Most professionals in the mortgage industry agree that the Consumer Financial Protection Bureau’s (CFPB) proposed changes to the Know Before You Owe rule — often referred to as the TRID rule (TILA-RESPA Integrated Disclosures) within the industry — are a step in the right direction. That’s to say, the changes are welcome, but there’s still plenty of room for improvement.
What Are the Positives in the Latest Proposal?
Mortgage professionals seem to unanimously praise the fact that the new amendments make an effort to address some of the ambiguous wording in the original rule. This alone suggests that the once complex and confusing regulations could be much easier to cope with in the future.
Based on industry polls following the proposed changes, the biggest wins seem to be:
- New wording on the tolerance for total of payments.
- More detail about how construction-to-permanent loans are affected by the rule.
- The inclusion of all cooperatives under the rule (as opposed to relying on different definitions for different states).
Many of the amendments sprung out of direct feedback from mortgage professionals tired of grappling with the weaknesses of the old rule. The latest proposal makes some valuable clarifications, but the industry clearly feels there is a long way to go before the regulation can be called perfect.
Where Do the Revisions Fall Short?
There are a few areas mortgage professionals are hoping to improve with another round of feedback for the CFPB. Some of the biggest weaknesses include:
- A lack of an outline for how to cure TRID technical issues discovered in loans that are already at the stage of production and post-origination.
- The potential for TRID-related errors to open up the possibility for loan buybacks. This weakness alone has had a chilling effect on the market for residential mortgage-backed securities, which makes it an issue of great importance for investors as well as mortgage professionals.
Some industry experts believe the issues above should have been dealt with in the most recent proposal. Unfortunately, the CFPB released a statement in July that all but closed the door. They said they would not be “proposing additional cure provisions.”
What’s Next?
The bureau thinks a further definition of the cure provisions would only lead to more confusion. They stated in July that attempting to provide greater detail would be extraordinarily complex. Their focus is solely on facilitating compliance with TILA-RESPA in the most expeditious manner possible, and sinking deeper into the cure provisions would supposedly only be a road block.
If mortgage industry professionals want to offer their feedback to the process, the CFPB is accepting comments on the proposal until October 18th.
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