The Consumer Financial Protection Bureau gave lenders a post-holiday present — telling anxious bankers that they wouldn’t be held liable for most minor errors in loan processing and paperwork under the new “Know Before You Owe” rule.
The federal rule, which went into effect in the fall, stipulated that consumers must be given the new combined Closing Disclosure with all the charges, fees and line items three days before the closing, rather than at the closing. The rules were designed to give consumers more time to read the documents before signing, as a way to avoid what happened during the height of the housing boom, when unscrupulous lenders, title agents and realtors used the blizzard of paperwork to slip in higher interest rates and hidden fees. But they’ve ended upcausing some disruptions in home lending and closings.
In a Dec. 29 letter to the Mortgage Bankers Association, the CFPB’s director, Richard Cordray, told the Washington, D.C.-based trade group that small paperwork errors and typos in key sections of the new disclosure rules, known as TRID, would not likely create a scenario where a private investor who buys a loan from a banker could sue the lender, or where the lender would face the regulatory wrath of the CFPB or the federal agencies that buy loans.