September 28, The Honorable Richard Cordray Director Consumer Financial Protection Bureau (CFPB) 1275 First Street, N.E. Washington, D.C.

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1 September 28, 2015 The Honorable Richard Cordray Director Consumer Financial Protection Bureau (CFPB) 1275 First Street, N.E. Washington, D.C Dear Director Cordray: As you know, the Mortgage Bankers Association has been extremely active in educating our members and assisting them with implementation of the CFPB s Know Before You Owe (KBYO) rule. We very much appreciate the support that the Bureau staff has provided our members and the industry at more than a dozen MBA-sponsored workshops, conference panels and webinars on KBYO implementation over the past year. Over the past few months we have shared with you status updates from informal surveys we have conducted with senior executives from our member companies regarding the state of implementation of the KBYO rule. Our latest informal survey assesses how more than 70 MBA member company executives a cross section of large and small, bank and nonbank -- think that the KBYO implementation will impact their customers during the transition period, and how it may impact the broader market. We believe the results highlight the need for more explicit CFPB action instituting a formal enforcement grace period. Despite the best efforts of lenders and vendors, the survey results (attached) indicate that the implementation date and the lack of a formal compliance grace period could put consumers at risk of missed closings, blown rate locks, and other potential costs. In short: Two-thirds of the companies say they are ready for KBYO and with little or no worry. However, one-third of the respondents indicate that they have had insufficient time to test and integrate systems and train their employees. Almost half of the company executives say they are concerned that the post October 3 transition period to the new KBYO systems and disclosures will create significant problems for their customers. Nearly half of these industry leaders say the overall impact of TRID during the next few months based on their own company s experience and their knowledge of broader industry implementation efforts will be significantly negative for consumers (...significant numbers of home purchase transactions will blow up or close late, adding a cost burden to resolve ).

2 MBA believes the Know Before You Owe rule will make the mortgage process better for consumers. However, as the survey shows, implementation has proven far more difficult than both industry and the CFPB anticipated due in large measure to the complexity of the technology and systems that have put in place over the years, and the challenges of integrating separate systems across the industry. There also continue to be reports that some vendors have not delivered systems in working shape. These issues are not isolated, as a significant proportion of the industry is concerned that their customers are at risk of failing to close or incurring additional costs in the first few months following the October 3 effective date. In light of these results, MBA believes the Bureau should consider steps to ensure consumers are protected from these transition risks. To mitigate the potential adverse impact on consumers during the KBYO transition, MBA urges CFPB to issue an emergency rule instituting a formal enforcement grace period -- including protection from private litigation that would provide lenders the flexibility to deviate from strict compliance with the KBYO if it is the consumer s interest (e.g., to close a purchase in a timely manner). A 120-day grace period will provide lenders, settlement service providers and the Bureau the additional time needed complete the transition to the new systems, monitor implementation challenges and address any adverse consumer or market impacts. In light of the unforeseen implementation challenges, we believe this grace period is necessary to ensure that the transition process itself does not harm consumers. MBA and its members remain committed to working with the Bureau to ensure the KBYO initiative is a success. Sincerely, Pete Mills Senior Vice President Residential Policy and Member Engagement

3 Q1 How would you describe your state of readiness and your ability to originate and close loans in the first few months after October 3? Answered: 71 Skipped: 0 Our systems are fully... We are just completing o... We are cutting it way too... Our systems are simply n... 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Answer Choices Our systems are fully integrated, tested and people trained. We are just completing our integration, testing, and training. We are cutting it way too close and have had not had time to fully integrate, test, and train. Our systems are simply not ready. Responses 11.27% % % % 1 Total 71 1 / 6

4 Q2 What will be the impact of TRID (Know Before You Owe) for your customers? Answered: 71 Skipped: 0 We don't expect any... We expect some minor issues... We are worried there may be... We think that there will b... 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Answer Choices We don't expect any problems related to our ability to originate and close loans. We expect some minor issues will arise but it will be manageable. We are worried there may be some problems in our systems that could impact some of our customers negatively. We think that there will be significant problems in our ability to originate and close loans after October 3. Responses 4.23% % % % 6 Total 71 2 / 6

5 Q3 Based on what you are hearing from others in the industry, how would you assess the impact of TRID (Know Before You Owe) on the market over the next few months? Answered: 71 Skipped: 0 It will be like Y2K; lo... There will be some problem... It's going to be ugly -... Not sure - hoping for t... 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Answer Choices It will be like Y2K; lots of worry leading up, but no major fallout. There will be some problems with some lenders and/or settlement agents, but no major systemic meltdowns. It's going to be ugly - significant numbers of home purchase transactions will blow up or close late, adding a cost burden to resolve. Not sure - hoping for the best, but expecting the worst. Responses 2.82% % % % 6 Total 71 3 / 6

6 Q4 Please rate the overall readiness of these below. Please rate 1 (Not Ready) - 5 (Most Ready) Answered: 71 Skipped: 0 Realtors Settlement Service/Titl... Mortgage Brokers Mortgage Bankers 4 / 6

7 Bank Lenders Correspondent Loan Buyers Wholesale Lender Channels LOS Provider 5 / 6

8 Doc Prep Provider 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Total Respondents Realtors 31.43% % % % % 1 70 Settlement Service/Title Companies 7.14% % % % % 1 70 Mortgage Brokers 25.00% % % % % 1 68 Mortgage Bankers 1.41% % % % % 1 71 Bank Lenders 2.90% % % % % 9 69 Correspondent Loan Buyers 2.94% % % % % 3 68 Wholesale Lender Channels 1.47% % % % % 1 68 LOS Provider 7.14% % % % % 4 70 Doc Prep Provider 2.94% % % % % / 6