Here's Why CFPB Had to Delay New Mortgage Disclosures

After publishing 1,888 pages detailing new mortgage disclosures, the Consumer Financial Protection Bureau's failure to file a required two-page form with Congress on time forced a delay of the rules' effective date.

Under the Congressional Review Act, Congress and the Government Accountability Office must receive any new rule at least 60 calendar days before it takes effect, barring an emergency. But the CFPB failed to submit its notice until Tuesday, according to Robert Cramer, associate general counsel at the GAO.

That was the unspecified "administrative error" that forced the CFPB to delay the effective date for changes to the Truth in Lending and Real Estate Settlement Procedures acts until Oct. 1, a CFPB spokesperson confirmed.

Mortgage and real estate trade groups, as well as nearly 300 members of Congress, had pushed for the CPFB to delay the Aug. 1 deadline or offer an enforcement grace period to give lenders more time to prepare for the changes. Of particular concern is a provision requiring lenders to deliver the upfront disclosure three days after receiving a borrower's application and provide the final settlement disclosure three days before a loan closes, or risk delaying the transaction.

The irony of the CFPB's failure to timely submit a document for a rule that prescribes deadlines for delivering disclosures was not lost on some mortgage industry participants.

"How can something that big be missed with such a simple clerical error?" Mark Mackey, CEO of mortgage software vendor International Document Services, said in an interview. "Hopefully we get the same leniency as an industry down the road, but I doubt it."

The delay gives mortgage lenders and vendors more time to prepare, but at this point most technology and process changes have already been made, so the extra time will be used primarily for testing, Mackey said.

"It kind of feels like when you're in school and you have an assignment done on time and then the teacher decides to give you an extra week," he said.

Keith Luedeman, CEO of goodmortgage.com, said he hopes that the CFPB will remember this incident later if lenders mess up.

"I hope that they can see that people are human and I hope we get that much consideration if we ever miss a deadline," he said.

Luedeman still prefers an outright delay to what he said was confusing guidance about how strict the CFPB would initially enforce the rules.

"It was a good decision by the CFPB to delay it by two months instead of just delaying it two weeks for the administrative error," he said.

Ruth Lee, executive vice president of outsourcing and technology provider Titan Lenders Corp., said "this underscores no one is immune to error."

"We are made up of imperfect humans who do our best to do our best," she said. "The lesson here is to have grace, and in doing so, perhaps that grace will be returned."

The GAO will now conduct a review of the final TILA-RESPA Integrated Disclosure rule to ensure it meets various criteria required in the Congressional Review Act, and will issue a report with its findings by July 1.

By law, Congress can use the 60-day window to vote on a joint resolution disapproving a submitted rule, but only one such vote has passed both houses of Congress since the reviews began in 1996.