House subcommittee wants delay on TILA-RESPA enforcement

Bipartisan legislation would delay enforcement of the new integrated disclosure rule

House subcommittee wants delay on TILA-RESPA enforcement
The House Financial Services Housing and Insurance Subcommittee held a hearing Thursday to determine how the upcoming integrated disclosure rule will affect consumers and mortgage lenders. The subcommittee touted bipartisan legislation that would delay enforcement of the new disclosure rule.

“Purchasing a home is one of the biggest and most important decisions most Americans will make,” said subcommittee chairman Blaine Luetkemeyer (R-Mo.). “That is why we owe it to all homebuyers to hold this hearing, to continue to press the CFPB, and make sure the home buying process is as straightforward as possible. The dramatic changes to this process have the potential to unnecessarily delay closings and cause a ripple effect throughout real estate markets.”

Industry groups are worried about the new rule as well. In a March letter to CFPB Director Richard Cordray, National Association of Independent Housing Professionals President Marc Savitt said he had spoken to hundreds of mortgage and real estate professionals about the new rules – particularly the rule that requires borrowers to receive their final closing disclosure three days prior to settlement.

“Without exception, all of these Main Street professionals believe the three-day waiting period will cause unnecessary delays in settlements, resulting in increased costs for borrowers,” Savitt wrote. “These increased costs will be incurred as the housing industry learns to efficiently implement the disclosures. Longer interest rate lock-in periods will be necessary to accommodate for the unexpected delays. Lock-in extensions will also be necessary, resulting in not only increased consumer costs, but also further delays in settlement.”

At Thursday’s hearing, witnesses testified that it could cost up to $100 million for the industry to retrofit forms and technology to comply with the new rule – costs that would presumably be passed on to customers. They also testified that it was unclear whether the rule will actually have the intended effect of simplifying the mortgage process.

Meanwhile, Reps. Steve Pearce (R-Minn.) and Brad Sherman (D-Calif.) have introduced legislation that would delay enforcement of the rule – set to begin on Aug. 1 – until Jan. 1 of 2016. That delay would be welcome news to many industry professionals.

“No one can know for sure the degree to which this new rule will increase the number of delays until the rule takes effect and is implemented,” testified Chris Polychron, president of the National Association of Realtors. “For this reason, NAR is advocating that the CFPB make the period August 1, 2015 to December 31, 2015 a restrained enforcement and liability period. During this period, industry would operate under the rule and use the new disclosure forms but be held harmless in terms of liability if acting in good faith. The industry and the CFPB can then collect data on problems and develop solutions to minimize costly and harmful impact on consumers.”