Last week we took a look at the launch of the new consumer protection measure for mortgage borrowers put in place by the Consumer Financial Protection Bureau (CFPB), called TRID. It went into effect October 4, and many in the industry predicted that the new requirements related to TRID would cause an initial slowdown in the closing process for many homebuyers, while lenders, realtors, and other entities who are part of the mortgage lending process got their bearing and adjusted to the change.
In response to the concerns that the transition may not be 100% smooth sailing, the House of Representatives passed a bill this week to instate a formal grace period for lenders that would last through February 1, 2016. As long as lenders show a “good faith effort” to comply with the new disclosure rules, they won’t be penalized, if the bill becomes law.
Though the bill, called the Homebuyers Assistance Act, has bipartisan support in both the House and Senate, as well as the support of organizations like the National Association of Realtors, the Mortgage Bankers Association and the National Association of Federal Credit unions, the White House has said it will veto the bill, if it passes the Senate. The administration says the extension will only “delay implementation of important consumer protections designed to eradicate opaque lending practices that contribute to risky mortgages,” but they seem to be more or less on their own when it comes to opposing a grace period. According to an opinion piece in HousingWire, by senior financial reporter, Trey Garrison, there simply is no good reason to veto this bill. All sides agree a grace period is appropriate, including White House-appointed CFPB director, Richard Cordray.
Also in agreement are Fannie Mae and Freddie Mac, the government-sponsored agencies that back conforming mortgage loans. These two entities have decided to go ahead and establish their own grace period for implementing the new disclosure rules, due to the drastic changes many lenders have had to put in place to comply. During the grace period, which has no definite end date as of yet, the two agencies “will not conduct routine post-purchase loan file reviews for technical compliance,” but they will be evaluating lenders to be sure they are making efforts toward compliance.
Whether a formal grace period is established or not, big changes like this one are never completely seamless; they must come with some kind of transitional period. If consumers are better protected and lending practices are more transparent, it will be worth all the growing pains the industry is currently experiencing.
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