On November 20, 2019, the Consumer Financial Protection Bureau (CFPB) issued a Request for Information (RFI) in connection with its assessment (or, as some call it, the “lookback”) of the TILA-RESPA Integrated Disclosure (TRID) rule as required under section 1022(d) of the Dodd-Frank Act. The RFI should be published in the Federal Register on November 22, 2019, and the comment period will end 60 days after publication on January 21, 2020.

Section 1022(d) of the Dodd-Frank Act requires the CFPB to “conduct an assessment of each significant rule or order adopted by the Bureau,” which must specifically address “the effectiveness of the rule or order in meeting the purposes and objectives of [Title X of the Dodd-Frank Act] and the specific goals stated by the Bureau.” The Dodd-Frank Act requires the assessment to “reflect available evidence and any data that the Bureau reasonably may collect.” The CFPB is required to publish a report of its assessment no later than five (5) years after the effective date of the rule. TRID become effective on October 3, 2015, so the CFPB’s TRID assessment report is due by October 3, 2020.

I.  This Does Not Mean the CFPB is Eliminating or Modifying the TRID Rule

I have seen comments about the CFPB’s RFI that express concerns (or perhaps elation?) that the CFPB plans to modify or eliminate the TRID rule.  In part this is because the CFPB’s press release states that the CFPB is inviting comment on “recommendations for modifying, expanding, or eliminating the TRID Rule, among other questions.”  The RFI also states that the CFPB invites comments on “recommendations for modifying, expanding, or eliminating the TRID Rule,” among other questions.

Let me assuage your despair about potential changes to or elimination of our beloved TRID rule.  Section 1022(d) of the Dodd-Frank Act requires the CFPB to invite public comment before publishing a report of its assessment, and the law specifically requires the CFPB to ask for comments on “recommendations for modifying, expanding, or eliminating” the rule.  In addition, the CFPB’s RFI notes that section 1022(d) assessments are for “informational purposes only” and are not rulemakings.  Further, the CFPB states that it “does not anticipate that the assessment report will include specific proposals by the Bureau to modify any rules.”  

As you can see, this RFI does not mean that the CFPB is planning to modify or eliminate the TRID rule.  The CFPB is only complying with its obligations under Dodd-Frank Act section 1022(d) to seek comment on whether it should modify or eliminate the rules that is assessing. 

But the comments submitted to the CFPB may be able to convince the CFPB to conduct future TRID rulemakings to address the comments.  The CFPB does acknowledge that the findings of the assessment “will help to inform the Bureau’s general understanding of implementation costs and regulatory benefits for future rulemakings.”  I encourage the industry to provide substantial comments to the CFPB on all concerns about the rule to ensure the CFPB has the most information possible to both inform its assessment and consider future rulemakings to modify the TRID rule (I doubt they would completely eliminate the rule – sorry TRID haters!).

II.  What is in the RFI?

A.  Background on the Assessment Requirement and the TRID Rule

The RFI gives some helpful background on the Section 1022(d) statutory requirement to conduct the assessment.  Importantly, as discussed above, the CFPB notes that the assessment is for “informational purposes” and is not a rulemaking.  The CFPB also notes that the assessment will look at the TRID rule as it had been on the date it took effect, October 3, 2015, including amendments made before that date.  But the CFPB stated that it will consider certain of the amendments made after the effective date of the rule, “to the extent that doing so will facilitate a more meaningful assessment of the TRID Rule and data is available.” 

The RFI also summarizes the “major provisions” of the TRID rule, which it breaks down into six (6) categories, as follows: (1) the integration of TILA and RESPA disclosure requirements; (2) redesign of the disclosures and requiring their use as standardized forms; (3) changing how certain information is disclosed (providing the example of simultaneous title insurance premiums) and changing who provides the disclosures (making the creditor responsible for the Closing Disclosure); (4) changing the definition of “application” for the disclosures; (5) changing the timing requirements for the disclosures (providing an example of the three-business day requirement for the Closing Disclosure); and (6) making the tolerance rules stricter.

The RFI also states that the CFPB determined that the TRID rule is a “significant” rule that is subject to the Dodd-Frank Act section 1022(d) assessment requirement.  The CFPB made this determination, in part, based on the implementation costs cited in the Dodd-Frank Act section 1022(b)(2) cost-benefit analysis of the rule that was included in the preamble of the 2013 final rule.  Specifically, the RFI states that in that analysis, “the Bureau estimated that the Rule would impose one-time costs of approximately $1 billion on creditors and approximately $340 million on settlement agents.”  

B.  What Exactly is the CFPB Assessing?

The RFI states that the assessment must address the rule’s effectiveness in meeting the goals of Title X of the Dodd-Frank Act, and the specific goals of the TRID rule.  With respect to Title X of the Dodd-Frank Act, the CFPB sets forth these goals as ensuring that, with respect to consumer financial products and services:

·      Consumers are provided with timely and understandable information to make responsible decisions about financial transactions;

·      Consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination;

·      Outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens;

·      Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, in order to promote fair competition; and

·      Markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.

With respect to the specific goals of the TRID rule, the CFPB notes the following two statutory goals that were set forth in the mandates to issue the TRID rule under Dodd-Frank Act sections 1098 and 1100A:

·      “to facilitate compliance with the disclosure requirements of [TILA and RESPA]”; and

·      “to aid the borrower or lessee in understanding the transaction by utilizing readily understandable language to simplify the technical nature of the disclosures.”

In addition, the RFI states that the CFPB also set forth a number of other goals when issuing the TRID rule, which the RFI describes as follows:

·      aid consumers in understanding their mortgage loan transactions;

·      facilitate cost comparisons; and

·      assist consumers in making decisions regarding their mortgage loans, including helping consumers decide whether they can afford a loan as offered.

C.  How will the CFPB Assess the TRID Rule?

1.  Cost-Benefit Perspective

The RFI states that its assessment will generally be “informed by a cost-benefit perspective.”  The CFPB states that, even though section 1022(d) of the Dodd-Frank Act does not require a cost-benefit analysis, it believes such a perspective “could be helpful” in conducting the assessment, noting that the CFPB conducted a cost-benefit analysis under section 1022(b)(2) of the Dodd-Frank Act when issuing the rule.

The CFPB states that it will “seek to quantify the costs and benefits of the TRID Rule as implemented, to the extent that available data and resources allow,” with a focus on:

·      effects on consumers;

·      effects on firms, particularly creditors, settlement service providers (including title agents), mortgage brokers, consumers, and others; and

·      effects on markets related to mortgage origination.

The RFI states that the CFPB will associate particular TRID rule requirements with observed outcomes of interest, but also notes that it may not be possible in many cases to associate particular effects with particular requirements of the rule.  The CFPB states that other independent factors may make it difficult to exactly measure the effects of the rule.  The CFPB warns that because of this, any association between observed outcomes and the rule’s requirements, while informative as to the effectiveness of the Rule, “does not necessarily prove the Rule caused that outcome.”  With respect to the data that the CFPB will use, the RFI states that the CFPB will consider existing mortgage data and data that it may reasonably collect, including data from third-party sources. 

The RFI notes that the CFPB “has been conducting, and will continue to conduct, external outreach meetings” with industry (including trade associations), other government agencies, and consumer groups.  The RFI states that the primary goal of this outreach is, “to become better informed of the potential effects of the Rule on various market segments.” 

2.  Consumer Effects

The RFI states that the CFPB will examine the TRID rule’s effects on consumers through addressing the following four research questions of how the TRID rule has affected consumers’:

1.     understanding of their mortgage disclosures;

2.     mortgage and settlement service shopping behaviors;

3.     satisfaction with their mortgage disclosures, mortgage products, and settlement services; and

4.     ability to compare and choose among mortgages and settlement services.

The RFI notes that the CFPB may use internal CFPB data, including the consumer testing conducted in connection with the issuance of the TRID rule.  The RFI also notes that the CFPB may use the National Survey of Mortgage Originations.

3.  Industry Firm Effects

The RFI states that the CFPB will examine the TRID rule’s effects on industry firms also through four research questions, which are as follows:

1.     what were the TRID Rule’s implementation costs to firms;

2.     what are the TRID Rule’s ongoing costs and cost savings to firms;

3.     how did the TRID Rule affect creditor’s ability to sell mortgages to others on the secondary market; and

4.     how did the TRID Rule affect the way creditors disclose information to consumers?

Interestingly, the CFPB states in the RFI that it envisions conducting “structured interviews” with industry participants to address these questions.  In addition, the RFI indicates that the CFPB may be “surveying and interviewing creditors and settlement agents,” to help it assess implementation and ongoing costs, cost savings, and how the accuracy and timing of disclosures changed and where creditors faced particular difficulties. 

The RFI also states that the CFPB will use internal data and external data.  The CFPB states that it may use “loan-level securities data from the Bloomberg Terminal and aggregate secondary market data from Inside Mortgage Finance (IMF) to assess the TRID Rule’s effect on creditors selling loans on the secondary market.”  The RFI also notes that a “consumer-level dataset” would be useful to the Bureau, especially if it covered a period before and after the effective date of the rule and included all related TILA and RESPA disclosures.   The CFPB states that the ideal fields in such a dataset would include:

1.     the type of disclosure;

2.     the date it was disclosed;

3.     if the creditor re-disclosed forms;

4.     the reason for the creditor’s re-disclosure; and

5.     fields for information contained on the forms.

4.  Industry Effects on Markets Related to Mortgage Origination

The RFI states that the assessment will address the rule’s effects on the interactions of related markets through three research questions:

1.     did the TRID Rule affect the price of mortgages or the volume of mortgage originations in the aggregate or for particular market segments or mortgage product types (e.g., construction loans, subordinate liens, manufactured housing, etc.)?;

2.     did the TRID Rule affect entry, exit, or consolidation in any parts of the mortgage market?;and

3.     did the TRID Rule’s specific provisions affect market structure by changing the relationship between various providers (e.g., creditors and settlement agents or creditors and their affiliates)?

The RFI states that the CFPB will rely first on data the Bureau already has, such as Home Mortgage Disclosure Act (HMDA) data, the National Mortgage Database (NMDB), and stress testing data from the Federal Reserve (Y-14 data).  The RFI states that the CFPB may use these datasets, “to identify changes in overall loan volumes, mortgage prices, price dispersions, and the availability of mortgage products.”  The RFI states that the CFPB will also use the same survey and structured interviews with industry participants for the industry firm analysis, which will allow the Bureau to assess specific areas of the market or mortgage product types (e.g., construction loans, subordinate liens, manufactured housing, etc.).  The RFI also states that the surveys and interviews will allow the CFPB to assess changes in the relationship between creditors and settlement agents as a result of their changing roles under the rule, as well as other entities as a result of the tolerance requirements.

5.  2018 Call for Evidence

The RFI also states that the Bureau will consider comments submitted to the CFPB’s 2018 Call for Evidence (which I previously wrote about here) that related to the TRID rule.  The RFI states that comments submitted to the Call for Evidence centered around curing TRID violations, secondary market issues, applicability to specific products, disclosure redesign, legal liability, and title insurance.  The RFI provides as examples of topics addressed by these comments: the difficulty selling “scratch and dent” loans based on TRID errors, hesitancy to offer more complex products because of TRID, and construction loans.  In addition, the RFI notes that comments were submitted to the Call for Evidence about the CFPB’s guidance function, and the RFI expresses the CFPB’s interest in learning more about aspects of the TRID rule that were confusing or where more guidance was needed and the effects of such confusion or lack of guidance. 

D.  Request for Comment

The RFI invites the public to submit comments, “information relevant to enumerating costs and benefits of the TRID Rule,” and any other information relevant to the CFPB’s assessment of the TRID rule.  The RFI invites specific comments on the following:

1.     Comments on the feasibility and effectiveness of the assessment plan, the objectives of the TRID Rule that the Bureau intends to use in the assessment, and the outcomes, metrics, baselines, and analytical methods for assessing the effectiveness of the Rule as described in part IV above;

2.     Data and other factual information that the Bureau may find useful in executing its assessment plan and answering related research questions, particularly research questions that may be difficult to address with the data currently available to the Bureau, as described in part IV above;

3.     Recommendations to improve the assessment plan, as well as data, other factual information, and sources of data that would be useful and available to the Bureau to execute any recommended improvements to the assessment plan;

4.     Data and other factual information about the benefits and costs of the TRID Rule for consumers, creditors, or other stakeholders;

5.     Data and other factual information about the effects of the Rule on transparency, efficiency, access, and innovation in the mortgage market;

6.     Data and other factual information about the Rule’s effectiveness in meeting the purposes and objectives of title X of the Dodd-Frank Act (section 1021), which are listed in part IV above;

7.     Data and other factual information on the disclosure dataset specified in the Assessing Firm Effects section above under part IV;

8.     Comments on any aspects of the TRID Rule that were or are confusing or on which more guidance was or is needed during implementation including whether the issues have been resolved or remain unresolved; and

9.     Recommendations for modifying, expanding, or eliminating the TRID Rule.

III.  Conclusion

It appears from the CFPB’s RFI that the agency will conduct a very comprehensive assessment of the TRID rule.  As the RFI notes, the implementation costs of the TRID rule were steep, and the rule affects many aspects of the mortgage origination process, as well as related markets.  But with integrated disclosures under TILA and RESPA, there may also be some ongoing efficiency created by the TRID rule.  For these reasons, it will be beneficial for the CFPB’s assessment to have a cost-benefit perspective as described in the RFI.  But as the RFI also notes, the effects of the rule, and in particular, the actual benefits consumers may have realized in better understanding their mortgage transactions, may be difficult to isolate and evaluate.  While the consumer testing data from the studies the CFPB conducted for the TRID rulemaking may be helpful, it will be interesting to see if the CFPB is able to assess such benefits from actual transactions, or conduct any comparative analysis to the old disclosure regime.  

This assessment will be also be a great opportunity for the industry to submit detailed comments and data regarding issues and challenges with the TRID rule.   Although the CFPB stated that the assessment is for “informational purposes” and not a rulemaking, as noted above, the comments submitted to this RFI can inform the CFPB’s understanding of how the TRID rule is actually functioning in the marketplace and what aspects of the rule may need to be changed to better achieve the intended goals or better cost-efficiency. 

The CFPB’s press release is available here.

Richard Horn led the CFPB’s final TRID rule, including the design and consumer testing of the TRID disclosures, when he was a Senior Counsel & Special Advisor at the CFPB.  Please contact Richard at rich@garrishorn.com if you would like assistance with drafting a comment letter to this RFI.