Originally published in RISMedia’s Real Estate magazine.
Over the last several months, NAR has been conducting webinars and education sessions, as well as participating in several industry forums, to educate real estate professionals on the upcoming RESPA/TILA integration. Through this outreach, it is clear that the RESPA/TILA integration is going to be a learning experience for everyone. To paraphrase one participant – “there are things we still don’t know that we don’t know” as the August 1, 2015* implementation date approaches.
However, there are some things that can be anticipated. First, there is potential for disruption as lenders figure out what will and will not require a new 3-day waiting period for the new Closing Disclosure (CD). Second, settlement service providers are unsure as to whether RESPA or more stringent TILA liability and recourse will apply in a given circumstance. And, in some states, there will be confusion around the disclosure of owner’s and lender’s title insurance premiums.
Real estate professionals should ensure that the need for last minute changes is minimized and prepare their clients accordingly. In the event last minute changes are unavoidable, it is hoped that lenders will be prepared and that they will be able to quickly discern whether a change requires a new waiting period or is clearly within the exception laid out by the Consumer Financial Protection Bureau (CFPB).
For the above reasons, as well as many others, it is clear that more guidance is necessary from CFPB. First, additional consideration should be given to laying out liability standards. RESPA standards should apply to what have historically been RESPA issues and TILA standards should apply to historically TILA issues. Clearly stating what the liability standards should provide lenders and other market participants some additional security that relatively minor issues will not invoke private rights of action and potential draconian penalties.
CFPB should also address the disclosure of title premiums under “simultaneous issue” of lender’s and owner’s policies. This will help avoid needless confusion and paperwork, as well as perhaps avoid additional disclosure documents.
Finally, August, September, October, and even November, are heavy closing months. Given the implementation concerns that continue to arise, industry groups think CFPB should consider making August 1 the beginning of a probation period, where everyone has to follow the rules, but legal liability will not be incurred. This would give the industry (and CFPB) time to catalog the issues that arise and share them with the CFPB so it can make adjustments without impeding transactions. The final rule could then go into full legal effect for liability purposes in January or February when there are fewer transactions and there will be much greater knowledge of how to avoid problems and still comply.
When HUD implemented RESPA reform, it also issued a 400 questions and answers to explain the rule. Industry had hoped that would be unnecessary with the new RESPA/TILA rule, but it appears more written guidance is not only unavoidable but would be a great benefit. NAR and its industry partners will continue to work with the CFPB to ensure lingering questions get answered so consumers only benefit from these new rules and disclosures.
* Update 8/11/2015: Because of an administrative error in providing notice about the new changes, the CFPB has changed the effective date for the use of the TILA/RESPA Integrated Disclosure forms from August 1, 2015 to October 3, 2015.