Despite warnings from the industry to the contrary, the Consumer Financial Protection Bureau says there are only three situations where a loan closing will be delayed using the new integrated disclosures.
CFPB Director Richard Cordray spoke to mortgage bankers on Monday at the Mortgage Bankers Association’s Annual Convention & Expo 2015 in San Diego.
Cordray’s comments came not long after Quicken Loans Inc. founder Dan Gilbert made a humorous presentation that applied the Integrated Disclosure Rule requirements to the process of ordering a hamburger at a fast-food restaurant.
Gilbert cleverly suggested that if TRID were used in the process of ordering a hamburger, the restaurant would be required to break down the cost of each individual ingredient — such as meat, onions, ketchup, etc. — before the hamburger could be provided to the consumer.
The presentation went on to suggest that because a consumer decided, after ordering the hamburger, to forgo the onions — the consumer would have to wait another three days before he could receive the hamburger.
Early on in his own presentation, Cordray
said, “I also appreciate the advice; the next time I go to five guys, I’ll work on my methods of buying a hamburger.”
The director noted that some warned the Ability to Repay and Qualified Mortgage rule
would cause mortgage costs to double, would cut originations in half and would result in no non-QM originations because of the risk of litigation.
He also highlighted how it was predicted that small financial institutions would withdraw from the
mortgage business altogether because of the new rules.
But, according to Cordray, although the rules have been in place for almost two
years — none of these concerns have come true.
Instead, as the director noted, Home Mortgage Disclosure Act data indicate that home purchase financing increased by nearly five percent in 2014.
On jumbo originations, which are all non-QM loans, volume has substantially increased.
“And so far as
we can tell, there has yet to be a single case brought against a lender for making such a loan,” Cordray said.
The
CFPB chief said he has been “disturbed” about how some vendors have performed poorly in getting their work done in a timely manner on TRID. He explained that many lenders were unfairly put on the spot with last-minute vendor changes or changes beyond the due date.
“It may well be that all of the financial regulators, including the consumer bureau, need to devote greater attention to the unsatisfactory performance of those vendors and how they’re affecting the financial marketplace,” Cordray stated.
The director went on to highlight how warnings were issued about the TRID rule.
He said warnings came about how TRID will delay and disrupt closings.
In addition, it was reportedly predicted that rate-lock costs will be driven up as a result of the new disclosures.
“These claims,
although, perhaps, partially correct during a transitional period, essentially reflect a failure, or perhaps, a refusal to understand what the rule actually says,” Cordray said. “The rule does require that the consumer receive the Closing Disclosure three days in advance.”
But
that doesn’t mean that closing costs must be known to the penny three days before closing, Cordray explained.
It also doesn’t mean that any changes of any kind will mean there will be a delay.
“That’s been a caricature, and it’s not correct,” he said.
The truth is, the CFPB chief said, that the Closing Disclosure can be changed right up to the point of closing.
Even after a loan is closed, the Closing Disclosure
can be corrected.
In fact, Cordray said there are only three narrow circumstances where the closing would be delayed.
The first is when the basic loan product is changed. An example of this is going from a fixed-rate mortgage to an adjustable-rate mortgage.
A second scenario when a new three-day period is triggered is when the annual percentage rate changes more than one-eight of a point on a regular transaction or a quarter point on an irregular transaction.
Third, the loan can be delayed if a prepayment penalty is “blatantly added to the loan.”
“In those very limited circumstances, and those circumstances only, we want — and need — consumers to be able to consider their options,” Cordray stated. “Any other changes, such as modifications made after the walk through, or adjustments requiring sellers credits, do not affect the closing date, and in fact can be made using an updated closing disclosure without having to cancel or delay the closing.
“You can add onions to your hamburger without having to redo the deal.”
