Fitch: US CFPB Addresses TRID Compliance Concerns

NEW YORK--(BUSINESS WIRE)-- The Consumer Financial Protection Bureau's (CFPB) clarifying letter to the Mortgage Bankers Association (MBA) confirms the industry's progress toward full compliance with the TILA RESPA Integrated Disclosure (TRID) rule, according to Fitch Ratings. Improvements in TRID compliance have been accompanied by some success in curing TRID violations despite lagging in fulfilling initials goals.

The letter also noted that not all technical errors can be cured. While the implicit liability for certain technical TRID violations may be low, the ability and success of originators to further reduce the incidence of TRID errors in the loan manufacturing process remains an important area of focus. Fitch expects these errors to be small enough to have no effect on investors in US RMBS.

The CFPB explained that initial examinations for compliance will focus on achieved industry progress. Good faith efforts will be viewed positively, with corrective and diagnostic feedback, as opposed to punitive. While material violations with TRID have been relatively infrequent, Fitch believes that the CFPB's approach provides the mortgage industry opportunity to work toward fuller compliance as it struggles to reduce the existing high incidence of good-faith formatting errors.

Additionally, the CFPB's letter to the MBA provides some detail on provisions for the curing of errors to achieve TRID compliance. Specifically, the "Know Before You Owe" mortgage disclosure rule provides for the issuance of a corrected closing disclosure, including non-numerical clerical errors and violations of monetary tolerance limits. The CFPB also explains that the Truth in Lending Act already contains provisions for error correction, which continues to apply to integrated disclosures. However, the CFPB's letter did not amend the TRID rule, and interpretation will ultimately be handled in a court of law.

The CFPB's letter indicated that it had worked with GSEs Fannie Mae and Freddie Mac to help facilitate the smooth implementation of the rule. In October 2015, they had indicated that they would not conduct post-purchase file reviews for technical compliance with TRID and would not exercise repurchase requests when the lender makes good faith efforts to comply. This moderate approach taken by the GSEs on technical non-compliance items, along with the significance of the GSEs' position within the mortgage industry, may reduce originator concern. Fitch will continue to monitor the impact of TRID on mortgage originators, aggregators and servicers as the industry works toward compliance with this rule.

Fitch describes its rating approach to considering TRID liability risk in US RMBS in the commentary "TRID Non-Compliance Risk Modest for US RMBS," dated Jan. 12, 2016, available on its website.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160112006093/en/

Fitch Ratings
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Source: Fitch Ratings

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