On October 3rd, the House passed bipartisan legislation to eliminate delays for homebuyers closing on their new homes
The bill, named the Homebuyers Assistance Act, passed 303-121 with bipartisan support, and is now headed to the Senate, followed by an imminent threat of veto from the White House.
The Act would provide businesses making a good-faith effort a hold-harmless period to comply with the new TILA-RESPA mortgage disclosure regulations that went into effect on October 3. This new rule enforces full disclosure to homebuyers of the mortgage process, including all fees involved.
This hold-harmless period would take effect until the end of 2015 under this bill. A host of trade associations support it, including the National Association of Realtors, Mortgage Bankers Association, American Bankers Association, American Land Title Association, and at least 25 others.
Earlier this year, 254 House members sent a letter to the Consumer Financial Protection Bureau (CFPB) requesting a formal grace period during the early phases of this new rule, while 41 senators sent the CFPB a similar letter.
Supporters of this bill strongly believe in the protection of credit union entities that work in good faith to remain in compliance with the TRID rule. These proponents also believe that there is no effective and efficient way to test out systems for compliance without this law in effect, regardless of how much lead time lenders and other industry entities are given.
The lending industry simply wants to hold companies acting in good faith protection from liability in order to comply. Mortgage companies want to be able to operate without looming fear of litigation over things out of their control, such as computer glitches or other minor errors that have nothing to do with unethical behavior. Assurances from the CFPB are not adequate enough according to those in the industry.
Without adequate protection from civil damages, mortgage professionals who are making the most genuine good faith efforts to comply with the new rule might still conduct business in a much more conservative manner in order not to be held liable for anything. This will inevitably make it much more challenging for homebuyers to access credit.
It remains to be seen how the Senate will act regarding this 1,888-page rule.
Should it pass at that level, it is believed that President Obama will veto the bill. Opponents to the bill claim that it would cause unnecessary delays in the application of critical consumer protections that have been developed to eliminate sketchy lending practices that lead to questionable mortgage packages. Opponents also fear that the bill would undermine the financial stability of the country.
Senior presidential advisors will likely recommend that the President veto the bill should it be presented to him.