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Since TRID was introduced, a debate has raged on as to whether the Truth in Lending Act’s (TILA) liability rules or RESPA’s would govern TRID violations. The debate has key ramifications: under TILA, there is a private right of action. Under RESPA, there is not. In a letter to the Mortgage Bankers Association, the CFPB has provided some answers to the debate while attempting to provide some assurances to the mortgage industry. The results are a mixed bag.
The letter comes in response to concerns raised by the Mortgage Bankers Association as to secondary market rejection of mortgages which may contain technical TRID violations. As to the secondary market, the CFPB assured that the Federal Housing Finance Agency, government sponsored entities, and the Federal Housing Administration will not conduct routine post purchase loan file reviews for technical compliance and do not intend to exercise contractual remedies, including repurchase, for noncompliance with TRID’s disclosure rules where the lender is making good faith efforts to comply. The CFPB also reiterated that initial examinations by regulators for compliance with TRID will focus on “whether companies have made good faith efforts come into compliance with the rule.” Examinations would be “corrective and diagnostic, rather than punitive.”
More importantly, the letter provided some helpful clarification of the CFPB’s interpretation of TRID liability and suggests that TILA’s provisions will control:
Limitations on Liability:
Bona Fide Errors:
While there has been significant debate as to whether RESPA or TILA would control the liability functions of TRID, Cordray’s letter suggests that the answer is TILA. While that is not entirely good news for the mortgage industry (as RESPA contains no private right action), the CFPB has at least provided some indication of their intentions and with a path in front of it, the mortgage industry can now better assess and manage risk.
Caren Enloe is a partner who concentrates her practice in consumer financial services litigation and compliance, bankruptcy, and commercial litigation with an emphasis on creditor’s rights. She has a deep understanding of the complex compliance environment surrounding the financial services industry and regularly advises financial service companies on licensing and compliance issues involving state and federal consumer protection and finance statutes. Caren is the author of a daily blog titled: Consumer Financial Services Litigation and Compliance where she posts timely and informative updates regarding the CFPB, FTC, and a host of topical litigation issues involving consumer protection law....LEARN MORE