by Timothy Raty
The long-awaited amendments to the TILA-RESPA Integrated Disclosure Rule (“TRID 2.0”) were finally released by the CFPB on July 7, 2017 (see https://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-updates-know-you-owe-mortgage-disclosure/). Many of the proposed rules were finalized with revisions (most of which are either minor in detail or provide further clarifications). Additional rules were implemented which were not in the original proposals and some of the proposed rules were not finalized. The following illustrates some of the major differences between the proposed and finalized versions of TRID 2.0. Please note that this is not an exhaustive, detailed list of all items which were added or removed.
Brand New Rules
- Creditors for “homebuyer assistance loans” partially exempt under Regulation Z (see 12 CFR § 1026.3[h]) have the option of providing either a Truth-in-Lending Disclosure (“TIL”) for these loans OR a Loan Estimate (“LE”) and Closing Disclosure (“CD”) – unlike now, where only a TIL can be provided for compliance purposes.
In addition, creditors may opt to use either of these three Regulation Z disclosures in lieu of the Regulation X disclosures (the GFE and HUD-1) for “homebuyer assistance loans” which meet the criteria set forth under Ibid. and which are considered a “federally related mortgage loan” under 12 CFR § 1024.2, but are totally exempt from Regulation Z (e.g. a federally-related mortgage loan which has four or fewer payment installments and in which no finance charge is imposed; see Supra § 1026.1[c][iii])
- Proposed changes concerning the “Written List of Settlement Service Providers” (“WLSSP”) were not finalized, but they were modified to provide the following:
- A determination of whether the creditor permits a consumer to shop for settlement service providers will not solely hinge on whether a WLSSP is initially provided or not, but will be “based on all the relevant facts and circumstances.” (12 CFR Pt. 1026, Supp. I, Paragraph 19[e][vi] – 1) This allows the CFPB to consider cases where creditors forgot to provide a WLSSP initially, but correct this error as soon as possible, as ones where the creditor did permit the consumer to shop for services, unlike under current law where such a mistake would be considered a case where the consumer was not permitted to shop and, therefore, the 10% tolerance rule under 12 CFR § 1026.19(e)(3)(ii) cannot be applied (see Supra Paragraph 19[e][ii] – 6).
- Clarification that the list of fee amounts on the WLSSP, as presented in Model Form H-27, may be deleted ( Paragraph 19[e][vi] – 3).
- If a WLSSP is not provided and the consumer chooses a settlement service provider, rather than the fee for such service being subject to the “Good Faith” tolerance under 12 CFR § 1026.19(e)(3)(iii), the fee may be subject to the 10% tolerance under § 1026.19(e)(3)(ii), unless the provider is the creditor (or an affiliate of the creditor), in which case it may be subject to Zero tolerance under Ibid. § 1026.19(e)(3)(i) (see 12 CFR Pt. 1026, Supp. I, Paragraph 19[e][iii] – 2). However, as noted before, whether a WLSSP is sufficiently provided or not is dependent upon the “relevant facts and circumstances”, so the CFPB may consider bona fide efforts to correct unintentional mistakes to be sufficient for determining that a consumer was truly given a chance to shop for a provider.
- When factoring per diem interest into the “Total Interest Percentage” (“TIP”) calculation, clarification is provided that prepaid interest which is disclosed as a negative number in Sections F of the LE and CD are to be included (see 12 CFR Pt. 1026, Supp. I, Paragraph 37[l] – 1). This clarifies an ambiguity as to whether per diem interest which is credited to the consumer should be included in the TIP, since the current language of the regulations specify that only per diem interest paid by the consumer should be included.
- While not added as a rule, but simply expounded upon in their analysis of their finale rule, the CFPB does provide the following guidance regarding which parties to a trust should receive required disclosures, when the trust is considered a “consumer”:
“Comment 2(a)(22) – 3 provides that a trust and its trustee are considered to be the same person for purposes of Regulation Z, and comment 17(d) – 2 provides that disclosures must be given to the principal debtor and, if two consumers are joint obligor with primary liability on an obligation, the disclosures may be given to either one of them. Thus, where credit is extended to trusts established for tax or estate planning purposes, the disclosures may simply be provided to the trustee on behalf of the trust. In rescindable transactions, however, comment 17(d) – 2 provides that the disclosures required by § 1026.19(f) must be given separately to each consumer who has the right to rescind under § 1026.23.” (p. 22 of the CFPB-version of the Final Rule; available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-updates-know-you-owe-mortgage-disclosure/)
This helps to clear up some ambiguities created by apparently conflicting decisions in Federal case law (see Shirley v. Wachovia Mortgage FSB, No. 10-3870 SC, 2011 WL 8555943 at *4 [N.D. Cal. Mar. 9, 2011] and Amonette v. IndyMac Bank, F.S.B., 515 F. Supp. 2d 1176, 1184 [D. Haw. 2007])
Proposed Rules which were Axed
- The CFPB proposed adding clarification that the term “paid by or imposed on”, as used in their tolerance rules under 12 CFR § 1026.19(e)(3)(i), would mean the same as the term “payable”, as used in other parts of Regulation Z (see 81 FR 54374 ). While doing so would have provided a better understanding of what these terms mean and how they should be applied, the CFPB decided to “axe” this because “commenters have shown that the term ‘payable’ is not commonly understood”, therefore “the Bureau is concerned that proposed comment 19(e)(3)(i)-8 would increase confusion concerning the meaning of the phrase ‘paid by or imposed on’ in § 1026.19(e)(3)(i).” (p. 76 of the CFPB-version of the Final Rule)
- The CFPB proposed several amendments to establish a structure to determine when the “may be permanently financed by the same creditor condition” specified in 12 CFR § 1026.17(c)(6)(ii) is satisfied, based on a variety of factors, such as whether the creditor “generally makes both construction and permanent financing available to qualifying consumers” and whether or not the “consumer expressly states that the consumer will not obtain permanent financing from the creditor.” This structure would further be used to determine whether an LE or CD which combines the terms of both the construction and permanent phases could be provided to consumers or not (see 81 FR 54372 ).
This proposed rule has been “axed” because “the Bureau concludes that proposed comment 17(c)(6) – 6 would not provide enough benefit to outweigh the potential consumer confusion and compliance burdens that may result.” (p. 57 of the CFPB-version of the Final Rule)
- The proposed amendments would have provided guidance specifying that “construction costs in connection with the transaction that the consumer will be obligated to pay, payoff[s] of existing liens secured by property identified under § 1026.37(a)(6), and payoff[s] of unsecured debt” should be disclosed in Sections H of the LE and CD (see 81 FR 54379 & 54382 ). The Bureau is not finalizing this proposal, but is rather specifying that such amounts should be disclosed in “Adjustments and Other Credits” in the “Calculating Cash to Close” tables (see p. 172 of the CFPB-version of the Final Rule).