In an April 7 hearing, Richard Cordray, Director of the Consumer Financial
Protection Bureau (“CFPB”), appeared before the Senate Banking
Committee. In the CFPB’s Semi-Annual Report to Congress, Cordray
addressed questions on a broad number of initiatives regarding liability
under the TILA/RESPA Integrated Disclosure (“TRID”) rule.
In a letter sent to the Tennessee Republican Senator Bob Corker, the director
answered questions about the TRID rule, commonly referred to as the “Know
Before You Owe” mortgage disclosure, and how it has affected settlement
agents’ view of closing instructions that require agents to indemnify
lenders responsible for TRID errors. TRID places the burden of responsibility
and accuracy for disclosures on the creditor, wrote Cordray.
The CFPB contends that lenders and settlement agents have always had the
liberty to divide this responsibility for delivering disclosure statements
through contract. He went on to say, “[W]hile creditors may enter
into indemnification agreements and other risk-sharing arrangements with
third parties, creditors cannot unilaterally shift their liability to
third parties and, under the Truth in Lending Act, alone remain liable
for errors on the Know Before You Owe mortgage disclosures.”
Two other questions from Senator Corker involved cure provisions for breaches
of TRID, and whether the CFPB would create an inside branch to address
First, Cordray wrote that TILA has provisions for errors to amend “non-numerical
clerical errors, or as a component of curing any violations of the monetary
tolerance limits.” Amendments are permitted by issuing a corrected
Closing Disclosure within sixty days of consummation.
Cordray continued to say that TILA also contains provisions to correct
errors discovered within sixty days of disbursement. Under particular
conditions, TILA grants exemption from civil responsibility for unintended
mistakes by settlement agents.
Despite addressing the latter question, Cordray failed to address the issue
of accountability and risk under RESPA created by violations that necessitate
cure provisions. Since the disclosures involve both RESPA and TILA liability,
many compliance officers and attorneys question whether TILA cure provisions
will protect lenders from liability for errors under RESPA.
Lastly, Cordray addressed the question regarding the possibility of the
CFPB forming an internal task force to work on TRID enforcement. He disclosed
that the CFPB did have an internal team working to resolve industry problems
and questions, and that the CFPB would continue to evaluate how it can
best assist industry professionals.
He said about the internal team, “They meet weekly to discuss industry
concerns and identify appropriate responses and have equally frequent
touch points with external stakeholders…we hope and expect (the)
industry will continue to feel free to reach out to our internal team,
as they have been doing.”
If you would like more information on this topic, please
contact Jaspreet Kaur, Esq. or call our main office at (949) 298-8050.