The CFPB has issued an interpretive rule to provide guidance to creditors and other covered persons involved in the mortgage origination process. The Bureau understands the COVID-19 pandemic could pose temporary business disruptions and challenges for covered persons that are involved in the mortgage origination process, including creditors, loan originators, settlement agents, and other parties such as real estate appraisers in addition to hardships placed on consumers and their potential need for prompt access to credit.

The interpretive rule, which became effective May 4, 2020, addresses two primary areas: • Bona fide personal financial emergency – 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 CFPB clarified that: (1) if a consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency; (2) the consumer’s brief statement describing the emergency identifies a financial need that is due to the COVID-19 pandemic; and (3) the emergency necessitates consummating the credit transaction before the end of an applicable TRID Rule waiting period or 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 the Regulation Z Rescission Rules. Note that the commentary to Regulation Z provides that whether waiver conditions are met is determined by the facts or circumstances of individual situations. Of particular note for institutions is the reminder that no preprinted forms may be used; in other words, the dated written statement must come from the applicant/borrower.

TRID Changed Circumstance: Additionally, the CFPB concluded in this interpretive rule 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 CFPB stated that, as with wars or natural disasters, the COVID-19 pandemic is an example of an extraordinary event beyond the control of any interested party, and thus is a changed circumstance. Accordingly, for purposes of determining good faith, creditors may use revised estimates of settlement charges that consumers would incur in connection with the mortgage transaction if the COVID-19 pandemic has affected the estimate of such settlement charges.

An example that the CFPB provided included the reduced availability of an appraiser. The initial Loan Estimate was issued with the typical costs disclosed but due to COVID-19 and the reduced availability of appraisers, the cost of the appraisal had increased. The CFPB’s interpretation of the rule provides that such a scenario exemplifies an extraordinary event beyond control and such increase in fees would be a valid changed circumstance in resetting the tolerance fee for determining good faith.

 

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