House Passes TRID Grace Period, but White House Still May Veto

French Hill

So the House passed bipartisian legislation Wednesday afternoon to to help keep the mortgage process moving despite the noise from the White House about a veto. The bipartisan vote was 303-121, which is significant.

The bill, called the Homebuyers Assistance Act, gives companies working in good faith, trying their best to comply with the onerous legislation, a four-month grace period to escape steep fines and hand slaps. Which could also delay closings. The TRID is about 1,888-pages of rules from the Consumer Financial Protection Bureau that went into effect Oct. 4.

Realtors, mortgage lenders and title companies have been spending months in preparation and millions of dollars to comply.

“I have talked to lenders who tell me they have spent millions on extra staff and new software,” said Brit Fair of Hexter-Fair Title Company.

Does he think those extra expenses will ultimately be passed onto the consumer?

Absolutely.

All the industry is looking for, or rather asking for,  is a simple grace period to test out the new systems they put in place to comply with the new law. The bipartisan law would simply create a formal “hold-harmless” grace period for lenders and others in the industry to ease into the new and incredibly complex rules.

As Trey Garrison said over on HousingWire, EVERYONE IN THE INDUSTRY WANTS IT. The grace period is like testing a new ship:

Everyone in the industry wants the grace period. That includes the National Association of Realtors, Mortgage Bankers Association, the National Association of Federal Credit Unions, and more than 25 others.

Democrats want it. Republicans want it. The industry wants it.

Why? Because there was simply no way, no matter how much lead time lenders and others in the industry had, to test out their systems for compliance until the law was in effect.

One congressman, a California Democrat mind you, regularly refers to the TRID grace period as a “shakedown” cruise, which is nautical talk for a new ship’s initial voyage to make sure everything is seaworthy. Navy captains are held to incredibly high standards for their ships, but no one faults them if there’s a problem on a new ship caused by a shipwright or construction crew mistake. You can’t be 100% sure everything is seaworthy until the ship is, you know, at sea.

Now here is another take on the CFPB’s TRID law — an article from The Huffington Post by financial expert Terry Savage. She is calling it a “consumer friendly law”.  Says the new law will make it easier for consumers to understand loan docs:

Starting October 3rd, lenders must present borrowers with two streamlined, easy-to-read documents that allow them to understand costs and compare mortgage products. For a quick tour of those documents go to Bankrate.com. Here’s what homebuyers (and realtors) need to know about the two new consumer friendly mortgage documents:

Savage then outlines five paragraphs on what consumers and Realtors need to know. A good journalist, she reduces 1,888 pages into five nut graphs. Simple simple simple.

Wait: if the law is so simple, why does it take her five graphs to explain just a portion of it?

Some mortgage companies will be scrambling to make the deadline, she says, but not the big boys like GuaranteedRate.com. I find it hard to believe they can profess to be so ready when they have not even tested the new system.

I know loan documents are hard to read and full of legal mumbo-jumbo. But I have managed, dumb as I am, to buy and close on 5 homes successfully in this life. (Six if you count the one I helped my mother buy.) When I do not understand the page I am looking at, or understand a phrase, I ask, hey, you, Mr. Title Company: what does this mean?

In Texas, we close at the Title Company; I know it’s not like that in every state.

The other aspect that Savage fails to explain in her “simple” explanation is the complex privacy rules on who can share what with who in the transaction: virtually no one.

But is the paperwork is easier to understand? Yes, OK, but that’s just scratching the surface. Like most of the tangled, bureaucratic legislation Washington sends our way, this one will probably lead to higher fees at the mortgage company to cover compliances expenses. Expect closings to be slight and very slow in November.

But of course, it’s the brainchild of the DC geniuses to protect the “poor consumer” from a group of bad mortgage lenders who are long gone (to The Grand Caymans) by now. Can’t find the bad guys, so we will just get real tough on the good guys.

I wonder if the extra work generated by TRID will end up like most other “protective legislation”,  like how we have to spend $200 in accountant’s fees to handle a $25 state franchise tax .

Ultimately, TRID will eventually just drive up costs for middle class consumers and buyers, the people these “experts” say they exist to protect.