Although the Consumer Financial Protection Bureau (CFPB) has moved implementation of new mortgage disclosure rules from Aug. 1 to Oct. 3, most real estate agents and brokers still have concerns about the CFPB’s regulation.
Released by the CFPB in November 2013 as part of its “Know Before You Owe” consumer financial education initiative, TILA-RESPA Integrated Disclosures (TRID) 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.
The CFPB received nearly 850 comments about the proposed Oct. 3 effective date, and only a small percentage of the feedback came from the real estate realm — probably because TRID primarily impacts lenders, who will bear compliance responsibility for all closing table parties, and settlement agents, who will handle closings and submit the forms to lenders.
However, the real estate brokers and agents who did respond to the bureau’s call for public comment generally showed support for the proposed Oct. 3 deadline, according to the comments that are published in the “Federal Register.”
DeDe Dickinson, a broker associate at Sonnenalp Real Estate in Vail, Colorado, said the new date would be in the best interest of the public, but also offers benefits to buyers and sellers who are trying to consummate a transaction around the same time their children are starting a new school year.
“The majority of clients with children would be taking out a mortgage to be able to purchase a property, and if they found a home in August, they just couldn’t get a deal done if this new rule is in place at the time,” Jackson wrote. “By pushing the timeline out, you will not have this very large group of buyers/sellers penalized and able to move forward.”
Sharon Devlin, associate broker at Berkshire Hathaway Home Services Towne Realty in Virginia Beach, Virginia, said the implementation extension will give real estate professionals more time to prepare for the changes because “we do not have enough time to do all of the things that are required with this new regulation.”
“It is imperative that you move the time for implementation to no earlier than October,” Devlin, who has been a Realtor for more than 20 years, wrote. “Most of us have properties pending to close within 30 days. I think that starting this in August instead of October will cause difficulties and impact both buyers and sellers.”
But commenters from the real estate segment also told the CFPB that they are concerned about how TRID will impact real-world closings and whether the software needed to process the new Loan Estimate and Closing Disclosure forms will be tested and ready to use by Oct. 3.
Michael Dryden, a Realtor with Re/Max Heritage in Fort Worth, Texas, wrote that if just one element of the financing process on a mortgage, such as a delayed appraisal, causes an interruption in the three-day notice requirement, the transaction will be delayed, “yet there is no penalty to the lender, who is the only one in control of the activity.
“This regulation’s three-day advance requirement is bound to cost consumers in delayed closings, expenses for temporary housing, or the need to do temporary leases and a host of other issues while offering absolutely NO protection to them in exchange for the additional regulation,” Dryden wrote. “Abolish the three-day advance requirement or implement a penalty to lenders who fail to provide the information in the required time frame.”
Mark D. Steele, president of Howard Hanna Mortgage Services, said his management team has spent 18 months preparing to make the transition by Aug. 1, but pointed out that there are still challenges posed by having to redesign their entire workflow and reliance on the delivery of software platforms from third-party service providers that enable the company to achieve compliance.
“Despite the best efforts of everyone, satisfactory testing of the process and the software in a real-world environment creates additional risk to the industry and the consumer,” Steele wrote. “Since the software systems will not have been tested in a ‘live’ environment … there is the potential for operational and software systems to fail.”
Steele recommended that the CFPB consider pushing the implementation date out even further to January 2016, which “represents the lowest point in the real estate cycle.”
Steele wrote: “This is a prudent, common-sense approach that will assure lenders that inadvertent good faith errors will not result in punitive measures during the initial implementation period.”
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