Changes made by the Consumer Finance Protection Bureau (CFPB) to the 2013 TILA-RESPA Integrated Disclosure Rule (“TRID”) will take effect on October 3, 2015. The amendment expands the time limit requirement for revised returns when mortgage consumers block an interest rate or extend an interest rate freeze after the credit estimate is submitted. Lenders can now submit a revised credit estimate within three business days of an interest rate lockdown, instead of presenting the revised credit estimate on the day the interest rate is frozen. This change was made by the GFPB on the basis of industry feedback, whereby lenders should strengthen their interest rate practices and limit the ability of a consumer to lock in interest rates on their mortgages without more time. To the extent that a lender does not meet the interest rates charged to a borrower, lenders must be careful not to evade the provisions of the UDAAP of the Dodd-Frank Act. UDAAP, the acronym for “unfair, deceptive and abusive acts and practices,” has been used by the CFPB and banking supervisors to prosecute false, misleading or deceptive acts by a consumer financial services provider. A lender that does not clearly indicate that the interest rates of a mortgage can be changed or that a tender interest rate is only available for a specified period of time could be considered an INFRACTION to the UDAAP. When interest rates rise, lenders should avoid any explicit or implied presentation of the availability of a fixed-term interest rate unless the lender is absolutely sure that the interest rate is met. Failure to do so is likely considered a UDAAP and may result in enforcement action by a state or federal regulator. Some borrowers leave the agreement when interest rates fall and unscrupulous lenders are known to end tax periods when interest rates rise under the guise that the borrower would not be able to process the necessary securities in time. If you decide to get an interest rate ban, you should make sure that your blocking contract is long enough to cover the time it takes to close your loan.
If you are concerned that your working hours may be too short, ask your lender if it needs to be changed for a longer period of time. Washington state lenders should also pay attention to the enforcement measures that the Washington Department of Finance has recently followed with respect to collective security agreements. While banks are generally exempt from the Savings Loans Act and are not required to grant interest rates to borrowers, banks should consider introducing formal interest rate freeze-blocking agreements as part of their policies and procedures after the implementation of TRID. In a rising interest rate environment, the process a creditor must face in obtaining a secure interest rate can be complicated and risky. Mortgages are considered in the “pipeline” from the date of application until the sale of the loan (i) on the secondary market, (ii) in the originator`s loan portfolio or (iii) the pipeline, because the client does not close the mortgage after receiving an interest rate ban. While the mortgage is in the pipeline, the creditor bears the risk of potential interest rate fluctuations between demand and closing. If the loan is sold on the secondary market, the yield on the secondary market may also be against the locking of interest rates before closing. While this amendment provides an urgent respite for creditors to provide relevant information, the GFPB expects that the TRID will be strictly complied with, given this easing of deadlines.