Cordray comes out swinging in NAR speech, says TRID 'misinformation' being spread...

Richard Cordray, the Director of the Consumer Financial Protection Bureau (CFPB) spoke last week at the National Association of Realtors, where he praised the role Realtors play in the homebuying process. Cordray also took the time to address the newest of the bureau’s mortgage reform rules: the TILA-RESPA Integrated Disclosure (TRID) rule or, the name the CFPB prefers, The Know Before You Owe Initiative.


In addition to explaining the basics of the rule which combines the required Truth in Lending Act and Real Estate Settlement Procedures Act disclosures when obtaining a mortgage loan, Cordray took a swipe at those he said were spreading “misinformation” about the three-day closing aspect of the rule.

According to the CFPB’s TRID compliance guide, a lender “may not provide a revised Loan Estimate on or after the date the creditor provides the consumer with the Closing Disclosure … Because the Closing Disclosure must be provided to the consumer no later than three business days before consummation, this means the consumer must receive a revised Loan Estimate no later than four business days prior to consummation.”

However, “If there are less than four business days in between the time the revised Loan Estimate would have been required to be provided to the consumer and consummation, creditors may provide consumers with a Closing Disclosure reflecting any revised charges resulting from the changed circumstance and rely on those figures (rather than the amounts disclosed on the Loan Estimate) for purposes of determining good faith and the applicable tolerance.”

Some have expressed fear that the three-day rule will delay many closings, causing severe stress on the homebuyer, seller and mortgage professionals involved in the transaction, namely the lender who may eat the costs associated with a changed circumstance.

“Should the Closing Disclosure become inaccurate due to three very limited sets of changes that are especially crucial – changing the loan product (say from fixed-rate to adjustable-rate), increasing the APR beyond certain limits or adding a prepayment penalty – consumers must be given a revised Closing Disclosure at least three days before the closing,” Cordray confirmed, before adding that situations in which a new Closing Disclosure would be required will be exceedingly rare.

“Some have been spreading misinformation about this point, claiming that last-minute changes based on walk-throughs or similar circumstances will cause frequent three-day delays in the closing process. That is simply wrong. Sellers’ credits and the like will never require a new Closing Disclosure that delays the closing date. Only the three very limited circumstances just described relating to changes in the loan terms will require a new Closing Disclosure,” Cordray said.

“This rule will reduce paperwork, remove confusion, and make the process more transparent – all changes that will help promote home sales, not hinder them,” he added. “Before people arrive at the closing, they can compare [the Closing Disclosure] to their Loan Estimate to see what has changed. Our form makes that comparison very obvious, which minimizes the potential for nasty surprises such as ‘bait and switch’ increases in rates, fees or settlement costs.”

Cordray also reiterated the bureau’s stance that the new rules will help empower consumers during the mortgage process to shop for the best rates.

“We want to encourage consumers to focus on ‘shopping for a mortgage’ instead of just ‘getting a mortgage,’ ” he continued. “Consumers have much more power than they realize to shop for the best deal. The power to comparison shop allows them to take more control of their financial lives and make better choices that will make a difference for themselves and their families.”

He also took the opportunity to tout the CFPB’s accomplishments since it opened its doors four years ago, including the Ability to Repay rule and the Qualified Mortgage (QM) rule, and called out opponents to the bureau’s efforts.

“When we put those new regulations in place, some were critical of our work,” Cordray said. “They made aggressive predictions that our rules would cause mortgage prices to double and would cut the volume in half.  They offered dire predictions that our rules would lead to the demise of community banks and credit unions, which would have to withdraw from the mortgage market altogether.  We never believed any of this unsupported hyperbole.”

Cordray continued, stating that recent data contradicts bureau opponents’ fears.
“In 2014, the first year of our new rules, mortgage originations for owner-occupied home purchases increased between 4 (percent) and 5 percent. The upward trend appears to have accelerated over the first half of this year,” Cordray said. “And while we saw minor consolidation in some parts of the mortgage market, there is no evidence of any mass exodus, as the doomsayers predicted. In fact, after adjusting for merger activity, the number of lenders that reported having originated mortgages showed an increase in 2014.”

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