WASHINGTON — The two main trade associations for the credit union industry cheered comments made by the Consumer Financial Protection Bureau (CFPB) and its director Richard Cordray that the agency will consider "good faith efforts" by credit unions to comply with the new integrated mortgage disclosures rule set to take effect Aug. 1 under the Truth in Lending Act and Real Estate Settlement Procedures Act (TILA/RESPA).
CFPB stated in in a blog-post on Wednesday which was designed to allay industry and congressional concerns that lenders will be penalized if they have not properly implemented new disclosure forms by the Aug. 1 deadline.
The agency also said examiners would be sensitive to institutions that made a "good faith effort" to comply with the new disclosures. The notice, however, fell short of a more formal grace period that lenders and lawmakers from both parties had been seeking.
Nonetheless, the leaders of the two most prominent credit union trade associations were effusive in their praise of Cordray and the CFPB.
"We appreciate director Cordray's consideration and leadership in recognizing the value of 'good faith efforts' by credit unions on this complex new rule," said Dan Berger, president and CEO of NAFCU, in a statement. "We also appreciate the bipartisan support of all the members of Congress who wrote director Cordray and met with him to urge a restrained examination period. A grace period will not only ensure a smoother implementation of the new TILA/RESPA mortgage disclosure forms, but it will also allow those who make a good-faith effort to comply with the regulation to do so without the fear of potential regulatory enforcement actions."
NAFCU noted that Berger and his staff had lobbied Congress and met with Cordray and his staff to discuss the impact of the TILA/RESPA regulations and expressed credit unions' compliance concerns.
Similarly, Jim Nussle, president and CEO of CUNA, thanked Cordray for "listening to the requests of CUNA, Congress and others in our call for a safe harbor period through the end of the year for the enforcement of the [TILA-RESPA Integrated Disclosure (TRID)] rule."
Nussle added that CUNA supports the CFPB's goal for transparency with the new disclosures helping consumers "better understand mortgage terms, and now credit unions will be allowed the time they need to figure out the day-to-day aspects of complying with the rule without worrying about enforcement."
In the aforementioned blog post, which was written by CFPB's Diane Thompson, the CFPB said it "will be sensitive to the progress made by those entities that have been squarely focused on making good-faith efforts to come into compliance with the rule on time. We have spoken with our fellow regulators to clarify this approach."
Thompson noted that the approach is similar to the one taken by the agency when it implemented the new ability-to-repay and qualified mortgage rules in 2014.
"This is consistent with our approach in the implementation of the [Qualified Mortgage rule]," she wrote. "Over the last couple of years, we've taken many steps to support industry implementation of the 'Know Before You Owe' mortgage rule so that lenders and financial institutions can effectively comply with the rule."
The fact sheet also clarified the few event changes in which a lender must re-issue closing documents to a consumer and give an additional three-day review period. Lenders fear a re-disclosure could delay closings, harming the mortgage market.
But CFPB officials have said it will have a very limited impact. The blog post said a re-disclosure is triggered when the annual percentage rate increases more than 1/8 of a percentage point on a fixed mortgage or more than 1/4 a percentage point on an adjustable-rate mortgage. The closing can also be delayed if a prepayment penalty has been added or the loan product itself changes, like going from a fixed- to adjustable-rate mortgage.
"No other changes require a delay for re-disclosure," wrote Cordray in a separate letter sent to members of Congress on Wednesday in response to their earlier bipartisan demands for the CFPB to offer an implementation grace period.
The industry has had two years to comply with the rule that combines the Truth in Lending Act with the Real Estate Settlement Procedures Act into one mortgage disclosure, called TRID. Still, industry advocates have pushed heavily for a deadline extension. More than 200 lawmakers have signed a letter backing an extended grace period.
"As you have suggested, the bureau's work to support the implementation of the rule does not end on the effective date of August 1, as we continue to work with the industry, consumers, and other stakeholders to answer questions, providing guidance, and support a smooth transition for the mortgage market," Cordray wrote in the letter directed to Republican Rep. Andy Barr of Kentucky and Democratic Rep. Carolyn Maloney of New York. "As we do so, and in response to considerable input we have received from you and your constituents, I have spoken with our fellow regulators to clarify that our oversight of the implementation of the rule will be sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with the rule on time."
— Palash Ghosh contributed to this report.