The Consumer Financial Protection Bureau (CFPB) on April 29 took steps to make it easier for consumers with urgent financial needs to obtain access to mortgage credit more quickly in the middle of the COVID-19 pandemic.
To help, the bureau issued an interpretive rule clarifying that consumers can exercise their rights to modify or waive certain required waiting periods under the TILA-RESPA Integrated Disclosure Rule (TRID) and Regulation Z rescission rules. The rule goes into effect when published in the Federal Register.
“The steps we are taking will help consumers facing financial emergencies obtain access to mortgage credit faster,” said CFPB Director Kathleen Kraninger. “The pandemic is resulting in consumers facing various challenges, and our temporary and targeted solutions are intended to ensure that consumers receive the credit they need in a timely manner.”
In the interpretive rule, the CFPB said it understands the pandemic could pose temporary business disruptions and challenges for covered businesses involved in the origination process, including settlement agents.
The CFPB said if a consumer determines that his or her need to obtain funds due to the COVID-19 pandemic (1) necessitates consummating the credit transaction before the end of the TRID Rule waiting periods or (2) 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, subject to the applicable procedures set forth in the TRID Rule and Regulation Z Rescission Rules.
Under TRID, creditors generally must deliver or place in the mail the Loan Estimate to consumers no later than seven business days before consummation. Consumers must receive the Closing Disclosure no later than three business days before consummation.
Under TRID, a consumer may waive the waiting periods if they meet a bona fide personal emergency. The CFPB said in the interpretive rule that borrowers who verify in a signed statement that due to the pandemic their financial situation necessitates a faster closing the waiting periods could be waived.
In the rule, the CFPB also concluded that the COVID-19 pandemic is a “changed circumstance” for purposes of certain TRID Rule provisions, allowing creditors to use revised estimates reflecting changes in settlement charges for purposes of determining good faith.
TRID requires creditors to estimate and disclose in good faith on the Loan Estimate the costs that consumers will incur in connection with their mortgage transaction. For purposes of determining good faith under the TRID Rule, creditors may use revised estimates of such costs in a limited number of situations pursuant to Regulation Z. “Changed circumstances” is one of these situations that could affect settlement charges.
TRID specifies that changed circumstances includes “an extraordinary event beyond the control of any interested party,” with the commentary to the TRID Rule clarifying that a “war or natural disaster” is an example of such an extraordinary event. The CFPB concluded the COVID-19 pandemic is an extraordinary event that permits creditors to provide consumers with revised estimates reflecting changes in settlement charges.
“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 bureau stated in the interpretive rule.
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