|Click image to enlarge - from New York Times|
Those of us in the real estate industry have known for well over a year and a half that new rules implemented by the Consumer Finance Protection Bureau to improve residential loan disclosures and force lenders to ceasing handling closing on a last second, chaos basis were coming on August 1, 2015. My employer, Liberty Title & Escrow has been getting ready for the change, purchasing new software, educating real estate agents and working with lenders to be prepared. Now, mortgage lenders - who typically do little on a timely basis based on my experience - are asking for delays in the effective date of the new disclosure laws which, among other things would require closing statements to be provided to borrowers not less than three days before closing (currently, we often do not have final figures from lenders until mere hours before closing). Not surprisingly, some of the biggest lenders are the worse to deal with. The New York Times looks at efforts by lenders to continue their bad old ways for a while longer. Here are excerpts:
New rules intended to make mortgage terms more transparent and easier for consumers to understand are scheduled to take effect on Aug. 1. But although the changes have been in the works for almost two years, the lending industry says it is not prepared for the shift.So with two months to go, banks are asking for a delay in enforcement.Outwardly, the new requirements seem fairly simple. Instead of the four different mortgage disclosure forms now required under the Truth in Lending and Real Estate Settlement Procedures Acts, borrowers will receive an initial Loan Estimate at the time of application, and a Closing Disclosure shortly before they sign off.The new forms are just one part of a nearly 1,900-page rule created by the Consumer Financial Protection Bureau to strengthen protections after the mortgage crisis. Known in the industry as TILA-RESPA, for its integration of the two existing acts, the rule was finalized in November 2013, with an implementation date of August 2015.The American Bankers Association, however, says its members aren’t ready. And it blames the vendors who supply the software and system upgrades needed for regulatory compliance.In a survey released earlier this month, 79 percent of responding banks said their vendors either had not verified a delivery date for the software updates or had said the systems wouldn’t arrive before June.The association supports legislation recently filed in the House that would prohibit enforcement of TILA-RESPA until Jan. 1, 2016. The bill would also prohibit anyone from filing a lawsuit against a lender for violating the requirements, provided the lender had made a “good faith effort” to comply.More than 20 consumer groups have signed a letter opposing the legislation, however, saying that it was borrowers who need protecting, not lenders.“Doesn’t the homeowner have the right to get a reasonably accurate disclosure in advance of closing?” said Alys Cohen, a staff attorney for the National Consumer Law Center.Richard Cordray, the director of the Consumer Financial Protection Bureau, has so far held firm on the Aug. 1 implementation date. At a May 12 speech before the National Association of Realtors, he acknowledged that the coming changes represent “a major undertaking.”
Personally, I hope the CFPB refuses to extend the implementation date. Lenders have known this was coming and need to be held strictly liable. I've seen lender "good faith efforts" and if they are given any leeway, they will continue to abuse the system, consumers and others involved in the closing process. The irony is that years ago, we used to have settlement statements prepared well in advance of closing, but then many lenders got greedy, cut staff and/or hired incompetent processors. The good, competent lenders should not be penalized by the unpreparedness of the bad ones who created the problem the CFPB rules seek to fix.