When it comes to the Consumer Financial Protection Bureau (CFPB), Democratic and Republican lawmakers are generally sharply divided with Democrats vigorously defending the Bureau or any action it takes.
So why did 64 Democrats—about a third of the 188 Democrats in the U.S. House of Representatives—vote in favor of H.R. 3192, the Homebuyers Assistance Act, on Wednesday to implement a formal grace period until February 1, 2016, for compliance with the CFPB's TILA-RESPA Integrated Disclosure (TRID) rule? Even the White House issued a statement saying that the President was advised to veto the bill if it reaches his desk.
Perhaps the amount of consternation and even "angst," as CFPB Director Richard Cordray put it in his testimony before Congress on September 29, expressed by those who work in the mortgage industry over whether they could be fully compliant with TRID in time for the October 3 effective date generated some sympathy among Democratic lawmakers and motivated them to vote in favor of the formal grace period. That was the case with Rep. Brad Sherman (D-California), co-sponsor of H.R. 3192 along with Rep. French Hill (R-Arkansas).
"These new forms and regulations are complicated," Sherman said. "Smaller lenders and title companies are complying in good faith with a 1,888 page regulation that is only now being tested in real life home closings. The Hill-Sherman bill tells these smaller lenders, title and escrow companies to implement the new forms immediately. However, if they act in good faith but make unintentional mistakes, they will not be subject to retribution for those mistakes made prior to February 1, 2016."
The Obama Administration, which created the CFPB out of the Dodd-Frank Act four years ago, has been fiercely protective of the Bureau and has fought repeated efforts by Republicans to reform the CFPB. The White House issued a statement saying they believe that it was unnecessary to announce a formal grace period for TRID.
"The CFPB has already clearly stated that initial examinations will evaluate good faith efforts by lenders," the White House wrote. "The Administration strongly opposes H.R. 3192, as it would unnecessarily delay implementation of important consumer protections designed to eradicate opaque lending practices that contribute to risky mortgages, hurt homeowners by removing the private right of action for violations, and undercut the Nation’s financial stability."
Both Sherman and Rep. John Garamendi (D-California), who voted in favor of the bill, noted that smaller lenders generally do not have the resources in place to quickly comply with the new regulations. A spokesperson for Garamendi told DS News that the Congressman voted in favor of H.R. 3192 "because the bill simply codifies the CFPB’s announced policy regarding enforcement. Secondly, while bigger servicers may have the capability to make such an immediate transition, smaller servicers may not have the resources. He believed the bill provides an adequate grace period, and Congressman Garamendi had them in mind when making his decision."
"This bill says there is no retribution for good faith efforts. This is especially important for smaller companies that do not have the resources to quickly comply with new government regulations."
Sherman questioned Cordray on the issue of a possible grace period, or "hold harmless" period, for TRID compliance during the director's testimony before Congress in late September. In that hearing, Sherman likened the TRID rule to a building a new ship, saying that no matter how much time is spent at the dock, the builder is not finished building the ship until it's taken on a" shakedown cruise," or a test run. The shakedown cruise began on October 3, however, since the new regulations and integrated forms could not be applied prior to the TRID effective date.
Cordray has said on multiple occasions that the CFPB would be lenient with those making a good faith effort to comply with TRID, though he steadfastly refused to say for how long after the rule took effect the grace period would last. In that Congressional hearing on September 29, Sherman asked the director if he would be willing to announce a three-month hold harmless period for those making a good faith effort to comply; Cordray responded that he was "pushing hard" to make announcement along the lines of what Sherman was asking for before October 3.
When no such announcement came, Congress took the matter into its own hands, fueled by House Majority Leader Kevin McCarthy (R-California) and quickly voted to pass H.R. 3192. The bill passed by a vote of 303 to 121 with bipartisan support—239 Republicans and 64 Democrats voted in favor. All 121 who voted nay were Democrats. Ten representatives (seven Republicans, three Democrats) did not vote; every Republican who voted chose to vote in favor of the bill's passage.
Click here for the complete voting results on H.R. 3192.