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Lenders and vendors found no bad surprises in the Truth in Lending Act/Real Estate Settlement Procedures Act integrated disclosure exam guidance, but it didn't clarify much industry confusion either.
September 18 -
License numbers for loan officers, real estate agents and settlement agents will be required on one of the new TILA-Respa integrated disclosure forms, raising questions about whether they could trigger investigations of possible illegal marketing services agreements.
September 15 -
More than half of real estate agents are planning to extend their sales contracts to provide more time for the closing processing due to the coming implementation of new mortgage disclosures.
September 1
Lenders that allow borrowers to shop for third-party settlement services will face new liability under the Consumer Financial Protection Bureau's integrated mortgage disclosure rules.
That's because the regulations that combine the Truth in Lending Act and Real Estate Settlement Procedures Act mortgage disclosures will put the requirement for lenders to provide borrowers with a written list of third-party service providers under the auspices of TILA, opening the door for borrowers to sue lenders for alleged violations.
"It is a requirement of Regulation Z, so there is the possibility of a private right of action for either failing to provide the list, or failing to provide the list consistent with the requirements. That is the most significant difference," said Benjamin Olson, a partner at the Washington law firm BuckleySandler and a former deputy assistant director in the CFPB's office of regulations.
The heightened risk associated with the vendor referrals that lenders provide on their written lists comes at a time when scrutiny of marketing services agreements between lenders and service providers is growing.
The Department of Housing and Urban Development originally established the requirement under Respa as part of its regulatory overhaul that took effect in 2010 to improve the accuracy of mortgage disclosures and make it easier for
As a requirement of Respa, regulators could take action to enforce compliance with the requirement, but consumers couldn't pursue their own individual lawsuits. But that changes once the CFPB's TILA-Respa Integrated Disclosure regulations, as known as TRID, go into effect Oct. 3 and the rule becomes a requirement of both the TILA and Respa.
There remains no prescribed format for the written list of providers, Olson said, but added the CFPB has published both an
Even after the change, any payment or other thing of value that changes hands to create a referral relationship remains a
"I don't see how the list would eliminate the incentive folks have to try and get these referrals. You want to be the one on the list," Olson said. "The question is do you get yourself on the list by providing outstanding service or are folks going to be tempted to get themselves on the list by entering into some sort of side agreement, where you're providing other services."
The CFPB did not respond to a request for comment.
Most MSAs are between lenders and real estate companies that don't appear on the written list of settlement service providers. But the overall focus on lender referral relationships will result in MSAs falling by the wayside, predicts Matt Corcoran, director of marketing and user experience at Pavaso, a technology vendor in Plano, Texas.
And without MSAs in place to encourage lenders and real estate companies to work together, loan officers will have to make a concerted effort to earn the trust of both consumers and real estate agents.
Loan officers must ask themselves, "What do I say to those Realtors to get them to understand that I'm serving the consumer's needs, I'm in line with the TILA-Respa regulations and the CFPB's mission, vision and values for the consumer?" Corcoran said.
Pavaso's technology facilitates collaboration between lenders, real estate companies and settlement services vendors by allowing users to create a network of trusted partners they work with, explained CEO Mark McElroy.
"I don't have to formalize the MSA because the collective nature of the network inside Pavaso allows us to market together," he said. The consumer can use the system to search among service providers and make their own choice.
At the same time, real estate agents are looking at their lenders when it comes to the speed to close and if the consumer is being taken care of properly.
"At the end of the day, it is about how fast am I going to get paid as a Realtor with this lineup of providers," Corcoran said.