The Consumer Financial Protection Bureau’s new proposal to update its Know Before You Owe rule has only been in the hands of the industry for a week. Coming in at a whopping 293 pages, there is a lot of information that everyone continues to work through.
At the end of June, HousingWire held a webinar with experts Benjamin Olson, partner at BuckleySandler, and Brandy Hood, associate at BuckleySandler, to give our readers some answers on how to conquer TRID.
Now that the new proposal is out, we circled back with the two expert TRID attorneys, and even added in an interview with Andy Dunn, senior attorney with Wolters Kluwer, to get their initial read on the rule.
Overall, Hood said, “They did a good job. They hit a number of different issues that really needed to be addressed.”
“It’s a step in the right direction. If this is finalized as proposed, it will clarify a number of ambiguities. Although there will still be ambiguities and other issues, the changes will address a lot of them,” she added.
Olson explained that the change the industry would most like to see is expanded cures in the regulation, but the bureau said they are not doing that, and said it pretty emphatically.
“They seem to be concerned it would detract from implementation efforts and are worried about reducing the industry’s incentive to get it right the first time,” he said.
“I read the statement that the bureau will not expand the cures to be a signal to industry that the bureau’s decision is final. In light of that, I would say the chances of an industry win there is very low, but on the things they did address, there may be room to persuade them,” he continued.
And he also explained that the industry has made great strides in starting to develop a consensus around what errors really matter. This proposal will hopefully help in that regard.
Meanwhile, Dunn added, “What the final rule doesn't allow, and the proposed rule doesn't change, is for lenders to make corrections to substantive/numerical errors, such as failing to declare a pre-payment penalty on either the Loan Estimate or the Closing Disclosure when the loan has that feature.”
Similarly, Dunn noted, “Allowing lenders to make these types of substantive corrections would weaken the consumer protections the CFPB built into the final rule. A core tenant of Know Before You Owe is the requirement for lenders to verify compliance with and the accuracy of the Loan Estimate and the Closing Disclosure before it's sent to consumers.”
An important aspect to the rule is how often the CFPB asks for comment on it, Hood said. “They ask for guidance on whether certain changes are appropriate. Have they gone too far? Should they go further? They are willing to ask for direction,” she said.
Simply searching the words “seeks comment” in the proposal generates 150 results on 23 pages.
Going a little broader, Dunn said, “I see rules like Know Before You Owe as being iterative. They will require regular updates throughout the years as technology changes and consumer-shopping habits evolve. That's why Wolters Kluwer is planning to add an addendum to our official comment on this proposed rule to highlight other nonbinding guidance we've received from the CFPB in response to lender questions. We think it would be good for consumers and the industry alike if this other nonbinding guidance also became formal guidance going forward, regardless of whether that occurs in this rulemaking effort or a future rulemaking effort.”
There were big successes in the rule, such as the addition of formal guidance that allows lenders to share a copy of the Loan Estimate and Closing Disclosure with the borrower's Realtor, Dunn noted.
Ultimately, “It's really too early to say at this point. We, and I'm sure most of the industry, are still digesting all of the new details,” Dunn said.
“That said, it's very encouraging to see the CFPB issue the proposed rule and ask for feedback from industry stakeholders on a provision-by-provision basis on its effective date. This action shows how focused they are in ensuring that implementation of the amendments to the final rule don’t solve one set of problems but then create others,” he continued.
And as Olson stated, “I am sure there are plenty of folks that want to be able to snap their fingers and make this all go away. But the flip side is that it’s now the middle of 2106, and the industry has devoted years and millions of dollars and resources to these exposure requirements.”
Feel free to add your thoughts on the new rule in the comment section below.
