On Oct. 7, the House of Representatives passed bipartisan bill 3192 which could provide the mortgage origination industry with a four-month window (through Feb 1, 2016) in which it will be immune from liability in civil actions by aggrieved consumers and regulatory actions by governmental agencies including the Consumer Finance Protection Bureau for failures to comply with new standards governing the disclosure of accurate information to consumers in the mortgage origination process. 

By including a four-month grace period in the Homebuyers Assistance Act, Congress is providing a window of opportunity for mortgage originators to make inaccurate disclosures of loan terms, use bait and switch tactics and other wrongful conduct that caused the economy to grind to a halt in 2008.  This time there is one major difference.  Today, consumers have meaningful federal statutes enacted as part of the Dodd Frank Wall Street Reform and Consumer Protection Act that provide consumer relief and serve as a deterrent to would be wrongdoers.  Now, Congress has voted to allow the bankers to act with complete immunity from the consumer protection statutes it enacted only a few short years ago.


Do we really have such short memories?  The nation only recently has approached the back end of a recession brought on by inappropriate and often fraudulent mortgage origination practices.  Yet 303 members of Congress voted in favor of giving mortgage originators a four-month period to wreak havoc on American consumers entering into what is likely the single largest financial transaction of their lives.  Who do the congressmen represent?  For those who voted yes, it is clear they do not represent the voting public.  As passed, the Homebuyers Assistance Act places the public at great risk, consumers, businesses and financial markets alike.  There is little doubt the grace period will be abused if it goes into effect.

The new mortgage origination disclosures commonly referred to as TRID are intended to eliminate confusion in the loan origination process and improve transparency.  House Financial Services Committee Chairman Jeb Hensarling (R-Texas) claims “without this bill, homebuyers could encounter delays and difficulties when they try to close on their homes.”  We are told expediency is trumping the financial future of individual Americans.  Missing from the quotes of politicians is recognition that the industry has known about the new disclosure rules since November 2013 and were originally scheduled to take effect on August 1, 2015.  During the early summer of 2015 the Consumer Financial Protection Bureau published formal guides for the mortgage lending industry to rely upon in preparing for TRID taking effect.  After concern from the industry and members of Congress were brought to the attention of Consumer Financial Protection Bureau Director Richard Cordray in June 2015, Cordray delayed the August 1, 2015 implementation of TRID to the start of October, 2015.  Accordingly, the industry has already had years of preparation and extra months added to the date upon which it must increase transparency in the lending process.

We must not allow short memories to place the future of individual Americans, and the financial recovery of the nation at risk.  On Oct. 6, the White House issued a Statement of Administration Policy setting forth the intention of President Obama to veto H.R. 3192 should it be presented to the president for signature.  Knowing the legislation is likely to be blocked is a relief, but a bitter taste lingers that Congress seeks to place the consumer at risk and grant immunity to the mortgage banking industry for it to repeat the ills of loan origination during the 2000s.

Deutsch is senior associate attorney at Denbeaux & Denbeaux.