Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB),
delivered a letter before the Senate Banking Committee in reply to Senator
Bob Corker. According to the letter, lenders would not be permitted to
shift liability for errors in mortgage transactions through indemnification
agreements between closing agents and lenders.
New closing instructions have been directed towards agents since the first
implementation of the TILA-RESPA Integrated Disclosure (TRID) rule, with
settlement agents being instructed during closing to indemnify liability
for lenders due to TRID errors.
The letter read by Cordray stated that while the CFPB would not interfere
with the agreements, responsibility for errors in TRID transactions remained
the providence of the creditors and lenders solely. This could be seen
as a problem, as banks fear reprisals from both regulators and consumers.
Cordray went on to elaborate that the new TRID provisions, including
The Know Before You Owe mortgage disclosure rule, placed responsibility for the delivery and accuracy
of the integrated disclosures squarely on the creditor. Cordray pointed
out that creditors can still enter into indemnification agreements, and
are welcome to share the risk of TRID errors across all stakeholders.
Regardless, Cordray added that under the Truth in Lending Act, creditors
were still liable for errors on the Know Before You Owe disclosure forms.
“While 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,” stated Codray.
Cordray’s letter responded to two additional concerns of the senator.
The first was regarding the cure provisions, which apply when a violation
of the TRID rule has occurred. Cordray confirmed that the remedy provision
offered a maximum sixty-day window after consummation, in which a corrected
Closing Disclosure can be issued when an initial error had occurred, so
long as the mistake involves a non-numerical clerical error.
Cordray also emphasized that TRID allows for the correction of mistakes
within sixty days of discovering the error, including an exception for
civil liability due to unintended errors in some cases. However, the director
did not comment on what liability might exist for violations requiring
cures. This uncertainty leads some industry experts to ponder whether
lenders will be shielded from RESPA liability if they comply with the
rules set forth by the TILA provisions.
Ultimately, the letter provided a response to an inquiry as to whether
or not the CFPB would form a task force internally to ensure compliance
was maintained throughout the industry. According to Cordray, the CFPB
has had an internal team working through TRID issues since the first publication
of the rule.
Director Cordray went on to claim the team meets weekly and is available
for industry insiders to contact, should they require additional information
regarding implementation or compliance with TRID.
Contact Geraci Law Firm at (949) 298-8050 today, or contact
Jaspreet Kaur directly
for more information.