Locke Lord QuickStudy: TRID Enforcement – Grace Period or Not?

October 8, 2015

Earlier this year, on June 3, the Consumer Financial Protection Bureau’s (CFPB) Director responded to Congressional requests for a grace period for enforcement of Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure rule (TRID) by indicating that “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 (TRID) will be sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with (TRID) on time.” 

On October 1, the CFPB again suggested that good faith compliance efforts will be taken into consideration when examining mortgage lenders for compliance with the newly effective TRID rules. The CFPB reiterated its perspective by a short letter written in response to a request from 17 banking and consumer finance trade associations asking for an articulation of the policy for examination and supervision of financial institutions for the initial months after TRID becomes effective.   

In its October 1 letter to the trade associations, the CFPB indicated that:

“(d)uring initial examinations for compliance with the (TRID rule), the agencies’ examiners will evaluate an institution’s compliance management system and overall efforts to come into compliance, recognizing the scope and scale of change necessary for each supervised institution to achieve effective compliance. Examiners will expect supervised entities to make good faith efforts to comply with the (TRID rule)’s requirements in a timely manner. Specifically, examiners will consider: the institution’s implementation plan, including actions taken to update policies, procedures, and processes; its training of appropriate staff; and, its handling of early technical problems or other implementation challenges.”   

Neither of these pronouncements has given the industry much comfort that there is a real or meaningful grace period for enforcement by the CFPB. What these statements appear to indicate is that if the CFPB determines that a lender has acted in good faith to comply with TRID as of its effective date of October 3, then it is unlikely that any enforcement action will be taken with respect to specific compliance failures related to TRID. However, this rule is a monumental shift in the mortgage disclosure regime. There will be glitches. There will be hiccups. There will be problems that need to be worked through.   

Such are the reasons why the House of Representatives passed a bill, H.R. 3192, on October 7 that would provide a statutory grace period for enforcement by the CFPB and private litigants until February 1, 2016. Unfortunately, before a consideration of the bill was held on the House floor on October 7, White House staff indicated that it would recommend a veto if the bill were to make it all the way to the President’s desk.   

Practice Tips:
  • Focus on compliance with the TRID rules. A legislative grace period would be welcomed, but it is unclear what the chances are for its final adoption, especially with the President’s staff opposed to its adoption. 
  • It appears that the CFPB’s, and other agencies’, examination and supervision functions will not act aggressively in their review of compliance with the TRID rules, as long as they can determine that the financial institution has made, and continues to make, good faith efforts to comply with TRID. 

Locke Lord has a dedicated team of financial services regulatory, compliance and litigation attorneys with significant experience handling various aspects of banking and consumer finance. Locke Lord attorneys regularly advise financial institutions on regulatory compliance matters, new product development and represent clients in regulatory enforcement matters, class actions and various lawsuits in the U.S. and abroad. Visit Locke Lord’s Financial Services Regulatory Practice website or contact the author with questions.