For the second time in recent weeks, the Consumer Financial Protection Bureau (CFPB) delayed the launch of the new integrated disclosures for residential mortgage loans under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). The launch date, now set for Saturday, October 3, was announced in a proposed amendment to the Know Before You Owe mortgage disclosure rule (also called the TILA-RESPA Integrated Disclosure) that pushes back the effective date. The delay resulted from the CFPB’s discovery that when it adopted the rule in December 2013, it failed to properly follow the Congressional Records Act and notify Congress sixty days in advance of the rule’s implementation. Although the delay was the result of the CFPB’s own accord, the CFPB was under pressure from numerous members of Congress from both sides of the aisle, urging the CFPB to postpone the deadline to allow lenders additional time to implement the necessary changes for the new disclosure form and to test their systems for compliance.
The proposed amendment seeks comments from banks and lenders regarding the delay and their planned implementation of the TILA-RESPA Integrated Disclosure and current data and practices on preparation for the rollout of the new form. The CFPB suggests in the proposal that the delay may be beneficial to both consumers and lenders. Lenders will benefit from the additional time to implement and test their compliance with the new disclosure rule. While the delay does harm consumers from obtaining the benefit of the new rule sooner, the CFPB believes consumers may also benefit from a smoother transition to the new form that should come by giving lenders additional time for compliance.
The TILA-RESPA Disclosure rule was mandated by Congress in the Dodd-Frank Act in order to provide timely clarity to consumers regarding key features of their mortgage loan. The form requires lenders to disclose to borrowers within three days after accepting an application the loan’s negative amortization features; escrow accounts; monthly payments for adjustable rate mortgages; and origination fees, among other disclosures. Although some commentators are speculating that the CFPB may not immediately enforce the requirements of the new rule—instead giving banks and lenders a grace period until CFPB examiners can implement a compliance review of the new rule into the course of their regular audits—this should give little comfort to mortgage originators. That is because both TILA and RESPA carry a private right of action that would allow consumers to file lawsuits against lenders for failing to comply with the new disclosure rule. Thus, the delay is significant for lenders as it gives additional time to ensure they are compliant when implementing the new rule.
LenderLaw Watch will continue to monitor implementation of the new rule and its impact on lenders.