CFPB Responds to MBA, Industry Concerns on Know Before You Owe

The Consumer Financial Protection Bureau sent a letter to the Mortgage Bankers Association and other industry trade groups yesterday, acknowledging implementation issues regarding the Bureau’s TILA/RESPA Integrated Disclosure rule (also known as Know Before You Owe) and outlining an expedited path to clarifying those issues.

In the letter, CFPB Director Richard Cordray acknowledged that implementation of Know Before You Owe “poses many operational challenges,” in part because of the diversity of industry participants, “whose perspectives may vary as to what compliance under this rule requires.”

The letter outlines an expedited path to issuing a formal Notice of Proposed Rulemaking to address the industry’s outstanding questions and concerns, and incorporating many of the issues that have been addressed so far through informal oral guidance.

Cordray said the CFPB has already begun drafting the rule based on the ongoing dialogue with MBA and other industry participants and will hold additional meetings with stakeholders prior to the targeted July NPRM.

“MBA believes this approach should provide a swift path to issuing a final rule that will give lenders, the secondary market and consumers the clarity and consistency of disclosures the market needs,” said Pete Mills, MBA senior vice president of residential policy and member engagement. “In the interim, we appreciate that the Bureau’s ‘diagnostic period’ for the KBYO rule will continue to accommodate good faith compliance efforts. We view today’s letter as a positive step, and we look forward to working with the Bureau to ensure industry priorities are addressed.”

Know Before You Owe went into effect Oct. 3. It includes a Loan Estimate document that replaces the initial Truth-in-Lending Act disclosure & Good Faith Estimate for most closed-end mortgage loans. The Closing Disclosure replaces the final Truth-in-Lending disclosure & HUD-1 Settlement Statement for most closed-end mortgage loans.

Last month, the MBA Quarterly Mortgage Bankers Performance Report reported a $493 net gain in the fourth quarter, down from $1,238 per loan in the third quarter.

Cordray said the Bureau “continues to work very hard to understand your concerns so that we can find more effective solutions…We continue to seek your active engagement in providing us with concrete information about technical problems. Although anecdotal information helps frame a picture of the issues, detailed and precise information is most helpful and will enable us to understand fully the concerns and evaluate how to best provide guidance.”

Cordray also acknowledged that “there are places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity.” He said the NPRM will address those concerns.