In a reply letter to Sen. Bob Corker, delivered Thursday before Consumer Financial Protection Bureau Director Richard Cordray appeared before the Senate Banking Committee, Cordray said that indemnification agreements between lenders and closing agents over mortgage transactions would not allow lenders to shift their liability for errors.
Since the TILA-RESPA Integrated Disclosure (TRID), also known as the Know Before You Owe mortgage disclosures in the bureau’s communications, took effect, settlement agents have seen new closing instructions asking agents to indemnify lenders for liability with TRID errors.
Cordray told Corker that although the CFPB would not interfere with the agreements, the lenders and creditors in TRID transactions remained solely responsible for errors, regardless of what the agreements stated.
“The Know Before You Owe mortgage disclosure rule (TRID) places responsibility for the accuracy and delivery of the integrated disclosures on the creditor,” Cordray wrote. “But, as discussed in the preamble … creditors and settlement agents are free, as they have always been, to decide how to divide responsibility and risk most efficiently and to implement those mutual decisions via contract.
“While creditors may enter into indemnification agreements and other risk-sharing arrangements with third parties, creditors cannot unilaterally shift their liability to third parties and, under the Truth in Lending Act, alone remain liable for errors on the Know Before You Owe mortgage disclosures,” Cordray continued.
Cordray addressed two other questions from Sen. Corker in the letter, the first about cure provisions for violations of the TRID rule. He began by saying the rule allows for issuing a corrected Closing Disclosure for as many as 60 days after consummation to correct “non-numerical clerical errors, or as a component of curing any violations of the monetary tolerance limits, if they exist.”
In addition, Cordray wrote that TILA contains provisions for the correction of errors that continue to apply to TRID loans and are valid within 60 days of discovering an error. “Similarly, TILA provides an exception from civil liability for unintentional errors, subject to certain conditions. We will continue to evaluate how we can best provide further guidance to industry on these and other matters.”
Left unaddressed, however, was what liability under RESPA could be borne by violations that required cures. Because the integrated disclosures have both TILA and RESPA liability involved, many compliance officers and attorneys have debated whether following TILA provisions for curing violations would protect lenders from RESPA liability for those errors.
Finally, Cordray responded to a question about whether the CFPB would form an internal task force to identify and address issues arising from TRID implementation. Cordray said the bureau has had an internal team working on addressing questions and industry issues since before the rule first was published.
“They meet weekly to discuss industry concerns and identify appropriate responses and have equally frequent touchpoints with external stakeholders,” he wrote. “We hope and expect (the) industry will continue to feel free to reach out to our internal team, as they have been doing.”