CFPB Issues Interpretive Rule on TRID and Reg Z Provisions Related to COVID-19 Posted by AVCU on 9:20 AM

Yesterday, The Bureau issued an interpretive rule regarding the application of certain provisions in the TILA-RESPA Integrated Disclosure (TRID) Rule and Regulation Z's Right of Rescission rules in light of the COVID-19 pandemic.  The pandemic has affected the mortgage origination process in many ways, from the inability to obtain an appraisal to staff shortages at settlement service provider companies, all of which could lead to delays in the mortgage process.  Additionally, many members have strong needs for proceeds from mortgage transactions and are being negatively impacted by these delays.  The Bureau recognizes these competing issues and has put out this interpretative rule to clarify a few existing provisions in the TRID Rule and in the Regulation Z right of rescission rules that can help credit unions and members alike in the current pandemic.

Bona Fide Personal Emergency provision

First, the Bureau clarifies that that if a consumer determines that his or her need to obtain funds due to the COVID-19 pandemic (1)  necessitates consummating the credit transaction before the end of the TRID Rule waiting periods or (2) must be met before the end of the Regulation Z Rescission Rules waiting period, then the consumer has a bona fide personal financial emergency that would permit the consumer to utilize the modification and waiver provisions, subject to the applicable procedures set forth in the TRID Rule and Regulation Z Rescission Rules.  The bona fide personal financial emergency provision already exists in the rule but the Bureau received questions about whether it could be invoked as a result of the the COVID-19 economic situation.  The Bureau clarified that it can be used but in order for the waiting periods to be modified or waived, the creditor must have a dated written statement by the consumer that: (1) describes the emergency, (2) specifically modifies or waives the waiting period, and (3) bears the signature of all consumers who are primarily liable on the legal obligation (for the TRID Rule) or who are entitled to rescind (for the Regulation Z Rescission Rules).  The Bureau is also encouraging lenders to inform borrowers about the modification and waiver provisions for bona fide personal financial emergencies if the consumer has a need to obtain funds due to the COVID-19 pandemic prior to the end of an applicable waiting period, as many consumers are unaware of this provision.

Change of Circumstance

Additionally, the rule clarifies that the COVID-19 pandemic is a "changed circumstance" for purposes of certain TRID Rule provisions, allowing creditors to use revised estimates reflecting changes in settlement charges for purposes of determining good faith. The TRID Rule specifies that changed circumstances includes "an extraordinary event beyond the control of any interested party," with the commentary to the TRID Rule clarifying that a "war or natural disaster" is an example of such an extraordinary event.  The Bureau's interpretative rule also clarifies that since the COVID-19 pandemic may affect the ability of stakeholders to provide accurate estimates of some settlement charges, the COVID-19 pandemic is considered an "extraordinary event beyond the control of any interested party" and thus is a valid changed circumstance for revising fees.  For example, a credit union could issue a Loan Estimate with an appraisal fee at reasonable market value, but then due to the pandemic causing a shortage of appraisers, the fee for an appraiser could turn out to be much higher.  The Bureau is clarifying that this sort of event that causes a fee increase due to the pandemic is a valid change of circumstance for resetting fees.

This rule becomes effective immediately upon the date of publication in the Federal Register.  Hopefully this interpretive rule will help credit unions assist members during COVID-19 by loosening up some of the regulatory requirements a bit in the event of bona fide personal financial emergencies or changed circumstances due to the pandemic.  Please reach out to CUNA Compliance with any questions.