Dec. 30: Atlanta RE event; TRID kickback reasons; December’s wave of CFPB news including letter meant to assuage industry’s TRID fears

Death is rarely funny, and the aftermath can be even worse. But here’s an interesting twist on things. Even in our digital world where e-mortgages should be in the not-too-distant future, paper is still king when it comes to life and death – that is, birth certificates and death certificates. “Some states, including South Carolina and California, use a certain security enabled paper to print those records. And that paper is suddenly in short supply. The Ohio company that produced it for years unexpectedly shut down last summer.” Tell some family they will have to wait for a death certificate


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Regarding the Seattle Times and BuzzFeed articles by Mike Baker and Daniel Wagner about Warren Buffett and Clayton Homes, I received this note from Audrey Saunders in Clayton’s Corporate PR & Communications Department. “We saw your recent article referencing the Seattle Times and BuzzFeed articles by Mike Baker and Daniel Wagner. In the interest of showing a fair and balanced view to your readers, we sincerely request that you include a link to our own response to the article’s accusations.”


The CFPB is warning bankers that it will focus examiner efforts in 2016 on spending a lot of time looking at loan officer compensation plans, consumer disclosure requirements, ability to repay rules and marketing services agreements.


The impact of “Know Before You Owe” continues to be felt by consumers, lenders, real estate agents, settlement agents, and investors. For example, Laura Williamson with Digital Risk observed, “Exact data on TRID kickback reasons is difficult to obtain; however, is it clear that the key contributors to TRID violations are content and attention to detail, such as hyphens, figures with ample number of decimal places, fees being listed in alphabetical order, and correct spelling of counterparty names. Mostly all primarily nonqualified jumbo mortgages have been rejected. The general consensus is that investors are rejecting many loans because they are dealing with the ‘fear of the unknown’ with regards to what the CFPB is going to focus on and how they will enforce it. Lenders have consulted technology vendors to integrate TRID requirements into their LOS system, but they would be wise to ALSO consult third-party consultants to work with them and the vendor to close compliance gaps and provide QC services that cover the technology’s soft spots.”


Yesterday Richard Cordray, the Director of the CFPB, sent a letter to MBA President Dave Stevens. As Pete Mills, SVP, Residential Policy and Member Services at the MBA put it, “(Here is) the CFPB providing additional clarity to investors and due diligence firms about the ability to correct TRID errors in the LE and CD, and emphasizing that minor technical errors in the LE and CD should not give rise to a private litigation or liability to assignees. The letter is in response to a letter MBA sent last week to the Bureau raising concerns about the potential for significant dislocation in the jumbo market and the correspondent lending channel (more than 1/3 of the market) arising from certain minor TRID errors.


“These clarifications are intended by the CFPB to give investors and 3rd party due diligence firms additional comfort that many of the technical TRID errors that are currently being flagged should not block secondary market sales. Importantly, the letter also emphasizes the Bureau’s commitment to work with stakeholders during the ‘diagnostic’ period to ensure that minor TRID issues do not impair the flow of loan purchases from the correspondent and wholesale channels.


Pete’s note went on. “There are several key points in the CFPB letter that the readers of your commentary should note. The first is ‘…consistent with existing Truth in Lending Act (TILA) principles, liability for statutory and class action damages would be assessed with reference to the final closing disclosure issued, not to the loan estimate, meaning that a corrected closing disclosure could, in many cases, forestall any such private liability.’


“Another is that, ‘Formatting errors and the like are unlikely to give rise to private liability unless the formatting interferes with the clear and conspicuous disclosure of one of the TILA disclosures listed as giving rise to statutory and class action damages in 15 U.S.C. 1640(a). A third is that, ‘The listed disclosures in 15 U.S.C. §1640(a) that give rise to statutory and class action damages do not include either the RESPA disclosures or the new Dodd-Frank Act disclosures, including the Total Cash to Close and Total Interest Percentage.’


“’Moreover, in light of the points made above about the existing provisions for cure under TILA, the specific cure mechanisms in the Know Before You Owe mortgage disclosure rule, and the limits of private liability under TILA, we believe that the risk of private liability to investors is negligible for good-faith formatting errors and the like.’ And lastly, ‘The Bureau will continue to work closely with the industry to monitor implementation, answer questions, and address developments in the secondary market that may arise.’


His note concluded with, “Needless to say, we think this is a very positive development, and MBA will continue to work with stakeholders to further mitigate any unintended impacts of TRID on secondary market activity.”


The CFPB has stated that it has supervisory authority over the service providers of bank and non-bank lenders, including software vendors, and Director Cordray has said, “Consumers must not be hurt by unfair, deceptive, or abusive practices of service providers. Banks and nonbanks must manage these relationships carefully and can be held accountable if they break the law.”


The House Financial Services Committee has picked up on the CFPB suing firms on discrimination using bogus data.


The CFPB issued a final rule containing “technical corrections” to the final TILA-RESPA Integrated Disclosure (TRID) rule that became effective on October 3, 2015.  The corrections are effective December 24, 2015, the date of their publication in the Federal Register.

According to the supplementary information accompanying the corrections, the publication of the TRID rule in the Federal Register “resulted in several unintended deletions of existing regulatory text from Regulation Z and the Official [Regulation Z Commentary] and, in one case, the omission of regulatory language in the [final TRID rule] from the [Code of Federal Regulations].”  While not clear from the CFPB’s statement, we understand that the final TRID rule was published correctly in the Federal Register but was incorrectly codified in the CFR by the Government Printing Office.


To correct the CFR, the final rule reinserts existing regulatory text that was “inadvertently deleted” from Regulation Z and its Commentary and amends the Commentary to Appendix D to Regulation Z to add a paragraph that had been included in the final TRID rule published in the Federal Register but “inadvertently omitted” from such Commentary.  The CFPB describes the corrections as “non-substantive changes” to the final TRID rule.


During 2015, despite requests from the industry to address many apparent errors with the TRID rule, the CFPB has so far decided not to act, not even to address issues that would be relatively simple to correct.  For example, because of an apparent error, property taxes paid at closing were not included in the list of items that are not subject to a specific percentage tolerance.  There also are disclosure issues, such as the provisions for determining how to complete the Cash to Close sections of the Loan Estimate and Closing Disclosure, which if followed as set forth in the TRID rule can result in (1) disclosing that there are no closing costs being financed when, in fact, the lender is financing closing costs and (2) disclosing a cash to close amount that is lower than the actual cash needed to close.  And, there is the so-called “black hole” issue that appears to prevent a creditor, in various cases, from being able to reset the tolerances with a Closing Disclosure.  Perhaps the CFPB will see fit to address the many issues in 2016.


The CFPB has announced annual adjustments to two asset-size exemption thresholds. First, the CFPB is making no change to the asset-size exemption threshold under HMDA/Regulation C which is currently set at $44 million. Banks, savings associations, and credit unions with assets at or below $44 million as of December 31, 2015 will continue to be exempt from collecting HMDA data in 2016.


Put another way, the CFPB announced the asset size exemption thresholds for depository institutions under Regulation C and for creditors under the escrow requirements, small-creditor portfolio and balloon-payment qualified mortgage requirements, and balloon-payment high-cost mortgage requirements under Regulation Z. These thresholds are effective Jan. 1, 2016.


The CFPB decreased the asset-size threshold under TILA/Regulation Z for certain small creditors operating primarily in rural or underserved areas to qualify for an exemption to the requirement to establish an escrow account for higher-priced mortgage loans (HPML). The threshold is currently set at $2.060 billion. Loans made by creditors operating primarily in rural or underserved areas with assets of less than $2.052 billion as of December 31, 2015 (including assets of certain affiliates) that meet the other Regulation Z exemption requirements will be exempt in 2016 from the escrow account requirement for HPMLs. (The adjustment will also decrease the asset threshold for small creditor portfolio and balloon-payment qualified mortgages which references the HPML escrow account asset-size threshold.)


The CFPB also launched a new online tool to help creditors determine which properties are located in a rural or underserved area. The tool can be found here. As stated in the Amendments Relating to Small Creditors and Rural or Underserved Areas Under the Truth in Lending Act (Regulation Z) final rule that was published on October 2, 2015, a creditor may rely on this tool to provide a safe harbor determination that a property is located in a rural or underserved area.


And don’t forget that earlier this month the CFPB spread the word that its eRegulations web tool is a platform that makes regulations easier to find, read and understand and now includes six additional CFPB regulations. “We are actively working to increase the number of regulations in the platform in 2016.” These are the new regulations live on the site are Regulations B (Equal Credit Opportunity Act), D (Alternative Mortgage Transaction Parity), J (Land Registration), K (Purchasers’ Revocation Rights, Sales Practices, and Standards), L (Special Rules of Practice), and M (Consumer Leasing).


Rates shot up Tuesday. Why? The “experts” attributed it to “a strong risk-on rally in commodities and stocks, limited liquidity, and technical factors.” But we did have some news out. The Conference Board’s Consumer Confidence Survey increased to “96.5” in December, up from 92.6 in November and from 93.1 in December 2014. And the Case-Shiller 20-City Index rose 5.5% in the year to October. The $35 billion 5-year Treasury auction was met with lackluster demand, drawing the lowest bid-to-cover ratio since 2009 and the lowest indirect bid since August 2015.


The 10-year yield has been in a 25-basis point range for 2 months now which makes that the tightest such range for 2015. Tuesday saw a 2.31% close which is on the high side but we were last here in early December and again in mid-November so at this point it isn’t earth-shattering. The good news is that MBS outperformed sharply as Treasury prices declined steadily over the day: the 10-year lost .75 in price, the 5-year note lost about .25, and agency MBS prices worsened .125-.375.


But hey, it’s Wednesday which ordinarily means we’ve seen the MBA application survey numbers from last week. But due to the year-end holidays, results for the week ending December 25 will be released next Wednesday along with results for the week ending January 1. Later this morning is a November Pending Home Sales figure (expected +.5%) and a $29 billion 7-year note auction. If anyone cares about rates the 10-year is still around 2.31% and agency MBS prices are roughly unchanged.



(Thanks to Tony H. for this one.)

A guy gets his yearly physical and the doctor tells him all the results will be available by email.

The next day he gets all excited and tells his wife, “The results say ‘Have Daily sex.’”

She exclaims, “No way! What does it really say?”

He replies, “I’m reading the results right here: ‘Have Daily sex.’ Woo Hoo!”

“Let me look at that.” She looks at the screen and says, “You idiot, it says: ‘Have Dyslexia.’”





(Copyright 2015 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

Rob Chrisman