TRID Rescission Waiver Rule & ECOA Valuations FAQ
On April 29, 2020, the Consumer Financial Protection Bureau (CFPB) released additional information which Director Kathleen Kraninger said she hopes “will help consumers facing financial emergencies obtain access to mortgage credit faster.” The new guidance impacts waiver of rights of rescission, good faith closing costs estimates, and ECOA valuations delivery timing requirements in connection with potential urgent consumer finance transactions.
“Temporary & Targeted Solutions.”
Mortgage lenders will need to be aware of this new interpretive rule and FAQ guidance and adjust their operations accordingly. Consumers who are accessing the COVID-19 resources center on the CFPB website likely will be aware of these potential ways to expedite transactions and will be expecting lenders to act accordingly. Key bases for the new rules include COVID-19 pandemic related “bona fide personal financial emergency” or “changed circumstances.”
TRID/ Reg Z Interpretive Rule – Modification or Waiver of Right of Rescission Timing
TILA RESPA Integrated Disclosure (TRID) rules protect borrowers by allowing them to receive information so they can “know before they owe.” Borrower exercise of three day rescission rights has been an issue of confusion and substantial litigation over the years. The new Rule may yield similar disputes in the future because of the evolving nature of the pandemic related financial hardship and the timing pressures involved. It also will be interesting to see how this temporary rule may influence either extension or sunset of current CARES Act foreclosure prohibitions.
The new Rule provides that “(1) if a consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency, (2) the consumer’s brief statement describing the emergency identifies a financial need that is due to the COVID-19 pandemic, and (3) the emergency necessitates consummating the credit transaction before the end of an applicable TRID Rule waiting period or must be met before the end of the Regulation Z Rescission Rules waiting period, then the consumer has a bona fide personal financial emergency that would permit the consumer to utilize the modification and waiver provisions…”
While under existing rules, lenders are not required to inform borrowers of the potential, under certain limited circumstances, to modify or waive their rights, this Rule strongly suggests otherwise. “The Bureau encourages creditors to consider voluntarily informing consumers during the COVID-19 pandemic of their ability to utilize the modification and waiver provisions for bona fide personal financial emergencies if the consumer has a need to obtain funds due to the COVID-19 pandemic prior to the end of an applicable waiting period.”
Unfortunately, the Rule provides lenders with no guidance on (a) whether the COVID-19 waiver requirements information should be conveyed verbally or in writing or (b) at what point during the application or closing process. Lenders may wish to issue internal guidance to personnel and consider updating their compliance and operations job aids and procedures that involve rights of rescission (see generally 12 CFR § 1026.15(e), and other relevant provisions).
GFE Estimates of Settlement Charges – Changed Circumstances.
The new Rule also provides that “…the COVID-19 pandemic is an example of an extraordinary event beyond the control of any interested party, and thus is a changed circumstance. Accordingly, for purposes of determining good faith, creditors may use revised estimates of settlement charges that consumers would incur in connection with the mortgage transaction if the COVID-19 pandemic has affected the estimate of such settlement charges.” The Rule impacts lenders’ compliance with provisions of 12 CFR 1026.19(e)(4)(i) and others. The Bureau offers the example that settlement service providers may not have the staff to issue invoices in a timely manner. Again, the fluid nature of business challenges caused by the COVID-19 pandemic as well as state mandates regarding business re-openings continue to impact many settlement service providers. Lender personnel may find this guidance helpful when providers are not able to quickly deliver final invoices.
ECOA Valuations FAQ – Waiving Timing on Right to Receive Valuation
In the same press release, the CFPB also issued a FAQ regarding Equal Credit Opportunity Act (ECOA) and Regulation B requirements to provide consumers with a copy of property valuations. While existing guidelines require delivery of the valuation to the consumer promptly upon completion or within three days of the transaction consummation (see generally 12 CFR 1002.14(a)(1)), the FAQ highlights existing “regulatory flexibility” to potentially “expedite access to credit.”
Specifically, the FAQ provides that “the ECOA Valuations Rule permits an applicant to waive the timing requirement through an affirmative oral or written statement and agree to receive any copy at or before consummation or account opening, except where otherwise prohibited by law.” The waiver should be obtained “at least three business days prior to consummation or account opening unless it pertains solely to the receipt of a copy of an appraisal or other written valuation that contains only clerical changes…” Again, lenders may wish to advise their personnel of this option and update operations job aids and procedures accordingly. Lenders also may want to consider specific protocols for contemporaneous documentation of any oral waiver request from consumers in order to mitigate risk of future disputes.
This new guidance can help consumers in need as a result of the COVID-19 pandemic. In executing communications regarding these potential consumer waivers, lenders should be mindful of potential operational pitfalls and work to educate their teams to mitigate such risk.