NATNews Blog > January 2016 > CFPB Responds to MBA’s Request for TRID Clarifications to Allay Investor Concerns

    CFPB Responds to MBA’s Request for TRID Clarifications to Allay Investor Concerns

    1/4/2016 12:46:36 PM
    The Consumer Financial Protection Bureau (CFPB), responding to a request from the Mortgage Bankers Association (MBA) to address investor liability concerns, advised that the risk of private liability to investors is negligible during the early days of the mortgage disclosure implementation period, citing existing provisions already in place to mitigate issues during this “corrective and diagnostic” period.
    The CFPB was responding to a Dec. 21 letter from MBA President and CEO David Stevens who reported investors have put in place “strict Know Before You Owe compliance standards that are resulting in very high fail rates on closed loans delivered for sale.”
    Stevens said the jumbo loan secondary market appeared to be experiencing the biggest problems.
    “The reason is simple,” he wrote. “Third party due diligence firms that are assigned by either ratings agencies or the investors themselves to perform quality assurance reviews on loans delivered into whole-loan trading (WLT), private-label securitizations (PLS) and credit risk transfer (CRT) pools are failing loan deliveries in large quantities. These firms have taken an extremely conservative interpretation of several aspects of the KBYO rule and the physical disclosure display requirements.”
    Stevens asked the CFPB to issue a written clarification in terms of a compliance bulletin, supervisory memo or blog post to educate investors, due diligence companies and lenders on methods lenders can undertake to cure KBYO errors during the diagnostic period.
    But CFPB Director Richard Cordray assured MBA in its Dec. 29 letter to Stevens that long-standing provisions in the Truth in Lending Act (TILA) as well as provisions in the TILA RESPA Integrated Disclosure (TRID) rule already provide the assurance investors need.
    “The bureau believes that if investors were to reject loans on the basis of formatting and other minor errors, as you indicate has been occurring, they would be rejecting loans for reasons unrelated to potential liability associated with the Know Before You Owe mortgage disclosures,” Cordray wrote. “Such decisions may be an overreaction to the initial implementation of the new rule, and our assessment is that these concerns will dissipate as the industry gains experience with closings, loan purchases and examinations.”