CFPB Re-Opening Of TRID Could Give Investors Much-Needed Comfort on Liability Concerns

As highlighted in a recent National Mortgage News article, lack of clarity on investors’ liability under the Truth In Lending Act (“TILA”) – Real Estate Settlement Procedures Act (“RESPA”) Integrated Disclosure (“TRID”) rules has prompted some to stop buying loans out of fear they could be held accountable for those errors. According to the article, most of the assignee liability is associated with the Closing Disclosure form, provided to consumers prior to closing to help them understand the transaction costs, but issues have also arisen associated with the Loan Estimate form, which informs consumers about the loans key features, costs and risks.

While a December letter from Consumer Financial Protection Bureau (“CFPB”) Director Richard Cordray could be viewed as a step in the right direction for giving market participants comfort on the matter, the article notes that the CFPB could provide more meaningful clarity on loan purchaser liability when it re-opens the rules for comment in July. As one industry participant cited in the article explains, "I think that probably the biggest and best thing that could come out of this proposal, hopefully, is for the CFPB to officially endorse those policy statements that they have already made and hopefully make people a little less worried in the secondary market."

Among those policy statements the CFPB could formalize is its indication that a TILA provision that does not hold lenders or investors liable for a violation when it is an unintentional, good-faith error should also apply to TRID errors. According to Grant Bailey, Managing Director at Fitch Ratings, "That's part of the ambiguity, that it's unclear what carries through from TILA and what carries through from RESPA. So I think providing some of that clarity is what they're going to focus on."

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