On April 29, 2020, the Consumer Financial Protection Bureau (the “CFPB”) issued two fact sheets on the ECOA Valuations Rule and a FAQ for compliance during the COVID-19 pandemic period. On the same day, the CFPB also issued an interpretive rule on the meaning of “bonafide personal financial emergency” under TILA and Regulation Z as well as an accompanying FAQ.
ECOA Valuations Rule
The ECOA Valuations Rule requires creditors to provide borrowers with a copy of all appraisals and written valuations developed in connection with their mortgage transaction as well as disclose to borrowers their right to receive copies of all appraisals and valuations. In light of stay-at-home orders around the country, in some cases, appraisals have been difficult to complete or have had to be modified to comply with social distancing requirements.
The first factsheet (here) describes the transaction coverage of the ECOA Valuations Rule, including discussion of what is an application, creditor or dwelling, and what is meant by an appraisal or written valuation. The second factsheet focuses on ensuring compliant delivery of all written valuations. The factsheet (here) describes the impact of different delivery methods and discusses methods for the borrower to waive timing requirements.
Finally, the CPFB published an accompanying FAQ on flexibility with these rules during the COVID-19 emergency. The FAQ consists of one question and advises creditors of the existing flexibility allowed under the ECOA Valuations Rule whereby a borrower may waive certain timing requirements in certain conditions.
The CFPB’s announcement of these factsheets and FAQ can be found on their website here.
TILA and Regulation Z Interpretive Rule
The CFPB issued an interpretive rule with the stated goal of allowing flexibility to lenders and borrowers during the pandemic. The interpretive rule discusses the existing mechanisms allowed by current regulations whereby consumers may choose to waive certain timing requirements that are part of the TRID rule or for rescission under Regulation Z. The CFPB states in the rule the agency is issuing the rule in response to numerous questions and requests for clarification from the industry.
The summary of the rule includes, “The Bureau concludes in this interpretive rule that if a consumer determines that his or her need to obtain funds due to the COVID-19 pandemic (1) necessitates consummating the credit transaction before the end of the TRID Rule waiting periods or (2) must be met before the end of the Regulation Z Rescission Rules waiting period, then the consumer has a bona fide personal financial emergency that would permit the consumer to utilize the modification and waiver provisions, subject to the applicable procedures set forth in the TRID Rule and Regulation Z Rescission Rules.”
In addition to their statement that circumstances arising from the COVID-19 emergency may give rise to bonafide personal financial emergencies for purposes of these waivers, the CFPB also concludes that there may also be issues caused by COVID-19 that may meet the definition of a “changed circumstance” under the TRID rule, allowing creditors to issue a revised estimate of related costs. It is important, however, that creditors review those circumstances and ensure they are directly related to increased costs and document the causation which supports increased costs.
Lenders should also note that the interpretive rule does not alleviate requirements for due diligence when issuing the initial estimate for closing costs.
You can find the CFPB’s Press Release here.
