The Consumer Financial Protection Bureau recently issued a proposed rule regarding integrated disclosure for mortgage transactions and, more recently, published a policy paper regarding loss mitigation programs in housing transactions. Taken together, the Bureau’s actions likely will impart new practices in the mortgage industry and affect disclosure, information sharing, and loss mitigation practices for both lenders and servicers.
Proposed Amendments to Federal Mortgage Disclosure Requirements
On July 29, 2016, the CFPB released a proposed amendment to its Know Before You Owe mortgage disclosure rule, also known as the Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act and the Truth in Lending Act (the “TILA-RESPA Final Rule,” or “TRID Rule,” including the prior CFPB amendments). The CFPB’s proposed amendments to the TRID Rule would provide clarity on certain unclear compliance issues and are likely to be welcomed by the industry. Specifically, these latest amendments would do the following:
- Change disclosure regarding the total of payments. The TRID Rule disclosure did not address the finance charge as part of the total of payments calculation, however the proposed amendments would include “tolerance provisions” that would parallel existing tolerances for the finance charge in other provisions and disclosures.
- Clarify the partial exemption for housing assistance programs. While the existing rule provides a partial exemption for certain housing programs, these amendments would clarify that recording fees and transfer taxes may be charged in connection with a housing assistance loan without losing the partial exemption.
- Cooperative unit coverage. The proposed rule would expand coverage to include cooperative unit transactions, regardless of whether state law classifies the units as real property or personal property.
- Privacy and information sharing. The Bureau proposes new commentary to clarify how a creditor may share disclosures with third parties to the mortgage transaction, including an ability to provide separate disclosure forms to the consumer and the seller.
The Bureau seeks comments on the proposed changes. The Bureau proposes an effective date of 120 days after publication of the final rule in the Federal Register, but would like feedback on when the rule changes should be effective. Comments on the proposed rule are due October 18, 2016.
Loss Mitigation Principles
The Bureau also released its Principles for the Future of Loss Mitigation on August 2, 2016. These are new consumer protection principles for loss mitigation “to guide mortgage servicers, investors, government housing agencies, and policymakers as they develop new foreclosure relief solutions.” The CFPB’s “policy paper” outlines four overarching principles of loss mitigation in housing transactions. Following the lead of other federal agencies with authority over the mortgage industry, the Bureau intends for these principles to complement ongoing efforts by consumer groups, policymakers, and market participants to create loss mitigation programs. The CFPB’s principles include the following:
- Accessibility. Customers should be able to easily learn about loss mitigation options and submit a request for loss mitigation, including the ability to speak to an individual about those options. Perhaps foreshadowing future fair lending concerns, the Bureau specifically noted that similarly situated customers should receive fair and equal consideration for loss mitigation options, and receive that consideration within similar timeframes.
- Affordability. Repayment plans and modifications should create a payment amount and structure that the consumer can afford, including a “meaningful” reduction in the payment amount or other tailored solutions. The principles do not include a definition of “meaningful”.
- Sustainability. Loss mitigation options should resolve the consumer’s delinquency and provide greater affordability over the life of the loan.
- Transparency. The decision about loss mitigation and all terms of the loss mitigation program should be clearly explained so that the consumer can understand them. Consumers should not be required to sign broad waivers of their rights before receiving loss mitigation. Industry participants should publically report loss mitigation data.
The policy paper lists a wide-spectrum of loss mitigation programs that may be appropriate, including forbearance agreements, repayment plans, short sales, deeds-in-lieu, and loan modifications; and notes that appropriate loss mitigation options may include home retention and home disposition options, “depending on the individual circumstances.”
 The CFPB published the initial TILA-RESPA Final Rule on November 20, 2013. The Bureau previously revised that rule with amendments on January 20, 2015 and July 21, 2015.