Consumer Finance Litigation

The long heralded TILA/RESPA Integrated Disclosures (TRID) are coming, and they are already causing some headaches in the real estate market. Congress provided for the new disclosures in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The TRID disclosures are designed to improve the existing disclosure process for mortgage lending and real estate closings by consolidating the old Truth in Lending Disclosure Statement (TILA), HUD-1 Settlement Statement (HUD-1), and Good Faith Estimate (GFE) into two new forms called a "Loan Estimate" (essentially a merger of the information now provided in a TILA/GFE) and a "Closing Disclosure" (essentially a merger of the information currently provided in a TILA and HUD-1). The new TRID forms not only consolidate the disclosure process into fewer forms, but use an updated organization and terminology similar in many respects to the now ubiquitous monthly mortgage statement. The time-frames for providing these disclosures are also getting a revamp. Congress gave the Consumer Financial Protection Bureau's (CFPB) authority to implement these changes, including most of the requirements governing the exact timing and content of the new disclosures. However, the roll-out of these new requirements has been far from the smooth process envisioned by Congress when it passed Dodd-Frank. Originally, the CFPB envisioned the new forms would be required for all closings after August 1, 2015. Ironically though, the CFPB missed a filing deadline for disclosing its new rules about TRID to Congress. As a result, the effective date for requiring the new disclosures was extended (twice) and is now set for October 3, 2015. The delay may account for the noticeable uptick in delayed (9.1% overall) and cancelled (1.2% overall) real estate closings attributable to lender's processes reflected in a survey by the National Association of Realtors (NAR). Some industry members have noted that that the new time-line for providing disclosures will make it hard to accommodate a borrower's last minute request to change the interest rate or other loan features. As a result, the NAR survey revealed that 55.9% of Realtors plan to change their purchase agreements to reflect a longer timeline, while 31.2% will add contingencies to the contract. How much time is enough time appears to be an open question, as there was little consensus among realtors. Anecdotal evidence suggests 15-day, 30-day, and even 60-day contract periods. Only time will tell if more problems are on the horizon as the new TRID requirements go live at the beginning of next month. Lenders and realtors should be sure that their practices provide enough time to accommodate the new TRID disclosures. As always, we will continue to monitor the information coming out of the CFPB regarding the implementation of this new rule.