January 2013 promises to be a big month for mortgages and the CFPB, as a variety of provisions of Title XIV of the Dodd-Frank Act take effect by operation of law on January 21, 2013 unless the Bureau issues final rules implementing them by then. The Bureau has proven to be savvy in meeting its own Dodd-Frank deadlines. We will soon find out if it is as savvy in establishing compliance deadlines for its new mortgage rules.
Title XIV—Dodd-Frank’s “Mortgage Reform and Anti-Predatory Lending Act”—says that its provisions take effect 18 months following the designated transfer date of July 21, 2011 unless final implementing rules have been issued by the Bureau prior to that time. It also provides that such rules must take effect not later than 12 months after they are issued. So the industry has circled January 21, 2014 as a potential best-case scenario on compliance dates for the following important Title XIV content:
- Ability to Repay & “Qualified Mortgages”
- Certain New Mortgage Servicing Requirements
- High-Cost Mortgage Scope and Restrictions
- Loan Originator Compensation and Qualification
- Appraisal Standards and Disclosures
We say “potential best-case” for a few reasons. First, the Bureau may not publish corresponding final rules in time, so these provisions could take effect by operation of law on January 21, 2013. No one really believes that will happen, but it is possible. Proposed rules are pending as to each of these elements.
Second, give the Bureau credit for recognizing the impracticality of implementing certain new mortgage disclosure rules required by Title XIV (e.g., repayment analysis disclosures) apart from its obligation to integrate TILA and RESPA disclosures under Title X. Dodd-Frank required that by July 21, 2012, the Bureau propose combined TILA-RESPA disclosures, a challenging task made even more difficult by the commendable approach the Bureau took to soliciting consumer and industry feedback on this initiative. We saw the voluminous outcome during the summer of 2012 within the Bureau’s “Know Before You Owe” campaign. Unlike how Title XIV set deadlines for its mortgage reforms, Title X did not set a deadline for the issuance of final TILA-RESPA integration rules, notwithstanding the compliance challenges that would result from the overlap between the titles’ required disclosure changes.
In order to close this gap and avoid the automatic implementation of certain Title XIV provisions rules on January 21, 2013 without related rulemaking and apart from the TILA-RESPA form changes, the Bureau in late 2012 issued an interim final rule that voided those “affected” Title XIV provisions as to all persons. The Bureau explained that this creative step was a temporary measure intended to facilitate a seamless transition to the changes required by both titles, and the mortgage industry was quite supportive. Some sort of discretionary interim or phase-in measure is also possible on compliance dates, taking them even beyond January 2014, but that is far from certain.
It is important also to bear in mind that the Bureau has taken an artful view of the date its rules have been issued. Agency rules are traditionally viewed as “issued” upon their publication in the venerable Federal Register, but the Bureau has taken a different position. Specifically, its TILA-RESPA proposal was released on its website on July 9, 2012—a few weeks before the July 21 Dodd-Frank deadline—but was not published in the Federal Register until August 23, 2012, a fact it has acknowledged. The Bureau later issued a rule on its own rulemaking intended to validate this approach.
So the CFPB may “issue” final rules on the above mortgage topics by January 21 through a channel other than the admittedly obscure Federal Register, and we can only hope it will be as creative on compliance dates. In this vein, we will be closely following two upcoming Bureau events—“mortgage policy” roundtables to be held in Baltimore on January 10 and in Atlanta on January 17—to see what news might break there.