Posts tagged ‘TRID’

Juneteenth Creates Compliance Glitch For Mortgage Lenders

The passage of legislation making Juneteenth a national holiday resulted in a compliance glitch which the CFPB could, and hopefully will, fix as early as today.

This issue sent me back to the preamble to the 2013 final TRID regulations. As the CFPB explained, neither RESPA nor TILA defines the term “business day.” As a result, for reasons that have never been clear to me, Regulation X which implements RESPA and Regulation Z which implements TILA contain separate definitions of a business day.

Most importantly, Regulation Z applies a definition of business days which includes calendar days except Sunday and legal public holidays specified in § 5 USC 6103. This is the section of law amended by Congress last week. As a result, from a strict compliance standpoint, June 19th was a national holiday and not a business day for disclosure purposes. This means that your credit union runs the risk of making loans that are out of compliance with federal regulations.

Yours truly is hopeful that common sense will prevail. Hopefully the CFPB will issue guidance clarifying that for purposes of complying with federal regulations. Lenders will not be deemed to be out of compliance for counting Juneteenth as a business day in 2021.

NY to Release Diversity and Inclusion Document to State Regulated Institutions

The Department of Financial Services will shortly release a memorandum to state chartered institutions explaining the department’s expectations as it relates to diversity and inclusion in the workplace. This publication is similar to one issued last October related to climate change initiatives. Its purpose is not to impose specific mandates at this time but to begin a discussion about the requirements that should be imposed on banks, credit unions, and mortgage lenders. When it comes to the efforts they are making to bring more diversity to middle and upper management. Stay tuned.

June 21, 2021 at 9:33 am Leave a comment

CFPB Puts Brakes on Mortgage Reform

Late last year, the CFPB passed a series of regulations making dramatic changes to the definition of qualified mortgages (QM) under TRID. Now, to the surprise of no one, the new leadership of the CFPB is holding off on these final regulations. This can get kind of confusing, so pay attention.

The regulations to which I am referring were finalized by the CFPB on December 10th of last year. One of the regulations created a new category of qualified mortgages, under which mortgages held in a lender’s portfolio for 36 months, which also met certain other criteria, would qualify as qualified mortgages. This distinction provides lenders with increased protections in the event the legality of the loan is challenged in a foreclosure. In finalizing the regulation, the CFPB had decided that regulations would not retroactively apply for this expanded QM definition, but also decided that the regulation would take effect March 1, 2021. In a statement yesterday, the CFPB indicated that it is going to let this regulation take effect, but that it is considering a new round of rulemaking that would amend this regulation. 

A second key development involves everyone’s favorite friend, the QM patch. The patch is that “temporary” provision, under which mortgages eligible for sale to the GSEs are classified as qualified mortgages. Also on December 10th of last year, the CFPB finalized amendments to this regulation which would replace the QM patch with a new QM definition classifying mortgages as qualified provided the interest rate terms of the loan are comparable to similar mortgages.

Currently, credit unions must be in compliance with this second regulation by July 1, 2021. In its statement yesterday, the CFPB indicated that it would also be considering making amendments to this regulation and most likely delaying the mandatory compliance deadline. 

February 24, 2021 at 9:49 am Leave a comment

Are You Getting Ready For New York’s Servicing Regulations?

On December 18, 2019 New York’s Department of Financial Services finalized regulations which impose requirements on mortgage loan servicers greater than those mandated under Federal law. Although I previously mentioned these regulations, I’ll mention them again because mandatory compliance starts in March and they require changes in some of your procedures.

The first question is: to whom do they apply? The regulation defines a mortgage servicer as any entity servicing a mortgage loan in the state “whether or not required to be registered pursuant to §590 of New York’s banking law”. This means that, as far as New York State is concerned, this regulation applies to both Federal and State chartered credit unions. For those of you with mortgage CUSOs, this distinction doesn’t matter much because CUSOs are state corporations, but for those of you who are federally chartered institutions you may wish to contact your attorney and clarify the extent to which these regulations may impact your institution.

The changes are too numerous to provide a blog sized summary, so I’m just going to highlight a few of the changes to demonstrate why you need to be cognizant of these new regulations. For example, §419.6 has extensive requirements dealing with how you communicate with your members, particularly when it comes to loss mitigation. For example, now you must maintain a toll-free number that enables persons to speak with a “living person” during regular business hours who can instruct callers on how to submit written complaints. Presumably this means that those of you planning on using zombies are out of luck.  While there is already a similar Federal mandate, New York’s is more extensive.

§419.7 will look awfully similar to those of you familiar with Federal loss mitigation requirements, but there are some important distinctions. For example, under this regulation servicers shall assign a single point of contact to any person who is 30 days delinquent or has requested a loss mitigation option, whichever is earlier. Under Federal regulations, delinquency information must be sent if the borrower is 45 days or more delinquent [see 1026.41 (d)(8)]. This is one example of how your periodic disclosures will have to be modified. Make sure your statement provider is aware of these changes.

These are not academic distinctions but litigation tripwires. One of the largest areas of mortgage litigation involves allegations that, but for a lender’s lack of compliance with servicing regulations, the borrower would not have lost their home.

Perhaps the section of the regulations that has gotten the most attention involves § 419.11 which codifies a servicers obligation to perform due diligence on 3rd party vendors. Importantly, this new section requires servicers to have policies and procedures requiring 3rd party providers to comply with the servicers’ applicable policies and procedures as well as state and Federal regulations. This reinforces the need for institutions subject to New York’s cyber security regulations to have strong vendor contracts.

Now, enjoy your day, get to work and in the immortal words of Sgt. Phil Esterhaus “Let’s be careful out there”.

February 19, 2020 at 10:07 am Leave a comment

CUNA: Scrap the CFPB and Pick Up the Pieces

Now that the Supreme Court has agreed to rule on the constitutionality of the single-director leadership structure at the Consumer Financial Protection Bureau, CUNA has submitted a provocative friend of the court brief. In this brief, CUNA argues that in the event the leadership structure is found to be unconstitutional, the court should invalidate the entire CFPB, but allow Congress six months to address the identified defects.

Just in case your second cup of coffee hasn’t quite kicked in yet, remember that the CFPB is unique among financial regulators in that it is overseen by a single director who can only be removed for cause by the president. Since the CFPB’s budget is not subject to congressional appropriations, the director exercises enormous power in comparison to any other federal regulator. Opponents of the CFPB have seized on this structure to challenge its constitutionality.

Most prominently, the Court of Appeals for the District of Columbia, in a decision by then-Judge Kavanaugh, ruled that the Bureau was in fact unconstitutional. He also ruled that this defect could be remedied by simply interpreting the statute as making the director subject to removal by the president with or without cause. Even though this decision was eventually reversed by the entire Court of Appeals, Kavanaugh’s decision has provided a template for other plaintiffs challenging the CFPB’s authority.

The Supreme Court will be deciding this issue when it hears Seila Law LLC v. CFPB. In its brief, CUNA argues that while it agrees that the Bureau’s structure is unconstitutional, the Kavanaugh solution is not appropriate, as Congress never intended the Bureau to be an extension of executive power. The solution, CUNA argues, should instead be to send this back to Congress to develop a bipartisan oversight board analogous to that of NCUA and other financial regulators. This argument is consistent with the position that the industry has taken in pushing for legislation in this area.

Of course, this raises the very real possibility that Congress won’t be able to reach a consensus on this issue. Remember, the court’s decision is going to be coming out in June in the midst of the most divisive and important election cycle since the Civil War. Furthermore, if Congress hasn’t come up with a plan on how to restructure the GSEs over the past decade, realistically, it won’t be able to deal with this issue swiftly.

So here is the question I ask my faithful readers to ponder in the coming days. Particularly, if you want to get a good debate going over Christmas dinner – would credit unions be better off with the CFPB and all its regulations done away with, or given the amount of resources that have already been committed to implementing and understanding thousands of pages of mortgage rules, would they be better off if the CFPB, with all its defects, remained intact? I for one believe that, for purely practical reasons, Justice Kavanaugh’s solution is the only feasible one.

CFPB Issues Important Guidance on Disclosure of Construction Loans

The entire framework of the TRID disclosure regime is based on the assumption that Dick and Jane go look for a house, sign a contract, get a mortgage, schedule a closing, and move in surrounded by a white picket fence to live happily ever after. In reality, a sizable number of home buyers want to build their house from the ground up. Although construction loans are covered by TRID disclosure requirements, grafting these requirements onto construction loans is, to put it mildly, perplexing.

Consequently, I am glad to announce that, just in time for the holidays, the CFPB has issued not one but two separate guidance’s to aid those of us who have been asked to advise on how best to disclose construction loans consistent with federal law.

I’ll have more to say on this in a future blog, I’m sure you can’t wait. I know I can’t.

December 19, 2019 at 9:17 am Leave a comment

TRID Clarifications Proposed

The Bureau That Never Sleeps is at it again!  On Friday, the Bureau released proposed amendments to its “know before you owe” TRID regulation, which took effect in October of 2015.  I’m going to dub these proposed changes Death Wish classics because some of the amendments are so technical that the only way I am going to get through them is to drink Death Wish coffee, which for the uninitiated, makes Starbucks taste like your mother’s Chock full o’ Nuts.

At first glance, it doesn’t seem like there are any major changes.  But there are several proposed amendments and clarifications including extending TRID’s coverage to all co-op units; clarifying the applicability of tolerances in early disclosures; and clarifying information that can be shared with third parties without violating a consumer’s privacy.  According to this morning’s American Banker, this last one was put in at the urging of the National Association of Realtors.  This is one to have your mortgage person take a look at.

Economic Growth Declines

Those of us of the opinion that the economic glass is half empty received further support for our negativity with the release of news on Friday from the Commerce Department that the U.S. economy grew at a seasonally adjusted annual rate of 1.2% in the second quarter.  According to the WSJ, this means that economic growth is now at its weakest level since 2011.

The thing that really perplexes me is that business investment declined for the third straight quarter.  American corporations are sitting on a record pile of cash.  For years, optimists have been waiting for businesses to start spending some of this cushion and really jump start the economy.  Wouldn’t it be something if business sits out an entire period of economic growth without making any sizable investments other than to buy back their shares?

On that note, grab your coffee and get to work.

August 1, 2016 at 8:36 am Leave a comment

Key NYS Legislation Starts to Move

Albany is getting down to its post-budget business, especially now that the seat vacated by former Senate Majority Leader Dean Skelos has been won by Democrat Todd Kaminsky.  This week’s Senate Banks Committee agenda includes legislation important to credit unions.

Most importantly, legislation sponsored by Senator Savino (S.7183) would clarify when a mortgage is considered consummated under New York State Law.  Under the TRID regulations, closing disclosures must be received by a homebuyer at least three business days before a mortgage loan is consummated.  Currently, there is no statutory definition of consummation and there is case law that suggests that consummation actually occurs at the time that the credit union or bank sends a commitment letter to a mortgage applicant.  The bill clarifies that for purpose of compliance with federal law, consummation occurs when a mortgage applicant signs a promissory note and mortgage.  Here is a previous blog I’ve done on the topic.

A second bill on the Committee’s agenda, S.7434, mandates the creation of a state-wide data base of vacant foreclosed property.  Under this bill, when a bank or credit union obtains a judgement of foreclosure on residential property that is or has become vacant or has been abandoned, the mortgagee is required to provide notice of the vacancy to the Department of Financial Services within ten days.  The Attorney General (AG) and municipalities would have access to the database and the hope is that it will make it easier to hold mortgagees responsible for maintaining the property.  The AG will have the authority to fine institutions that violate this section.  Unlike a proposal previously put forward by the Attorney General, this bill does not seek to impose responsibilities on financial institutions for vacated property on which they have not obtained a judgement of foreclosure.

CFPB Unveils Class Action Protection Proposal

At a New Mexico field hearing yesterday, the CFPB formally unveiled a proposal that would prohibit banks and credit unions from including arbitration clauses in account agreements that prohibit consumers from joining class action lawsuits.  The CFPB is taking this step pursuant to the Dodd-Frank Act which mandated that it study the use pre-dispute arbitration clauses and make regulatory changes where appropriate.

This is a big deal for many industries that have turned to arbitration clauses as a means of controlling liability risks.  It is not clear to me how many credit unions use arbitration clauses, but at the hearing yesterday it was suggested that the use is growing in the industry, particularly by larger credit unions.  If you would like to know my personal opinion of the CFPB’s proposal, here is a blog I did on arbitration clauses earlier this week for CU Insight (how’s that for a shameless plug, I figure if I take the time to write this stuff, I might as well encourage people to read it).

Bankruptcy Cliffhanger

Here is a question for you to ponder over the weekend.  Can a bankruptcy court overseeing a Chapter 13 reorganization vest legal title in residential property in a bank or credit union over the objection of a bank or credit union holding the mortgage on which it has not yet foreclosed?  Or, put another way, you know that abandoned piece of property that simply isn’t worth foreclosing?  Can you be made to take legal title?  I’ll be providing the answer to this question next week.  I am sure you can’t wait, but enjoy your weekend nevertheless.


May 6, 2016 at 8:58 am Leave a comment

3 Things You Should Know on a Friday Morning

Ridesharing a Top Legislative Priority

When the Legislature returns from its late April slumber, the regulation of the emerging ride sharing industry will be a top priority according to Assembly Democrat John McDonald. In an interview published yesterday, the Cohoes Legislator argued that expanded ride sharing options and the traditional taxi medallion industry can co-exist.

“I don’t look at ridesharing as the threat to the (taxi) industry that most people think it is. Most of the taxi business here is medical transport. That’s what they do, 80 percent of it,” McDonald said. “We’re working on a parallel path with the taxi industry to Uber-ize them as well, bring them into the 21st century. It’s the technology.”

The Assemblyman’s comments are worth noting for a few reasons. First, with the biggest issues taken care of (paid family leave and the minimum wage) in the budget, ride sharing has certainly moved up the Legislative to-do list.  Furthermore, the fact that an upstate Assemblyman is highlighting the issue demonstrates why it is so complex.  Whereas, down-staters are understandably concerned about the regulation of New York’s existing medallion system, up-staters view ride sharing as a means of expanding transportation options.  Your blogger will attest that the taxi service in the Albany area is nothing short of atrocious.

Remember that for credit unions the two big issues are proper insurance to protect the value of their auto loans and the value of medallion loans.

CFPB to Make Further Changes to TRID

In a letter to industry stakeholders yesterday, the Bureau said that it would be incorporating much of its informal guidance into proposed amendments to the TRID regulations by late July.

The Bureau has been doing a fair amount of letter writing lately. It recently responded to a letter from Tennessee Republican Senator Bob Corker, who asked the Bureau four questions:

  1. What is the CFPB doing to address the borrower confusion due to the discrepancies between federal and state law regarding the disclosure of title insurance premiums?
  2. What steps is the CFPB taking to prevent lenders from shifting liability to settlement agents?
  3. Will the CFPB consider forming an internal task force to identify and address issues arising from the implementation of the TRID rule? And
  4. Will the CFPB release technical guidance regarding what constitutes a technical error and potential remediation method?

Here is the Bureau’s response.

By the way, while lenders remain ultimately responsible for ensuring proper disclosures, there is nothing to prevent them from spreading the cost of liability to third parties, nor should there be.

Justice Department Oks KeyCorp Merger

KeyCorp and First Niagara Financial Group Inc. have agreed to sell 18 of First Niagara’s branches in and around Buffalo, New York, with approximately $1.7 billion in deposits, to resolve antitrust concerns that arose from KeyCorp’s planned acquisition of First Niagara,the Justice Department announced yesterday. Here is a list of the branch locations to be divested. The Department said that with these branch sales it will no longer oppose the merger. Both Senator Schumer and Governor Cuomo have urged the federal government to block the merger which has to ultimately be approved by the Federal Reserve.  They argue that it will result in a loss of jobs and financial services in the impacted regions.


April 29, 2016 at 8:46 am Leave a comment

Tripped Up by TRID?

If you are still scrambling to get your systems updated and your members are experiencing delays in closing on their mortgage loans since the new TRID rules took effect on October 3, you are not alone.  This is clear from the results of a survey released by the American Bankers Association yesterday, which surveyed banks ranging in size from under $50 million to over $20 billion in assets.

Among the most surprising findings:  the surveyed banks are still scrambling to make changes to their loan operating systems months after the regulations took effect.  According to the American Banker, this reflects the fact that vendors are still trying to figure out what is required of lenders under these new regulations.  According to the survey, 72% of respondents are still waiting because of vendor software problem defects.

The CFPB would argue that these little bumps in the road are worth it to end up with a better consumer process.  As of right now, the benefit to consumers is mixed at best.  For example, 77% of the respondents reported delays in loan closings because of TRID, ranging anywhere from 1 to 20 days, with an approximate average of 8 days.  In addition, 40% of respondents reported that the cost of obtaining a mortgage alone has increased.

Perhaps it is time for the CFPB to wake up and smell the coffee.

Republican Party Gets Trumped

I wasn’t going to say anything about Donald Trump’s primary victories last night, all but assuring that he will be the GOP candidate for President in November, but I can’t help myself.  Here are some quotes from the op-ed section of the Wall Street Journal, which summarized my feelings nicely this morning.

Conservative columnist William A. Galston wrote:  “suppose we give Mr. Trump more credit than he deserves and take him at his word. It is abundantly clear that no Mexican leader or government would ever agree to pay for his border wall. What then? He would lack the legal authority to impose tariffs on countries such as China and Mexico that run persistent trade surpluses with the U.S. What then? He has proposed a massive tax cut and other programs that, according to the Committee for a Responsible Federal Budget, would add between $11.7 trillion and $15.1 trillion to the national debt over the next decade. This plan, which would be ruinous if enacted, would not be adopted, and candidate Trump has no other economic agenda. What then?”

This next quote summarizes how I feel about my fellow Americans who decided that voting for Mr. Trump was a good idea.  Holman W. Jenkins, Jr. wrote:  “To be honest and impolitic, the Trump voter smacks of a child who unleashes recriminations against mommy and daddy because the world is imperfect.  The blaming of elites has gone too far. The American voter has a big hand in his own disappointment.”

March 2, 2016 at 8:46 am Leave a comment

CFPB Clarifies TRID Liability


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.


January 4, 2016 at 8:20 am 1 comment

TRID Highlights Need For Vendor Due Diligence

The performance of vendors in implementing the TRID regulation has been put under the microscope lately and frankly, I think it reflects poorly on the vendor due diligence being carried out by credit unions and other relatively small lenders in the financial marketplace. We don’t need more regulation of vendors. What we do need is more institutions to take the process of vendor due diligence seriously.

I’m fired up after following up on an article I read in this morning’s Credit Union Times. The article related testimony from a rural $59 million credit union that explained to the Senators that difficulties with its vendor had forced it to comply with TRID disclosure requirements by hand.

Furthermore, none other than Richard Cordray explained in a recent speech to the Mortgage Bankers’ Association that he has “been disturbed by reports I have heard about vendors on whom so many of you rely. Some vendors perform poorly in getting their work done in a timely manner, and they unfairly put many of you on the spot with changes at the last minute or even after the due date.” Have no fear, the Bureau is considering devoting greater attention to the unsatisfactory performance of vendors and how they are affecting the marketplace.

Nothing annoys me more than when credit unions argue about the need to reduce regulatory burdens while at the same time implicitly arguing for greater government oversight. I, for one, have no sympathy for a credit union who is struggling to comply with TRID because of vendor incompetence. The industry has had almost two years to choose a vendor and test its systems. This is basic 21st century due diligence.

And let’s be clear. NCUA has stressed the importance of vendor management since at least 2007. (NCUA letter to credit unions, 07-CU-13, December, 2007). Nevertheless, I suspect there are still come credit unions that choose vendors based solely on the recommendation of their peers; save money by not having attorneys review vendor contracts, and don’t assign staff to oversee a vendor’s performance. By taking these basic steps, most credit unions can and do retain vendors who are ready, willing and able to do the work for which they are being contracted.

In addition when a vendor does make a mistake, a well-drafted damages clause can do more to prevent vendor negligence than the CFPB ever could.

November 2, 2015 at 8:43 am 1 comment

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Authored By:

Henry Meier, Esq., Senior Vice President, 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. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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