CFPB Clarifies TRID Liability

January 4, 2016 at 8:20 am 1 comment


Well, I’m back for another fun-filled year trying to help you stay up-to-date on the issues that could most affect your credit union.  If, like your faithful blogger, you have spent a good chunk of the last week and a half engaged in pursuits that have little if anything to do with banking, here is a quick look at an important development you may have missed.

On December 29, the CFPB offered its opinion regarding the increased liability mortgage lenders face as a result of the “Know Before You Owe” mortgage disclosure rule that took effect in October in response to a letter from the Mortgage Bankers’ Association.  In a nutshell, the Bureau does not believe that lenders face greater liability.  This is certainly one to keep in the file.  Dodd-Frank mandated that homeowner disclosures required by the Truth in Lending Act and RESPA be combined into a single regulatory framework.  Since RESPA and TILA have historically imposed different penalties for compliance failures, lenders have been justifiably concerned about how much liability they face when they make a mistake implementing this new regulation.

Among the key points from the Bureau are “as a general matter” legal liability will be based on the accuracy of final closing disclosures and not on initial loan estimates.    According to the Bureau, this means that “a corrected closing disclosure could, in many cases” forestall private liability.

In response to concerns that the regulation has made it more difficult to sell mortgages in the secondary market, the Bureau stresses that if investors are rejecting loans based on formatting “and other minor errors,” they are doing so for reasons unrelated to potential liability.

While the Bureau’s clarifications are welcome, the issues raised by concerned lenders, including credit unions, will ultimately be resolved by the Courts.  In other words, while the CFPB’s interpretation of Dodd-Frank may provide persuasive authority, it is far from the final word on the issue.

On that note, welcome back.


Entry filed under: Compliance, General, Mortgage Lending, Regulatory. Tags: , , .

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1 Comment Add your own

  • 1. C. Richard Wagner  |  January 5, 2016 at 11:35 am

    See the movie, THE BIG SHORT, it is difficult for people not knowledgable with finance, but really scary if you know. It also gives an insight to how our “corporate CUs” got caught , because they forgot SLY. Richard Wagner Municipal CU


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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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