When the Mortgage Bankers Association (“MBA”) began to hear
reports that investors were refusing to buy loans due to a myriad of technical
TILA/RESPA Integrated Disclosure (TRID) rule violations, it became concerned
with the potential effect on the market. As such, in December 2015, the
MBA wrote a letter to the Consumer Financial Protection Bureau (“CFPB”)
requesting guidance on how best to mitigate the concerns of investors.
Later that month, CFPB Director Richard Cordray issued a response to the
MBA. Although Cordray’s response does not include any absolute protection
from liability while the TRID implementation period tolls, the letter
does include information helpful in navigating the complexities of TRID
Cordray’s letter highlights the fact that the new TRID provisions
allow for the correction of certain types of errors after the loan has
closed. These rules can be used to cure non-numerical clerical errors,
and will be utilized as part of the solution to a violation of the monetary
tolerance limits. The Director included a statement emphasizing that the
new TRID provisions are to be consistent with pre-existing principals
established by the Truth in Lending Act (“TILA”), likely in
response to concerns raised by the MBA that loans are being rejected by
potential investors due to technical errors on the Loan Estimate.
The Director’s letter also stipulates that the already-established
TILA cure provisions are applicable to TRID. Explaining further, the Director
stated that the statutory cure provisions allow a creditor to remedy TRID
violations, provided the creditor ensures the borrower is aware of the
breach and appropriately adjusts the consumer’s account before the
consumer notifies the creditor of the error.
The letter goes on to reaffirm that TRID does not fundamentally alter the
principles of liability established by the Real Estate Settlement Procedures
Act (“RESPA”) or TILA. Consequently, the following points
apply to mortgage loans that do not qualify as high-cost:
- Formatting errors are unlikely to result in private liability unless
those errors obfuscate one of the TILA disclosures that lead to statutory damages
- Under TILA, there is no assignee liability unless the error in question
is apparent from the face of the document
- Statutory damages are limited under TILA
- Disclosures listed under TILA section 130(a) (15 U.S.C. § 1640(a)),
which give rise to class action and statutory damages, do not include
the disclosures required under the Dodd-Frank Act or RESPA
As such, the Director’s letter provides invaluable guidance concerning
the limitations on statutory damages available under TILA.
Ultimately, the Director had two significant statements regarding private
liability under TILA. First, given the extent of cure provisions, the
Director does not believe there is a substantial risk of liability for
good-faith errors. Also, the Director believes that if investors are rejecting
loans due to minor errors such as formatting, the rejection is based on
reasons unrelated to TRID rule liability.
The Director confirmed that regarding administrative responsibility, the
CFPB and other regulators will provide a good faith effort to bring compliance
with the new TRID regulations for the time being.
If you would like more information on this topic, please
contact Jaspreet Kaur, Esq.
or call our main office at (949) 298-8050.