Request for Information Regarding the Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth In Lending Act (Regulation Z) Rule Assessment
| Published date | 22 November 2019 |
| Citation | 84 FR 64436 |
| Record Number | 2019-25260 |
| Section | Proposed rules |
| Court | Consumer Financial Protection Bureau |
Federal Register, Volume 84 Issue 226 (Friday, November 22, 2019)
[Federal Register Volume 84, Number 226 (Friday, November 22, 2019)]
[Proposed Rules]
[Pages 64436-64441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25260]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 84, No. 226 / Friday, November 22, 2019 /
Proposed Rules
[[Page 64436]]
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Parts 1024 and 1026
[Docket No. CFPB-2019-0055]
Request for Information Regarding the Integrated Mortgage
Disclosures Under the Real Estate Settlement Procedures Act (Regulation
X) and the Truth In Lending Act (Regulation Z) Rule Assessment
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Assessment and request for public comment.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
conducting an assessment of the Integrated Mortgage Disclosures Under
the Real Estate Settlement Procedures Act (Regulation X) and the Truth
In Lending Act (Regulation Z) Rule and certain amendments in accordance
with section 1022(d) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act). The Bureau is requesting public
comment on its plans for assessing this rule as well as certain
recommendations and information that may be useful in conducting the
planned assessment.
DATES: Comments must be received on or before: January 21, 2020.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2019-
0055, by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Email: [email protected]. Include Docket No. CFPB-
2019-0055 in the subject line of the email.
Mail/Hand Delivery/Courier: Comment Intake--TRID
Assessment, Consumer Financial Protection Bureau, 1700 G Street NW,
Washington, DC 20552.
Instructions: The Bureau encourages the early submission of
comments. All submissions must include the document title and docket
number. Because paper mail in the Washington, DC area and at the Bureau
is subject to delay, commenters are encouraged to submit comments
electronically. In general, all comments received will be posted
without change to http://www.regulations.gov. In addition, comments
will be available for public inspection and copying at 1700 G Street,
NW, Washington, DC 20552, on official business days between the hours
of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment to
inspect the documents by telephoning 202-435-9169.
All submissions in response to this request for information,
including attachments and other supporting materials, will become part
of the public record and subject to public disclosure. Proprietary
information or sensitive personal information, such as account numbers
or Social Security numbers, or names of other individuals, should not
be included. Submissions will not be edited to remove any identifying
or contact information.
FOR FURTHER INFORMATION CONTACT: Dustin Beckett, Economist; Pedro De
Oliveira, Senior Counsel; Alan Ellison, Small Business Program Manager;
Division of Research, Markets, and Regulations at 202-435-7700. If you
require this document in an alternative electronic format, please
contact [email protected].
SUPPLEMENTARY INFORMATION:
Background
Section 1022(d) of the Dodd-Frank Act requires the Bureau to
conduct an assessment of each significant rule or order adopted by the
Bureau under Federal consumer financial law. The Bureau must publish a
report of the assessment not later than five years after the effective
date of such rule or order. The assessment must address, among other
relevant factors, the rule or order's effectiveness in meeting the
purposes and objectives of title X of the Dodd-Frank Act and the
specific goals stated by the Bureau. The assessment also must reflect
available evidence and any data that the Bureau reasonably may collect.
Before publishing a report of its assessment, the Bureau must invite
public comment on recommendations for modifying, expanding, or
eliminating the rule or order.\1\
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\1\ 12 U.S.C. 5512(d).
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In November 2013, the Bureau issued a final rule titled
``Integrated Mortgage Disclosures under the Real Estate Settlement
Procedures Act (Regulation X) and the Truth In Lending Act (Regulation
Z)'' to implement sections 1098 and 1100A of the Dodd-Frank Act and, as
amended, the rule took effect on October 3, 2015.\2\ This document
refers to this rule as the ``2013 TILA-RESPA Final Rule.'' The Bureau
amended the 2013 TILA-RESPA Final Rule on two occasions before its
effective date.\3\ This document refers to the rule as amended when it
took effect on October 3, 2015 as ``the TRID Rule'' or ``the Rule.'' As
discussed below, the Bureau has determined that the TRID Rule is a
significant rule and it will conduct an assessment of the Rule.
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\2\ 78 FR 79730 (Dec. 31, 2013), 80 FR 43911 (July 24, 2015).
\3\ See 80 FR 8767 (Feb. 19, 2015) (January 2015 Amendments); 80
FR 43911 (July 24, 2015) (July 2015 Amendments).
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The Bureau also amended the TRID Rule after the October 3, 2015
effective date, in amendments issued in July 2017 and April 2018.\4\
While such amendments are not intended to be the subject of this
assessment, the Bureau may consider certain of the amendments to the
extent that doing so will facilitate a more meaningful assessment of
the TRID Rule and data is available. Furthermore, the Bureau
acknowledges that certain information, such as data focused on current
mortgage practices, may reflect these 2017 and 2018 amendments and
therefore it may be difficult to isolate the effects of the TRID Rule
during this assessment. This assessment will treat and discuss the
challenge of distinguishing between the effects of the TRID Rule and
the effects of the 2017 and 2018 amendments to it as a factor that
makes it difficult to evaluate the effectiveness of the TRID Rule. In
this document, the Bureau is requesting public comment on the issues
identified below as part of the planned assessment.
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\4\ See 82 FR 37656 (Aug. 11, 2017) (July 2017 Amendments); 83
FR 19159 (May 2, 2018) (April 2018 Amendments).
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Assessment Process
Assessments pursuant to section 1022(d) of the Dodd-Frank Act are
for informational purposes only and are not part of any formal or
informal rulemaking proceedings under the Administrative Procedure Act.
The
[[Page 64437]]
Bureau plans to consider relevant comments and other information
received as it conducts the assessment and prepares an assessment
report. The Bureau does not, however, expect that it will respond to
each comment received pursuant to this document in the assessment
report. Furthermore, the Bureau does not anticipate that the assessment
report will include specific proposals by the Bureau to modify any
rules, although the findings made in the assessment will help to inform
the Bureau's general understanding of implementation costs and
regulatory benefits for future rulemakings.\5\ Upon completion of the
assessment, the Bureau anticipates that it will issue an assessment
report not later than October 3, 2020.\6\
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\5\ The Bureau announces its rulemaking plans in semiannual
updates of its rulemaking agenda, which are posted as part of the
Federal government's Unified Agenda of Regulatory and Deregulatory
Actions. The current Unified Agenda can be found here: http://www.reginfo.gov/public/do/eAgendaMain.
\6\ Section 1022(d)(2) of the Dodd-Frank Act requires the Bureau
to publish a report of assessment of a significant rule or order not
later than five years after the rule or order's effective date.
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The TILA-RESPA Integrated Disclosure Rule
For more than 30 years, Federal law required creditors and
settlement agents to provide two different sets of disclosure forms to
consumers applying for and consummating consumer mortgage transactions.
Two different Federal agencies, the Department of Housing and Urban
Development and the Board of Governors of the Federal Reserve System,
developed these disclosure forms separately, under two distinct Federal
statutes: the Truth in Lending Act (TILA) and the Real Estate
Settlement Procedures Act of 1974 (RESPA). In 2010, under the Dodd-
Frank Act sections 1032(f), 1098, and 1100A, Congress directed the
Bureau to integrate TILA and RESPA mortgage loan disclosures.\7\ At the
same time, Congress also enacted a number of other new provisions
governing disclosures related to origination and servicing of consumer
mortgages, including several new disclosure requirements added to TILA.
Many of these requirements were implemented by the Bureau in the TRID
Rule.\8\ The major provisions of the TRID Rule are summarized below.
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\7\ Public Law 111-203, 124 Stat. 1376, 2007, 2103-04, 2107-09
(2010).
\8\ See 78 FR at 79750-53.
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A. Major Provisions of the TRID Rule
The TRID Rule contains six major elements.
1. Integration of Certain Mortgage Disclosures
The TRID Rule implemented the Dodd-Frank Act's directive to combine
certain disclosures that consumers received under TILA and RESPA in
connection with applying for and closing on a mortgage loan.
Specifically, the TRID Rule's Loan Estimate form integrated RESPA's
Good Faith Estimate (GFE) and TILA's initial disclosure, while the TRID
Rule's Closing Disclosure form integrated RESPA's HUD-1 settlement
statement and TILA's final disclosure.
2. Disclosure Redesign
The TRID Rule not only combined previous TILA and RESPA disclosures
but also required that all creditors use standardized forms (i.e., the
Loan Estimate and the Closing Disclosure) for most transactions, so
that consumers get information in the same way across multiple
applications, including applications to different creditors or for
different loan products, thereby making it easier for consumers to
comparison shop.\9\ While Regulation X already required a standard form
for RESPA disclosures,\10\ TILA section 105(b) explicitly provides that
nothing in TILA may be construed to require a creditor to use any model
form or clause prescribed by the Bureau under that section.\11\ Section
1100A (5) of the Dodd-Frank Act amended TILA section 105(b) to require
that the Bureau publish a single, integrated disclosure for mortgage
loan transactions (including real estate settlement cost statements)
which includes the disclosure requirements of TILA in conjunction with
the disclosure requirements of RESPA that, taken together, may apply to
a transaction that is subject to both or either provisions of law.\12\
Unlike prior TILA mortgage disclosure requirements, the TRID Rule
generally does not permit creditors to make changes to the standardized
forms.\13\ The redesigned and standardized disclosures display key loan
features in a manner intended to enable consumers to locate the
features quickly through headings and labels. Moreover, the TRID Rule
requires that creditors use a standardized format for most consumer
mortgage transactions, so that consumers are presented information in
the same manner across multiple loan types and multiple creditors.\14\
The TRID Rule also requires consistent formatting in the Loan Estimate
and Closing Disclosure forms, to facilitate consumer understanding to
aid in consumers' ability to identify discrepancies or changes that
occurred in loan terms or costs after a Loan Estimate is provided.\15\
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\9\ 78 FR at 80079.
\10\ 12 CFR 1024.8.
\11\ 15 U.S.C. 1604(b).
\12\ Id.
\13\ 12 CFR 1026.37(o); 12 CFR 1026.38(t)(3).
\14\ 78 FR at 80079.
\15\ 78 FR at 80074.
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3. Disclosure Provision Responsibility
The TRID Rule changed how certain required information was
disclosed. For example, the TRID Rule changed who was responsible for
disclosing title insurance premiums for federally related mortgage
loans.\16\ Whereas TILA required the creditor to provide the Truth in
Lending disclosures and RESPA required settlement agents to provide the
final HUD-1 settlement statement, the TRID Rule reconciled these
statutory differences by making the creditor, rather than the
settlement agent, ultimately responsible for providing the integrated
Closing Disclosure.\17\ While creditors were coordinating with
settlement agents to provide existing TILA and RESPA disclosures before
the TRID Rule, by reallocating legal responsibility to creditors to
provide disclosures, the TRID Rule also reallocated to them some of the
risks of liability for regulatory violations.
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\16\ 78 FR at 79964. Previously, the simultaneous title
insurance premiums would be disclosed in accordance with State law
allocations. The TRID Rule mandated disclosure of the full cost of
the creditor's title insurance policy when such insurance is
required by the creditor and of the incremental cost of the optional
owner's title insurance policy. The Bureau decided that benefit of
clearly disclosing a required cost outweighed the benefit of
disclosing the lender's and owner's nominal title insurance premiums
since such a nominal disclosure may result in confusion about what
the consumer would actually pay if the consumer did not obtain an
owner's title insurance policy.
\17\ 78 FR at 79731.
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4. Definition of an Application
The TRID Rule revised the regulatory definition of a consumer
mortgage loan ``application.'' \18\ Under the Rule, an ``application''
consists of six specific items: The consumer's name, income, social
security number, property address, estimated property value, and the
mortgage loan amount.\19\
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\18\ 78 FR at 80083-84.
\19\ 12 CFR 1026.2(a)(3)(ii).
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5. Timing Requirements
The TRID Rule changed the timing of when consumers receive certain
information. The TRID Rule requires that within three business days of
receiving an application, as defined by
[[Page 64438]]
the Rule, a creditor must provide a Loan Estimate to a consumer.\20\
The Rule also integrated the timing requirements of the TILA final
disclosure and RESPA HUD-1 by generally requiring that consumers
receive Closing Disclosures no later than three business days before
consummation.\21\
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\20\ 12 CFR 1026.19(e)(1).
\21\ 78 FR at 80086. TILA, as implemented by Regulation Z,
generally provides that, if the early TILA disclosures contain an
APR that becomes inaccurate, the creditor shall furnish corrected
TILA disclosures so that they are received by the consumer not later
than three business days before consummation. On the other hand,
RESPA and Regulation X generally require that the RESPA settlement
statement be provided to the borrower at or before settlement.
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For applications submitted to a mortgage broker, prior to the TRID
Rule, Regulation X had already permitted a mortgage broker on a
creditor's behalf to provide a RESPA GFE not later than three business
days after a mortgage broker received information from a consumer
sufficient to complete an application. Regulation X also assigned
creditors the responsibility for ascertaining whether mortgage brokers
had provided GFEs to consumers.\22\ However, the TILA disclosure
requirements under Regulation Z did not apply to mortgage brokers.\23\
The TRID Rule reconciled these differences by making creditors
responsible for ensuring that mortgage brokers provide Loan Estimates
to consumers within three business days of mortgage brokers receiving
the six specific application items (i.e., the three-business-day period
begins even if creditors have not yet received the six specific
application items from mortgage brokers).
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\22\ 78 FR at 79799-801.
\23\ Id.
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The three-business-day period may facilitate consumers identifying
whether and how the terms of their loans or of their transactions may
have changed from what creditors or mortgage brokers previously
disclosed to them.\24\ To prevent closing delays, the TRID Rule allows
creditors to update Closing Disclosures in certain circumstances
without triggering an additional three-business-day waiting period.\25\
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\24\ 78 FR at 80086.
\25\ 12 CFR 1026.19(f)(2)(i); see also 78 FR at 80086. If,
between the time the Closing Disclosure is first provided and
consummation, the loan's APR becomes inaccurate (over and above the
specified tolerance level), the loan product changes, or a
prepayment penalty is added, a corrected Closing Disclosure must be
issued with an additional three-business-day period to review the
transaction. All other changes to the Closing Disclosure may be made
without an additional three-business-day waiting period, but a
corrected Closing Disclosure must be provided at or before
consummation. See 12 CFR 1026.19(f)(2)(ii).
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6. Tolerance Rules
The TRID Rule also tightened the tolerance rules that limit
creditors and third party service providers charging consumers
settlement costs that exceed the estimates that had been previously
disclosed.\26\ Absent timely revised disclosures from the creditor
based on certain valid justifications such as a borrower-requested
change, the TRID Rule subjects a larger category of charges to a ``zero
tolerance'' prohibition on cost increases than was the case under
RESPA. Specifically, the TRID Rule expands that ``zero tolerance''
category to also include fees charged by affiliates of creditors and
fees charged by service providers selected by the creditor and fees for
services for which the Rule does not permit consumers to shop.\27\
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\26\ 78 FR at 80084. The preexisting RESPA GFE tolerance rules
generally place charges into three categories: The creditor's
charges for its own services, which cannot exceed the creditor's
estimates unless an exception applies (``zero tolerance''); charges
for settlement services provided by third parties, which cannot
exceed estimated amounts by more than ten percent unless an
exception applies (``ten percent tolerance''); and other charges
that are not subject to any limitation on increases (``no tolerance
limit'').
\27\ Id.
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B. Significant Rule Determination
The Bureau has determined that the TRID Rule is a significant rule
for purposes of Dodd-Frank Act section 1022(d).\28\ The Bureau made
this determination based on a number of factors, including the
following. First, the Bureau considered the TRID Rule's effect on the
features of consumer financial products and services, that is,
mortgages, and the scale of operation changes caused by the Rule. The
major elements of the TRID Rule described in the preceding section have
caused significant changes in business operations.
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\28\ For more information on how the Bureau determines a rule's
significance for purposes of section 1022(d) of the Dodd-Frank Act,
see U.S. Gov't Accountability Office, Dodd-Frank Regulations:
Consumer Financial Protection Bureau Needs a Systematic Process to
Prioritize Consumer Risks, December 2018, https://www.gao.gov/assets/700/696200.pdf.
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Second, while generally creditors were already responsible for the
GFE, by reallocating responsibility for completing and providing
settlement disclosures to the consumer, the TRID Rule reallocated from
settlement agents to creditors some of the risks of liability for
regulatory violations. Such legal risk in turn may increase the risk to
creditors that those who purchase their loans in the secondary market
will demand that creditors repurchase the loans if they were not
originated in compliance with the TRID Rule. To avoid or mitigate this
risk, creditors may have increased the resources they devote to quality
control to eliminate or reduce such defects in the disclosures they
provide to consumers during origination.
Third, the TRID Rule may have also affected quality control
operations because, as described above, the Rule requires that all
creditors use standardized forms for most consumer transactions,\29\
which can alter the risk of formatting-related regulatory violations
whether that is risk increasing due to the change from model forms
under TILA to prescribed, standard forms consistent with RESPA, or risk
decreasing associated with providing fewer number of forms per mortgage
transaction under TRID. Moreover, quality control operations are
affected because the TRID Rule subjects a larger category of charges to
a ``zero tolerance'' prohibition on cost increases,\30\ and implemented
several new disclosure requirements added to TILA by the Dodd-Frank
Act, including some disclosures that, if creditors did not give
accurate ones, can give consumers private rights of action against
creditors.\31\
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\29\ 78 FR at 79993-94.
\30\ See supra note 23.
\31\ See supra note 8.
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Finally, the Bureau considered the costs of the TRID Rule. In the
1022(b)(2) cost-benefit analysis that accompanied the 2013 TILA-RESPA
Final Rule, the Bureau estimated that the major costs of the Rule would
be one-time implementation costs, primarily labor costs, which
creditors, settlement agents or third-party providers would incur to
update systems and procedures to comply with the Rule. Specifically,
the Bureau estimated that the Rule would impose one-time costs of
approximately $1 billion on creditors and approximately $340 million on
settlement agents. In its analysis, the Bureau amortized all costs over
five years, using a simple straight-line amortization, resulting in an
estimate of approximately $275 million per year of cost for each of the
five years. The Bureau also stated that the ongoing costs of the Rule
would be ``negligible'' relative to the baseline of existing regulatory
requirements.\32\
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\32\ 78 FR at 80076.
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Taking these factors and others into consideration, the Bureau
concluded that the TRID Rule is ``significant'' for purposes of section
1022(d) of the Dodd-Frank Act. Section 1022(d) therefore requires the
Bureau to conduct an assessment of the TRID Rule.
[[Page 64439]]
The Assessment Plan
Pursuant to section 1022(d) of the Dodd Frank Act, this assessment
must address, among other relevant factors, the Rule's effectiveness in
meeting the purposes and objectives of title X of the Dodd-Frank Act
and the specific goals of the TRID Rule as stated by the Bureau.
Purposes and Objectives of Title X. Section 1021 of the Dodd-Frank
Act states that the Bureau shall seek to implement and, where
applicable, enforce Federal consumer financial law consistently for the
purpose of ensuring that all consumers have access to markets for
consumer financial products and services and that markets for consumer
financial products and services are fair, transparent, and
competitive.\33\ Section 1021 also sets forth the Bureau's objectives,
which are to exercise its authorities under Federal consumer financial
law for the purposes of ensuring that, with respect to consumer
financial products and services:
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\33\ 12 U.S.C. 5511(a)
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(a) Consumers are provided with timely and understandable
information to make responsible decisions about financial transactions;
(b) Consumers are protected from unfair, deceptive, or abusive acts
and practices and from discrimination;
(c) Outdated, unnecessary, or unduly burdensome regulations are
regularly identified and addressed in order to reduce unwarranted
regulatory burdens;
(d) Federal consumer financial law is enforced consistently,
without regard to the status of a person as a depository institution,
in order to promote fair competition; and
(e) Markets for consumer financial products and services operate
transparently and efficiently to facilitate access and innovation.\34\
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\34\ 12 U.S.C. 5511(b)(1)-(5).
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Specific goals of the TRID Rule. Sections 1098 and 1100A of the
Dodd-Frank Act set forth two goals for the TRID Rule: ``to facilitate
compliance with the disclosure requirements of [TILA and RESPA]'' and
``to aid the borrower or lessee in understanding the transaction by
utilizing readily understandable language to simplify the technical
nature of the disclosures.'' \35\
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\35\ 12 U.S.C. 2603(a), 15 U.S.C. 1604(b).
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The Bureau stated a number of goals in the final TRID Rule, the
preamble to the final TRID Rule, and in public statements surrounding
the release of the Rule. Generally, these goals reflect the goals set
forth in the Dodd-Frank Act. In promulgating the Rule, the Bureau
sought to: Aid consumers in understanding their mortgage loan
transactions, facilitate cost comparisons, and assist consumers in
making decisions regarding their mortgage loans, including helping
consumers decide whether they can afford a loan as offered.\36\
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\36\ 78 FR at 79730.
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By combining the TILA and RESPA disclosures, the TRID Rule also
sought to identify and reconcile inconsistencies between TILA and RESPA
requirements to reduce regulatory burdens.\37\
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\37\ 78 FR at 79730.
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Scope and approach. To assess the effectiveness of the TRID Rule in
meeting these goals and the purposes and objectives of the Dodd-Frank
Act, the Bureau's current assessment plan is informed by a cost-benefit
perspective. While section 1022(d) of the Dodd-Frank Act does not
expressly require cost-benefit analysis, the Bureau believes such a
cost-benefit perspective could be helpful in conducting this
assessment, as a consideration of benefits and costs will assist the
Bureau in evaluating the effectiveness of the TRID Rule. In particular,
such an approach to evaluating the TRID Rule is consistent with the
fact that the Bureau issued the TRID Rule after conducting a benefit
cost analysis under section 1022(b)(2) of the Dodd-Frank Act. Research
questions under the Bureau's assessment plan seek to quantify the costs
and benefits of the TRID Rule as implemented, to the extent that
available data and resources allow, with a focus on the: (i) Effects on
consumers; (ii) effects on firms, particularly creditors, settlement
service providers (including title agents), mortgage brokers,
consumers, and others; and (iii) effects on markets related to mortgage
origination. The Bureau believes that studying this set of effects will
provide the most useful information for stakeholders, including
potential future policymakers.
To the extent possible, the assessment will associate Rule
requirements with observed outcomes of interest. In certain cases, data
may be available that will allow the Bureau to identify effects caused
by the Rule. However, more generally, the presence of multiple other
factors that affect the mortgage market independently of the Rule may
make it challenging to identify exact measures of the effects of the
Rule. In general, any association between observed outcomes and
requirements of the Rule, while informative as to the effectiveness of
the Rule, does not necessarily prove the Rule caused that outcome. In
conducting this assessment, the Bureau will consider existing mortgage
data and data that the Bureau may reasonably collect, including third-
party sources (see more detail below regarding the Bureau's research
activities, data sources, and comment requests).
The Bureau has been conducting, and will continue to conduct,
external outreach meetings with industry (including trade
associations), other government agencies, and consumer groups
(including housing counselors). The primary goal of this outreach is
for the Bureau to become better informed of the potential effects of
the Rule on various market segments.
Other research activities in addition to those described in the
remainder of this section may also be considered as appropriate, and
the Bureau is interested in suggestions from stakeholders regarding
additional research activities that the Bureau could conduct to better
assess the Rule.
1. Assessing Consumer Effects
The approach to examining the TRID Rule's effect on consumers is
shaped by four broad research questions based on the aforementioned
goals of the Rule, namely, how the TRID Rule affected consumers': (i)
Understanding of their mortgage disclosures; (ii) mortgage and
settlement service shopping behaviors; (iii) satisfaction with their
mortgage disclosures, mortgage products, and settlement services; and
(iv) ability to compare and choose among mortgages and settlement
services. Internal Bureau data can provide insight on many of these
research questions. The TRID disclosure testing, conducted during the
process that resulted in the 2015 TRID Rule, can provide causal
estimates of the effect of the new disclosures on consumer
understanding and on consumers' ability to compare mortgage terms
across different mortgage products. In addition, analysis of the
National Survey of Mortgage Originations (NSMO) can provide
correlational estimates of how much consumers' knowledge, shopping, and
satisfaction changed after the Rule took effect.
2. Assessing Firm Effects
The approach to assessing the TRID Rule's effect on firms is shaped
by four broad research questions: (i) What were the TRID Rule's
implementation costs to firms; (ii) what are the TRID Rule's ongoing
costs and cost savings to firms; (iii) how did the TRID Rule affect
creditor's ability to sell mortgages to others on the secondary market;
and (iv) how did the TRID Rule affect the way
[[Page 64440]]
creditors disclose information to consumers? \38\
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\38\ In assessing the effects of the Rule on firms, the Bureau
will also strive to identify outdated, unnecessary, or unduly
burdensome aspects of the TRID Rule. See 12 U.S.C. 5511(b)(3).
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To address these questions, the Bureau envisions conducting
structured interviews and surveys with industry participants as well as
using relevant data the Bureau already possesses and third-party
information that may be useful. Surveying and interviewing creditors
and settlement agents will help the Bureau to assess firms'
implementation costs, ongoing costs, and cost savings, and allow the
assessment to assess how the accuracy and timing of disclosures changed
as a result of the TRID Rule and where creditors faced particular
difficulties, if any, with respect to disclosures creditors provided.
The Bureau anticipates that interviewing creditors and quality
control providers will provide insight on potential difficulties the
TRID Rule may cause for creditors seeking to sell mortgage loans in the
secondary market. In addition, the Bureau may use loan-level securities
data from the Bloomberg Terminal and aggregate secondary market data
from Inside Mortgage Finance (IMF) to assess the TRID Rule's effect on
creditors selling loans on the secondary market.
Additional data that would be informative to the Bureau in
understanding the effects of the Rule on creditors providing
disclosures to consumers include a consumer-level dataset. Such a
dataset would be most informative if it covered a period before and
after the effective date of the TRID Rule and if it included all or
most TILA and RESPA related mortgage loan disclosures that creditors
provided to consumers in the process of obtaining a mortgage loan. The
ideal fields contained in this dataset would include the type of
disclosure, the date it was disclosed, if the creditor re-disclosed
forms, the reason for the creditor's re-disclosure, and fields for
information contained on the forms (i.e., loan terms, loan structure,
loan fees, closing costs, etc.). This dataset would help the Bureau
understand how the Rule affected the information consumers received
from creditors (e.g., have initial disclosures become more accurate? Or
timelier?).
3. Assessing the Effects on Markets Related to Mortgage Origination
Consumer demand and firm supply interact in markets. This
interaction can be measured in transaction prices, transaction volume,
and market structure, among other ways. The assessment's approach to
market effects is thus reflected by three broad questions: (i) Did the
TRID Rule affect the price of mortgages or the volume of mortgage
originations in the aggregate or for particular market segments or
mortgage product types (e.g., construction loans, subordinate liens,
manufactured housing, etc.)?, (ii) did the TRID Rule affect entry,
exit, or consolidation in any parts of the mortgage market?, and (iii)
did the TRID Rule's specific provisions affect market structure by
changing the relationship between various providers (e.g., creditors
and settlement agents or creditors and their affiliates)?
To assess market effects, the assessment will rely first on data
the Bureau already possess, such as Home Mortgage Disclosure Act (HMDA)
data and the National Mortgage Database (NMDB) and stress testing data
from the Federal Reserve (Y-14 data). These datasets may be used to
identify changes in overall loan volumes, mortgage prices, price
dispersions, and the availability of mortgage products. In addition,
the assessment will rely on the same survey and structured interviews
with industry participants that would be used to consider costs on the
firm side. The industry survey will allow the Bureau to assess specific
areas of the market or mortgage product types (e.g., construction
loans, subordinate liens, manufactured housing, etc.). Surveying
creditors and settlement agents will allow us to assess changes in the
relationship between creditors and settlement agents as a result of
their changing roles under the TRID Rule. Surveying creditors will also
allow the Bureau to assess changes in the relationships between
creditors and other entities involved in mortgage transactions as a
result of the TRID Rule's changed disclosure tolerances.
Comments from the 2018 Call for Evidence. The Bureau is considering
in its TRID Rule assessment plan the comments received in relation to
the TRID Rule during the 2018 Call for Evidence Requests for
Information (RFIs).\39\ The Bureau received approximately 63 comments
related to the TRID Rule. Most TRID-related comments were submitted to
the Adopted Regulations and New Rulemaking Authorities RFI and to the
Inherited Regulations and Inherited Rulemaking Authorities RFI
(Rulemaking RFIs).\40\ Trade associations, consumer advocacy groups,
and others from industry provided comments relevant to the TRID Rule.
The assessment plan and research questions reflect the information
provided to the Bureau in response to the Calls for Evidence, to the
extent the comments highlighted topics concerning the TRID Rule.
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\39\ In January 2018, the Bureau commenced a ``Call for
Evidence'' to ensure that the Bureau is fulfilling its proper and
appropriate functions to best protect consumers. Over a number of
weeks, the Bureau published in the Federal Register a series of
Requests for Information (RFIs) seeking comment on enforcement,
supervision, rulemaking, market monitoring, complaint handling, and
education activities. These RFIs provided an opportunity for the
public to submit feedback and suggest ways to improve outcomes for
both consumers and covered entities. Altogether, over 88,000
comments were received across 12 dockets.
\40\ For comments on the Adopted Regulations and New Rulemaking
Authorities Request for Information, see https://www.regulations.gov/docket?D=CFPB-2018-0011. For comments on the
Bureau's Inherited Regulations and Inherited Rulemaking Authorities
Request for Information, see https://www.regulations.gov/docket?D=CFPB-2018-0012.
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Comments to the Rulemaking RFIs generally centered on topics and
issues pertaining to TRID including curing violations, secondary market
issues, applicability to specific products, disclosure redesign, legal
liability, and title insurance. For example, with regard to secondary
market issues, two trade groups expressed concerns that creditors will
need to either retain in portfolio or sell on the ``scratch and dent''
secondary market at a steep discount loans containing TRID errors.
Commenters indicated that this treatment of loans results in lack of
liquidity or losses for the lender. Commenters also indicated that
lenders can face higher risk of receiving buyback requests, which are
demands from investors (most often GSEs) that lenders buy back the loan
from the creditor due to documentation errors or other irregularities.
As another example, a trade group commented that many creditors have
been hesitant to offer more complex mortgage products, including, among
others, construction loans, for fear of misinterpreting TRID
requirements. Four commenters provided comments relating to the
construction loan market specifically. Most of these commenters
requested additional guidance or simpler disclosures for construction
loans.
In March of 2018, as part of the 2018 Call for Evidence series, the
Bureau also issued the Bureau Guidance and Implementation Support
Request for Information (Guidance RFI), a request for comment and
information to assist the Bureau in assessing the overall effectiveness
and accessibility of its guidance materials and activities (including
implementation support) to
[[Page 64441]]
members of the general public and regulated entities.\41\ The comments
the Bureau received in response to the Guidance RFI highlight the
importance of guidance and compliance aids for regulatory
implementation, specifically for implementing highly technical rules
such as the TRID Rule.\42\ They also highlighted certain aspects of
guidance that were not addressed or guidance styles that did not work
well such as providing more guidance on what requirements of the TRID
Rule apply to different segments of the market and providing specific
examples to facilitate compliance. For assessment purposes of the TRID
Rule, the Bureau is interested in learning more about any aspects of
the Rule that were confusing or on which more guidance was needed,
whether at the time the Rule took effect or afterwards, and the effects
of this confusion or lack of guidance (including any unintended effects
on market liquidity in any sectors of the housing finance system).
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\41\ For the full electronic docket, see https://www.regulations.gov/docket?D=CFPB-2018-0013. The Bureau received
approximately 49 comments on this RFI (42 that addressed the
substance of the RFI). The Bureau received a number of comments
related to guidance but for the purpose of the TRID assessment, only
comments received related to TRID guidance are mentioned.
\42\ The Bureau continues to update and improve its regulatory
guidance and implementation aids. Several materials were, and will
be, published after the implementation of the TRID Rule to provide
more guidance and clarity, and the Bureau continues to work to
identify and address additional guidance needs.
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Request for Comment
The Bureau hereby invites members of the public to submit
information and other comments relevant to the issues identified above
and below, information relevant to enumerating costs and benefits of
the TRID Rule to inform the assessment's cost-benefit perspective, and
any other information relevant to assessing the effectiveness of the
TRID Rule in meeting the purposes and objectives of title X of the
Dodd-Frank Act (section 1021) and the specific goals of the Bureau. In
particular, the Bureau invites the public, including consumers and
their advocates, housing counselors, mortgage creditors, settlement
agents, and other industry participant, industry analysts, and other
interested persons to submit comments on any or all of the following:
(1) Comments on the feasibility and effectiveness of the assessment
plan, the objectives of the TRID Rule that the Bureau intends to use in
the assessment, and the outcomes, metrics, baselines, and analytical
methods for assessing the effectiveness of the Rule as described in
part IV above;
(2) Data and other factual information that the Bureau may find
useful in executing its assessment plan and answering related research
questions, particularly research questions that may be difficult to
address with the data currently available to the Bureau, as described
in part IV above;
(3) Recommendations to improve the assessment plan, as well as
data, other factual information, and sources of data that would be
useful and available to the Bureau to execute any recommended
improvements to the assessment plan;
(4) Data and other factual information about the benefits and costs
of the TRID Rule for consumers, creditors, or other stakeholders;
(5) Data and other factual information about the effects of the
Rule on transparency, efficiency, access, and innovation in the
mortgage market;
(6) Data and other factual information about the Rule's
effectiveness in meeting the purposes and objectives of title X of the
Dodd-Frank Act (section 1021), which are listed in part IV above;
(7) Data and other factual information on the disclosure dataset
specified in the Assessing Firm Effects section above under part IV;
(8) Comments on any aspects of the TRID Rule that were or are
confusing or on which more guidance was or is needed during
implementation including whether the issues have been resolved or
remain unresolved; and
(9) Recommendations for modifying, expanding, or eliminating the
TRID Rule.
Dated: November 13, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-25260 Filed 11-21-19; 8:45 am]
BILLING CODE 4810-AM-P
