Know Before You Owe: A Work in Progress

The Consumer Financial Protection Bureau’s (CFPB) “Know Before You Owe” harmonization of the Truth in Lending Act and the Real Estate Settlement Procedures Act (TILA-RESPA, or TRID) has been a work in progress for several years, overhauling mortgage disclosure practices to improve clarity with the home-buying process.

With the CFPB’s guidance and willingness to reduce ambiguities, lenders, real estate agents, and settlement providers have finally started adapting to the new system. A National Association of REALTORS® (NAR) Survey of Mortgage Originators revealed that while TRID-related delays may still be occurring, cancellations attributed to the new processes have decreased.

When TRID went into effect in 2015, lenders were reluctant to share the new required Closing Disclosure (CD) with real estate professionals out of fear of liability for disclosing clients’ nonpublic personal information. Lenders claimed that sharing the CD violates federal privacy law (Gramm-Leach-Bliley Act, or GLBA); however, an exception within the GLBA allows lenders to distribute the CD to third parties, including real estate professionals.

In a new final rule issued in July, the CFPB reiterated that TRID did not amend this existing exception and explained that it is “usual, appropriate, and accepted for creditors and settlement agents to provide the combined or separate Closing Disclosure to consumers, sellers, and their agents.” This language gives confidence to those hesitant to share the CD as it is “a confirmation, statement, or other record of the transaction” falling under the GLBA exception. The CFPB further clarified permissible CD modifications when necessitated by applicable state laws.

Access to the disclosure by real estate professionals ensures consumers are avoiding costly slowdowns for their real estate purchases, just as it was before TRID, when real estate professionals had access to the HUD-1. According to the NAR lender survey, only 16.7 percent of respondents reported sharing the CD unconditionally. More than half indicated increasing fees for consumers to cover TRID-related costs, averaging $220 per transaction. When real estate professionals have access to the CD, instrumental oversight is added to the closing process, reducing errors that could result in preventable charges being passed on to consumers.

In addition to the TRID final rule, the CFPB has also issued a new proposed rule seeking feedback on how lenders use a CD to reset tolerances to reflect a valid change in circumstance. The CFPB seeks to minimize transaction disruptions and reduce unnecessary costs by easing restrictions on resetting tolerances after the CD has been provided. Such flexibility should increase lender confidence in addressing issues arising after a CD has been sent to the consumer and ensure smoother closings.

As the leading advocate for real estate professionals and their consumers, NAR supports regulatory reform measures that promote transparency, flexibility and certainty for the industry, striving to help qualified buyers with their real estate purchases. Modifications to TRID must continue to put consumer interests first while eliminating excessive regulatory barriers for those working to further those interests and the benefits of homeownership.

Christie DeSanctis is a policy representative for business issues at the National Association of REALTORS®.

This column is brought to you by the NAR Real Estate Services group.

For more information, please visit www.nar.realtor.

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