The CFPB Wednesday clarified the circumstances that will require credit unions and other mortgage lenders to allow consumers more time to review a mortgage package and offered assurances that the agency will take into account lenders' good faith efforts to comply with its new rule on Truth in Lending and Real Estate Settlement.

CFPB scheduled the regulation to go into effect on Aug. 1 and the agency has steadfastly refused to delay the implementation date.

The clarification came in a June 3 letter from CFPB Director Richard Cordray to Reps. Andy Barr (R-Ky.) and Carolyn Maloney (D-N.Y.) in response to a letter they had jointly sent the agency about the rule. Both Barr and Maloney sit on the House Financial Services Committee.

According to the letter and an enclosed flyer, credit unions and other mortgage lenders will only have to restart the clock on borrowers' three-day review period before closing under three circumstances.

First, if the lender increased the annual percentage rate by more than 12.5 basis points on a fixed rate loan or 25 basis points on an adjustable rate loan (decreases in APR do not trigger delay); second, if the lender adds a prepayment penalty; or, third, if the lender changes the loan from a fixed rate loan to an adjustable loan.

No other circumstances would require a lender to restart the review clock, though other circumstances would still require new disclosure statements, Cordray indicated.

In addition, Cordray made it clear that the agency would exercise sensitivity when enforcing the rule in the beginning.

“I have spoken with our fellow regulators to clarify that our oversight of the implementation of the rule will be sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with the Rule on time,” Cordray wrote. “My statement here is intended to ease some of the concerns we have heard about this transition to new processes in the coming months and is consistent with the approach we took to the implementation of the Title XIV mortgage rules in the early months after the effective dates in January 2014, which worked out well,” he added.

Reaction to the letter has been largely positive but some legislators complained the agency did not go far enough.

Reps. Blaine Luetkemeyer (R-MO), Chairman of the Housing and Insurance Subcommittee and Randy Neugebauer (R-TX), Chairman of the Financial Institutions and Consumer Credit Subcommittee declared their disappointment that CFPB had not launched a formal “hold harmless” period on the rule and alleged Cordray had led them to expect one.

“Nearly 300 Senators and House Members have written to Director Cordray asking for a formalized hold harmless period,” the representatives wrote. “Anything short of that is unacceptable. That request was reiterated during a bipartisan meeting with Director Cordray yesterday afternoon. Today's announcement falls far short of our expectations and runs contrary to the impression with which Members were left yesterday. We hope the Bureau and all banking regulators will stand by their commitment to work with consumers and market participants to ensure a seamless implementation of the rules.”

Credit union trade associations, however, were more generous.

“We appreciate Director Cordray's consideration and leadership in recognizing the value of 'good faith efforts' by credit unions on this complex new rule,” NAFCU President/CEO Dan Berger said. “We also appreciate the bipartisan support of all the members of Congress who wrote Director Cordray and met with him to urge a restrained examination period. A grace period will not only ensure a smoother implementation of the new TILA/RESPA mortgage disclosure forms, but it will also allow those who make a good-faith effort to comply with the regulation to do so without the fear of potential regulatory enforcement actions.”

Jim Nussle, President and CEO of CUNA, was also laudatory. However, he praised the agency for including a safe harbor that doesn't exist, according to Luetkemeyer and Neugebauer.

“I thank CFPB Director Cordray for listening to the requests of CUNA, Congress and others in our call for a safe harbor period through the end of the year for the enforcement of the TRID rule,” Nussle said in a prepared statement. “CUNA supports the CFPB's goal for transparency with the new disclosures helping consumers better understand mortgage terms, and now credit unions will be allowed the time they need to figure out the day-to-day aspects of complying with the rule without worrying about enforcement,” he added.

Instant Insights /

CFPB Clarifies TILA-RESPA Rule

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