Banking and Finance Law Daily TRID Integrated Disclosure gets attention in efforts to reduce regulatory burden
Friday, October 2, 2020

TRID Integrated Disclosure gets attention in efforts to reduce regulatory burden

By Colleen M. Svelnis, J.D.

The Bureau released the results of its assessment of its TRID Integrated Disclosure Rule, while the Fed looks at relieving its regulatory burden on community banks.

The Consumer Financial Protection Bureau has published a report containing the results of its assessment of the Bureau’s Integrated Disclosure under the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA), also known as TRID. The assessment found that the TRID Rule made progress towards several of its goals. The purposes of the rule are facilitating compliance with disclosure requirements and helping borrowers better understand mortgage transactions. According to the Bureau, the evidence available for the assessment indicates that the TRID Rule improved consumers’ ability to locate key information, compare terms and costs between initial disclosures and final disclosures, and compare terms and costs across mortgage offers.

The CFPB stated that the evidence was mixed, leaning positive on whether the rule improved consumer understanding of forms. The assessment also found that the rule resulted in sizeable implementation costs for companies. The report examined potential effects on a range of market outcomes, such as interest rates and origination volumes, and found either no change or relatively short-lived changes in these measures around the rule’s effective date.

The Bureau also released a Data Point, How Mortgages Change Before Origination, by the Bureau’s Office of Research, examining how the terms and costs of a mortgage loan may change during the origination process as reflected in the Loan Estimate and Closing Disclosure forms provided to borrowers pursuant to the TRID Rule.

The TRID Rule updated how federal laws governing mortgage disclosure forms were implemented, including by combining previously separate and overlapping disclosure forms. In putting together the Data Point report, the Bureau looked at mortgages originated after the TRID Rule took effect. Because of that, it does not address how the TRID Rule may have changed the size, prevalence, and timing of changes in mortgage terms. However, the Bureau notes in the report that, when possible, the report includes data from other sources that allow for comparisons before and after the TRID Rule took effect.

Under TILA-RESPA, both a Loan Estimate and Closing Disclosure are required to be provided for closed-end consumer credit transactions secured by real property or a cooperative unit. The rule requires the creditor or mortgage broker to give the Loan Estimate to the consumer within three business days after the consumer applies for a mortgage. The report states that, according to survey data, "the TRID Rule appears to have resulted in consumers receiving their Closing Disclosures a number of days earlier than when pre-TRID consumers typically received HUD-1 settlement statements." But it was not clear if it resulted in potential borrowers receiving their first disclosure form sooner.

Reducing regulatory burden. Federal Reserve Board Governor Michelle W. Bowman spoke about community banking and homeownership in her remarks during a roundtable discussion at a virtual Montana State University event on TRID. Bowman’s speech, Mortgage Market Regulation and Access to Mortgage Credit, focused on opportunities and challengers for homeownership, discussed community bankers and their response to the Coronavirus pandemic, and examined ways to ease regulatory burden on community banks.

Bowman spoke about how home mortgage lending has become more complicated and stated that one of the most significant challenges facing community bankers is navigating the complex regulatory framework. She stated that, along with tightened lending standards, "this trend has made it harder for middle- and lower-income borrowers to obtain mortgage credit since the global financial crisis." Bowman discussed work way to relieve the regulatory burden, noting that TRID is one of the real estate regulatory requirements that smaller banks cite most frequently as creating a heavy burden.

ICBA statement. Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey issued a statement on the Montana State University event, and revealed that the association is joining the Fed and CFPB in "a collaborative effort to test certain community bank-inspired improvements to the TILA-RESPA Integrated Disclosure Rule through the CFPB's Trial Disclosure Sandbox." According to Romero Rainey, the ICBA "looks forward to working with the Fed and CFPB and using the 'Sandbox' to improve the TRID process for smaller community bank lenders, which will help make mortgage credit more available in local communities."

Romero Rainey noted that "for many borrowers, mortgage rules released by the CFPB in recent years have restricted mortgage lending at smaller community banks. TRID has been of particular concern to community banks because it is overly prescriptive and costly, which has led to closing delays for borrowers, less clarity for consumers, and driving many smaller community banks out of mortgage lending altogether—cutting off access to critical credit in local communities."

Companies: Independent Community Bankers of America

MainStory: TopStory BankingOperations CFPB CommunityDevelopment FederalReserveSystem Loans Mortgages RESPA TruthInLending

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