidance, including:
- 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.
The association also highlighted two areas where it could use formal, written guidance from the CFPB. The first concerns changes in circumstances regarding appraisals that may affect settlement charges.
Under TRID, the appraisal fee has been moved into the “zero-tolerance” category, even though loan originators may not have enough information about a property to quote the proper appraisal fee at the time of application. NAR pointed out that upon arrival at the subject property, an appraiser may discover additional complexities in the assignment such as physical deterioration, unpermitted renovations or excess land.
Finally, NAR also wants the CFPB to clear up questions the real estate industry has about the bureau’s discussion of ways to co-brand and distribute its “Your Home Loan Toolkit” with agents and brokers.
The public comment period ended July 7. NAR’s letter is among 804 comments received.
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