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CoreLogic U.S. Housing Policy Update: June 2016

CFPB Changes Its Tactics Over TRID - More Clarity (Maybe More Cooperation?) To Come

Faith Schwartz    |    Housing Policy, Videos


The Consumer Financial Protection Bureau (CFPB) has softened its approach to the TILA-RESPA Integrated Disclosure.

After months of informal dialogue between the industry and CFPB on issues related to TRID, the CFPB chief broke his silence and released a letter to industry trades, saying that it will issue a Notice of Proposed Rulemaking on TRID to provide greater certainty and clarity on the “Know Before You Owe” rule. The new clarifications are expected by the end of July.

The letter was light on specifics but at least it is an apparent change of tactics, which we think is a positive sign.

In his letter, Director Cordray acknowledged the effect of the Mortgage Bankers Association’s (MBA) persistent advocacy. The MBA, and now Congress, has been pushing for more clarity from the CFPB, arguing that many TRID errors are minor or just technical glitches.

But that uncertainty over liability is impacting the non-agency side of the business. It has led to “significant market disruptions”, according to the MBA, that have produced a new class of scratch and dent loans and added additional headwinds to private label securitization. “If these conditions persist,” the MBA warned, “many lenders will experience liquidity issues as unsold or repurchased loans clog warehouse lines and balance sheets.”

Critics, including some members of Congress, are also questioning whether the benefits of TRID justify the significantly higher cost of origination that will be passed on to consumers. Having said that, consumer advocates have applauded TRID for its benefits to the consumer: noting that its delivering accurate, transparent information from application to closing of a mortgage loan. The attention on accuracy regarding adequate disclosures and closings has never been higher, they say.

Most industry observers are hoping that the CFPB will provide greater certainty and clarity on big un-resolved issues like: What’s a material defect? What can be cured and how? They are also hoping for more direction on how to handle disclosures on complex products, like construction-to-permanent loans, and what level of reconciliation, and record keeping, are required in the event of multiple re-disclosures.

Home Sales Growth Decelerating

Home Sales Growth Decelerating

Despite these un-answered questions, it does appear that the industry is getting used to the new post-TRID world. At a recent CoreLogic Symposium in New York City, my colleague Sam Khater examined TRID’s effect.

Looking at the year-to-year change in weekly home sales in the top 100 markets, he found that there was a swift dip that correlates with TRID implementation. But there has been a quick rebound this year, with a bounce-back as high as 10 percent growth year over year, now modulating back to six percent, the levels seen last November.

Likewise, there have recently been some consumer surveys that show borrowers seem to like the new forms and the greater level of price and cost transparency that they provide. So the long view on TRID is that it may yet be a win-win for consumers, the industry, and CFPB!

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