Buyer Walk-Throughs Problematic under TRID Attorney Says

The Housing and Insurance subcommittee of the HousernFinancial Services Committee has scheduled a hearing this afternoon titled “TILA- RESPArnIntegrated Disclosure (TRID): Examining the Costs and Benefits of Changes tornthe Real Estate Settlement Process.” rnAccording to the hearing memorandum, the  hearing will provide members with a betterrnunderstanding of the new TRID and testimony “will focus on the impact of TRID on the real estaternmarket, implementation and compliance costs associated with TRID, and a comparison of those costsrnto the benefits consumers and industry participantsrnare expected to derive from the rule.”</p

However, asrnreported here earlier this week, it appears that the hearing is actually layingrngroundwork for delaying enforcement of TRID implementation until January 1,rn2016.  At least two subcommittee membersrnhave been advocating for such a postponement and one, Steven Pearce (R-NM) hasrnfiled legislation requiring it.</p

Scheduled as witnesses at the hearing arernthree housing industry representatives and one representative of a consumerrngroup:</p<ul class="unIndentedList"<liCynthiarnLowman, President, United Bank, Mortgage Corporation, United Bank of Michigan, onrnbehalf of the American Bankers Association</li<liDianernEvans, Vice President, Land Title Guaranty Company, on behalf of the American Land Title Association</li<liLauriernGoodman, Center Director, Housing Finance Policy Center, Urban Institute</li<liChris Polychron, Executive Broker, 1st Choice Realty,rnon behalf of thernNational Association of Realtors</li</ul

There are no representatives of thernConsumer Financial Protection Bureau (CFPB) which is responsible for TRID implementationrnscheduled to appear at the hearing.  </p

There have been no prepared remarks from witness madernavailable, but in advance of the hearing Richard J. Andreano, Jr. published anrnanalysis in Ballard & Spahr’s CFPB blog of some of the concerns thernindustry appears to be raising as they prepare for implementation.  He used as a basis a statement made by RichardrnCordray, CFPB Director, to the National Association of Realtors (NAR) onrnTuesday to suggest that Cordray “may not fully appreciaternthe implications” of the TRID rule.  </p

Andreano’s analysisrncenters around the section of the rule which requires that the TRID “ClosingrnDisclosure” be received by the borrower at least three business days before thernloan is closed and that certain changes in the loan require not only a newrndisclosure but a new three-business-day waiting period.  Lenders apparently are concerned that problemsrnsometimes encountered during the usually last minute buyer walk-through of thernproperty could trigger a renewed three-day waiting period and delay some closings.</p

In his statement tornNAR Corday noted that his agency had specifically responded to earlier concernsrnabout such changes and had limited the reasons requiring the waiting priod tornthree:</p<ul class="unIndentedList"<lia change in the APR of more than 1/8rnpoint for fixed-rate or ¼ point for adjustable rate loans;</li<liaddition of a prepayment penalty;</li<lia change in the basis loan product.</li</ul

CFPB recognizes, Cordray said, thatrnthings can and do change and the rule makes allowances for ordinary ones withoutrndelaying the closing.  An earlier versionrnof the rule would have required a waiting period had closing costs increasedrnmore than $100.  CFPB removed thatrnprovision as an accommodation to industry concerns.   </p

Andreano says the Director’s comment “isrnnot consistent with industry views and experience” and that issues arising fromrna walk-through can result in changes that could cause the APR to becomerninaccurate.</p

Another problem he writes is that whilernthe TRID rule limits how much lender and other fees may increase it allows themrnto increase based on changed circumstances and similar events.  However in most circumstances only thernupfront disclosure (the Loan Estimate) may be used to increase fees and thernrule does not permit a lender to issue one subsequent to issuing a ClosingrnDisclosure.  Thus if a later changernaffects the transaction so as to increase fees the lender will either have to absorbrnthe increased costs or deny the loan. </p

Both of these situations are mattersrninvolving the borrower and seller not the lender.  Lenders, he says, would welcome revisions tornthe rule that would allow them to make changes without triggering a waitingrnperiod.  This would benefit consumers asrnwell.</p

Andreano also engages in a lengthyrndiscussion as to how the 1/8 point and ¼ point tolerances for APR changes mightrnbe interpreted for regular and irregular transactions.  He concludes that the complexity of theserntolerances will likely result in many delayed closings and recommends revisingrnthe rule to simplify when a new waiting period is required because of changes.

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