The Consumer Financial Protection Bureau openly acknowledged that the transition to new mortgage-disclosure requirements presents a major challenge for lenders, saying it will give them some leeway in upcoming exams.
"We're very aware of the significant challenges the industry has faced in order to get into compliance with this rule," said Allison Brown, a program manager in mortgage servicing in the CFPB's office of supervision policy.
The bureau will be "very sensitive" to the implementation's impact on lenders, title companies, closing agents and real estate professionals, Brown said Wednesday at a Mortgage Bankers Association conference in Orlando, Fla.
"We understand that most industry members were ready" on the Oct. 3 deadline, "but there are going to be implementation challenges that you wouldn't know about until the rules took effect and you started using those disclosures," she said.
The conference was aimed more at the servicing side of the mortgage business than originators, which have had to adopt the Truth in Lending Act/Real Estate Settlement Procedures Act integrated disclosures, known as TRID. However, a growing number of servicers also lend because their thinning margins have made loan production revenue more attractive.
Initial TRID exams "will focus on compliance management systems — what you did to get ready for the new rules," Brown said.
Brown also addressed mortgage industry consternation about the requirement that borrowers review the final loan-closing disclosure for three days after receipt, a delay that is compounded when the disclosure has to be reissued in some circumstances.
"We've certainly had a lot of concerns and controversy over that part of the rule, but we also find that it's very consistently misinterpreted because in reality there are a lot of changes that do not require a new three-day review," Brown said.
She cited as examples "unexpected discoveries on walk-through" like a plumbing problem, new seller concessions, new agreements buyers make with sellers to buy personal property, adjustments to real estate commissions, and typographical errors found at closing.
"There are actually only three changes that will delay a closing, but they are all very important to the borrower," Brown said. These are an increase in the borrower's rate above certain tolerances, the addition of a prepayment penalty, or a loan-product change such as a switch to an adjustable-rate loan from a fixed-rate product.
Loan-closing timelines have lengthened by about four days since TRID took effect, according to Ellie Mae data on mortgages originated on its Encompass system. The mortgage industry largely expected TRID implementation would extend closing timelines, but some predict the slowdown will be temporary.