House passes TRID ‘hold harmless’ bill

The U.S. House of Representatives yesterday passed an industry-backed measure that would give a little breathing room to mortgage lenders and their real estate industry partners if they make a “good faith” attempt to comply with the Consumer Financial Protection Bureau’s (CFPB) complex TILA-RESPA Integrated Disclosures (TRID) rule.

The bill, HR 3192, dubbed “The Homebuyers Assistance Act,” would give industries affected by TRID until Feb. 1, 2016, to get up to speed on the 1,888-page regulation and new disclosure forms without threat of CFPB examination or civil liability for any compliance issues they may encounter. TRID took effect nearly a week ago on Oct. 3.

Most of the industries affected by TRID have said that although they were given nearly two years to prepare for the changes, the rule is very nuanced and complex — a particular challenge for smaller entities that lack the legal and compliance resources needed to tackle it — and it may take some time to iron out the kinks in a real-world settings.

The CFPB has acknowledged that it could not anticipate every possible unique mortgage closing scenario in writing the rule, and it will offer guidance going forward on the affected industries’ most frequently asked questions.

But the bureau has stopped short of agreeing to give the industry a formal “hold harmless” period with a concrete end date — which other federal agencies have in the past included along with their new regulations.

Richard Cordray.

CFPB Director Richard Cordray has said only that the bureau will be “sensitive” for an undefined period of time and take actions that are “diagnostic, not punitive” against companies that can show they are making a good-faith attempt to comply with the rule.

As pointed out by Republican proponents of the bill on the House floor yesterday, the bill is a bipartisan effort that simply aims to codify a formal grace period for TRID compliance, and to prevent any disruptions to the mortgage loan application process.

But Democrats who opposed the measure argued that it removes homebuyers’ right to pursue legal action if they are harmed by non-compliance, which they say contradicts the intent of the Dodd-Frank Act and the CFPB in the first place.

HR 3192 passed by a vote of 303-121. It now awaits approval by the Senate, but the bill’s success may be moot.

“The administration strongly opposes HR 3192, as it would unnecessarily delay implementation of important consumer protections designed to eradicate opaque lending practices that contribute to risky mortgages, hurt homeowners by removing the private right of action for violations and undercut the nation’s financial stability.” – White House policy statement

On Oct. 7, ahead of the bill’s vote, the Office of Management and Budget released a policy statement saying that if President Barack Obama is presented with the bill, “his senior advisors would recommend that he veto the bill.”

“The CFPB has already clearly stated that initial examinations will evaluate good faith efforts by lenders. The administration strongly opposes HR 3192, as it would unnecessarily delay implementation of important consumer protections designed to eradicate opaque lending practices that contribute to risky mortgages, hurt homeowners by removing the private right of action for violations and undercut the nation’s financial stability,” the policy statement said.

HR 3192 was co-sponsored by Reps. French Hill, R-Arkansas, and Brad Sherman, D-California. The bill was backed by several industry trade groups.

Email Amy Swinderman.