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From Banking and Finance Law Daily, October 8, 2015

House passes safe harbor for TRID rule

By Colleen M. Svelnis, J.D.

The House of Representatives approved legislation that would create a temporary safe harbor from enforcement of the Consumer Financial Protection Bureau’s final rule that streamlines the disclosure requirements for consumers during the home buying process. The bill, the Homebuyers Assistance Act, provides a four-month grace period for businesses that are working in good faith to comply with the disclosure rules. The Truth in Lending Act and the Real Estate Settlement Procedures Act Integrated Disclosure rules, commonly referred to as the Know Before You Owe regulation, or TRID rule, for TILA/RESPA integrated disclosures rule, went into effect Oct. 3, 2015. “Without this bill, homebuyers could encounter delays and difficulties when they try to close on their homes,” said Financial Services Chairman Jeb Hensarling (R-Tex). “Buying a home is stressful enough, and bureaucratic delays should not add to their stress.”

H.R. 3192, sponsored by Rep. French Hill (R-Ark), creates a temporary safe harbor, until Feb. 1, 2016, as long as a good faith effort was made to comply with the final rule. The bill passed 303-121. The Obama Administration has indicated the President’s intention to veto the bill (see Banking and Finance Law Daily, Oct. 7, 2015).

Hill responded to the bill’s passage with the following statement. “This is a straightforward measure that will provide our title companies, bankers, and others in the industry who are earnestly trying to comply with the TRID rule the confidence and certainty needed to properly transition into this new closing regime. I am happy members on both sides of the aisle were able to come together and move legislation that will prevent costly market disruptions and delays for American homebuyers. I strongly urge the Senate to act immediately so we can shelter from punishment those acting in good faith to meet the criteria of this 1,888-page rule.”

More time for smaller companies. The bill had bipartisan support, with 64 Democrats voting in favor. Response to the bill’s passage was generally positive. House Majority Leader Kevin McCarthy (R-Calif) released a statement that “Smaller lenders and title companies need to have time to understand the Consumer Financial Protection Bureau’s rulemaking and make a good faith effort to comply without fear of inadvertently violating the law.” McCarthy also said the bill “provides that time so Americans will have the opportunity to realize their American Dream.”

“Common sense”. Rep. Pete Sessions (R-Texas) chairman of the House Rules Committee, voted in favor of the bill, calling it “pure common sense. By delaying the required date of compliance of the TILA-RESPA Integrated Disclosure Rule, homebuyers will be better equipped to apply for a mortgage, and the federal government will be able to halt implementation of this rule to ensure it is being administered effectively and efficiently. More knowledge and data about the challenges that exist when implementing this disclosure can only be seen as a positive.”

Not enough time. Rep. Steve Pearce (R-NM) explained that the CFPB has not provided the industry with the time it needs to implement the “beneficial” changes. “Today’s bill addresses this shortfall, without impacting the transparency the CFPB rule creates. It creates a near 5-month hold harmless period that provides industry time to work through any unintended consequences of this new process, while still offering mortgages and serving the American public.

Insufficient protection. According to a statement released by Rep. Ed Royce (R-Calif), senior member of the House Financial Services Committee: “The CFPB and House Republicans agree that a transitional period for TRID compliance which enables lenders to test their systems and ensures there is no large scale disruption to mortgage lending is necessary. However, declaring an enforcement safe-harbor period without codifying it, as the CFPB has done, is insufficient protection for the housing market and families looking to settle into a new home without delay.”

Avoiding delays. Rep. Robert Hurt (R-Virginia) called the bill, “an important piece of legislation” and stated that “the temporary grace period provided by the Homebuyers Assistance Act will give hardworking Americans certainty that the CFPB’s new rules will not unduly disrupt the home-buying process.”

Representative Scott Tipton (R-Colo) stated that “While the intent of these new requirements—to streamline the disclosure process—is based on common sense, it requires lending businesses to use a slew of new, and seemingly ever-changing forms. As businesses work to adapt to these new requirements, any unintended mistake or glitch in the process—including something as simple as using an old disclosure form—can result in significant delays and disruptions for consumers.”

Industry reaction. The Financial Services Roundtable’s Housing Policy Council (HPC) applauded the House’s actions, saying it will “help ensure that the housing market recovery will not be slowed by any uncertainty resulting from the implementation of the new TILA-RESPA regulations and disclosures.” HPC President John Dalton said the bill “will give lenders and other key players in the mortgage settlement process the opportunity to put new procedures in place and prevent any delays in closing on home purchases. It will also keep the mortgage settlement process operating smoothly for homebuyers, as well as the business participants in mortgage closings.”

Other bills passed. In addition to the Homebuyers Assistance Act, the House passed other Financial Services committee bills:

  • H.R. 1553, Small Bank Exam Cycle Reform Act, sponsored by Tipton, which passed the committee on July 29 by a unanimous vote of 58-0;

  • H.R. 1553 passed the House on October 6 unanimously by a vote of 411-0;

  • H.R. 1839, Reforming Access for Investments in Startup Enterprises Act (RAISE) Act, sponsored by Rep. Patrick McHenry (R-NC), passed the committee on July 29 by a unanimous vote of 58-0;

  • H.R. 1839 passed the House on October 6 unanimously by a vote of 404-0;

  • H.R. 2091, Child Support Assistance Act, sponsored by Rep. Bruce Poliquin (R-Maine), passed the committee on July 29 by a vote of 56-2;

  • H.R. 2091 passed the House on October 6 by voice vote;

  • H.R. 1525, Disclosure Modernization and Simplification Act, sponsored by Rep. Scott Garrett (R-NJ), passed the committee on May 20 by a unanimous vote of 60-0; and

  • H.R. 1525 passed the House on October 6 by voice vote.

Companies: Financial Services Roundtable

MainStory: TopStory CFPB Mortgages RESPA TruthInLending

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