Everett Ives and Associates
June 17th - CFPB delay of implementation of TRID
On June 17th, CFPB announced that they would propose a rule change that would delay the implementation of TRID from August 1st to October 1st, of 2015. Let's be clear, this is a PROPOSAL to change the date, it is not changed yet and it may not change.
Evidently, CFPB made an administrative error in the existing rule, the fix of which would have caused a two week delay in implementation. This gave CFPB the face saving opportunity to bow to Realtor pressure to not implement TRID during the peak home selling season. The National Association of Realtors made the specific argument that August is a critical time for families to get settled into their new homes, just in time for the beginning of school for their kids. CFPB referred to this argument in their announcement. CFPB ignored numerous specific concerns of many industry groups and nearly half of the US Senate.
In my opinion, this only delays the problem. Certainly, this will cause pain to fewer people but it does not address the problem of an untested system. While the lending, title and settlement industries have spent hundreds of millions of dollars getting ready for TRID, primarily in software systems and personnel training, they have not been able to actually test these systems in a live environment. Live environment is more than a “live borrower”, it means computer interactions between various computer systems that exchange information in a normal real estate transaction. Further, most of the persons that will be using these new systems have not seen their new software yet. And, while they likely will be able to play with sample disclosure scenarios before the implementation date, they will not be able to upload these sample files to other vendor’s computer systems to test the system fully.
Any competent corporate manager would roll out a major change such as TRID in a way that causes the least disruption, not by simply delaying the implementation date. CFPB actually has a predecessor that made major changes to disclosures in the 1980s and rolled the changes out over the course of a year. Beginning on a certain date, a lender COULD use the new forms but by that date one year later, the lender MUST use the new forms. This gave the industries affected, time to roll out changes a branch at a time or a region at a time, or to roll back to the old system until critical errors were fixed in the new system.
Given CFPB’s failure to understand sound business practices, the very least they could do is create a “safety zone” around the new system so that industries are not forced to operate in a hyper paranoid state. By delaying enforcement and all private right of action for just 90 days, the industries affected have time to identify errors and make system corrections without threat of multi-million dollar penalties, (for which the CFPB is known).
So, back to the Proposed Rule change, this triggers a Public Comment period. In my opinion, CFPB does not care what the public or industry "comments", the comment period is statutory and that is the only reason they are seeking comments. CFPB is hell bent to do this their way.
Mr. Cordray’s previous promise to be “sensitive” to TRID compliance failures demonstrates complete ignorance of the enormity of the change TRID causes. From his isolated Washington office, it would be easy to believe that if the CFPB orders it, it will happen. History is forgotten quickly, but it was not that long ago that another industry had a similar major revamping – the health insurance industry. And, even the US Government’s computer programmers where not successful in rolling out new computer systems successfully with more than a year of preparation. One of the significant aspects of that failure was the inability of that system to successfully communicate with the many and various other computer systems that were necessary to make the system function. Very much like the untested issue with TRID software.
Remember, the old Good Faith Estimate, Truth in Lending Statement and HUD-1 do not go away after TRID. There are still several loan programs that will be under that old system. In fact, some First Time Home-buyers that receive down payment assistance loans will get a TRID Loan Estimate and Closing Disclosure on half of their loan and a Good Faith Estimate, Truth in Lending Statement and HUD-1 on the other half. Won’t that be easy to understand! It also means that all of the industries affected by TRID will now be required to maintain two software systems, the current, and TRID.
Many years ago a wise teacher admonished me, “Don’t start vast projects with half-vast ideas”. Mr. Cordray could have benefited from that advice.
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