A freeze on a final rule of the Consumer Financial Protection Bureau’s Know Before You Owe mortgage disclosure rule, also called the TILA-RESPA Integrated Disclosures rule, TRID, could become an unfortunate side effect of Trump’s executive order on Monday.
TRID was the buzzword of the year last year, even dominating a good chunk of HousingWire’s coverage.
But not anymore. The hype around TRID faded away as the industry, better yet, nation, focused its attention on a new unknown, President Donald Trump.
The last major update on TRID came out in October of last year when the comment period on the CFPB's proposed updates to it closed, with top industry associations such as the National Association of Realtors and Mortgage Bankers Association giving their final thoughts on the proposed rule.
Leading up to that point, the industry was desperate for answers and clarifications to the rule, especially when it comes to the secondary market.
While the industry praised the proposed update, like the eagerly anticipated clarifications on the Closing Disclosure form, it technically is not final.
The last status update the bureau gave the industry was that comments were due on Oct. 18 and will be weighed before final regulations are issued.
But will that ever happen at this point? Even the teaser of the proposed update isn’t official although it may still be helpful guidance for the industry.
Since October, the industry has been waiting for a final rule, and judging by the latest announcements from the Trump administration, the industry may never get those answers.
If things did play out as originally planned, the bureau would issue a final rule on TRID, it would be published in the Federal Register shortly thereafter, and then the industry would have one year from publication to comply.
Two recent announcements from the Trump administration are causing major confusion around this.
1. Regulation roll back
Trump signed an executive order Monday morning to significantly roll back regulations, following through on claims that he would be “cutting regulation massively.”
According to the order, “For every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.”
The news follows a meeting Trump had last week with business leaders where he stated that he plans to cut regulations by 75% or more.
2. A freeze on regulation (And here’s where it gets complicated)
TRID’s cousin, the bureau’s final mortgage servicing rule, is in a similar situation except it made it further down the rule-making process.
Last week, the Trump administration announced a freeze on federal regulations.
According to the announcement, all rules already published in the Federal Register but not yet in effect will be temporarily postponed from their effective date for 60 days for the purpose of reviewing questions of fact, law, and policy they raise.
The final mortgage servicing rule was scheduled to go into effect on Oct. 19, 2017.
Meanwhile, the TRID final rule hasn’t even been announced. And according to the regulatory freeze, people can’t send any new regulations to the Office of the Federal Register until a department or agency head appointed or designated by the President reviews and approves the regulation.
But the situation gets extremely complicated when you realize the bureau is an independent agency, which legally doesn’t fall under these new rules.
According to the Consumer Financial Services Review blog post by Mayer Brown Lawyers Laurence Platt and Joy Tsai, “The newly announced freeze on federal regulations does not appear to apply across the board. ‘Independent regulatory agencies,’ such as the Consumer Financial Protection Bureau, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Securities and Exchange Commission may be excluded from that moratorium.”
However, the bureau could elect to honor the memorandum’s spirit, meaning the servicing rule would be delayed 60-days minimum and the TRID rule would have to be reviewed by a department or agency head appointed or designated by the president.
But what does honor the spirit even mean? Could the bureau elect to implement some regulations but not others, confusing the industry even further and making a messy grey area?
And then there’s the bigger unknown on if the bureau will even exist given Cordray’s job is in the line of fire and a court case that’s currently questioning the constitutionality of the CFPB.
There is a growing hole of unanswered questions on what Trump’s actions mean for the industry and even the CFPB is digesting what it means for them.
What I can say for a fact is that two of the biggest regulatory guidelines the industry has had to implement are in limbo, raising a lot of questions and few answers.
