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TRID Allows for Partial Exemption for Housing Assistance Loans

Housing finance agencies (HFA) offer individuals, families and businesses a wide range of support in realizing their dreams. Loans provided by housing finance agencies or by private creditors who partner with housing finance agencies that extend credit within the guidelines of HFA programs are low-cost, non-interest bearing and subordinate- lien loans. These loans allow middle to low income families obtain a mortgage for which they would have otherwise have trouble qualifying.

As of Oct. 3, 2015, the TILA-RESPA Integrated Disclosure Rule (TRID) required that lenders issue disclosures to consumers in most residential mortgage transactions. In order to be less onerous on lower risk loans, the TRID rule allows for a partial exemption from the disclosure requirements. On July 7, the Consumer Financial Protection Bureau (CFPB) amended the qualification requirements for the partial exemption for housing financing loans and down payment assistance loans—an act which the bureau believes will make the program more flexible and encourage its use.

In order to qualify for the partial exemption, the loan must be amortizing, forgivable and include fees that cannot exceed 1 percent of the principal of the loan. Previously, the 1 percent threshold included recording fees and transfer taxes. The CFPB amended the rule to exclude recording fees and transfer taxes from the 1 percent threshold.

Proponents of the amendment persuasively argued that excluding recording fees and transfer fees from the 1 percent calculation will make the program more flexible, and thus, increase the amount of HFA loans disbursed. The bureau believes that statutory predetermine fees do not pose a risk sufficient enough to warrant its incorporation since it is not determined by the market. Since recording and transfer fees are predetermined fees set by state and local jurisdictions—and not the market, there is limited risk in excluding it from the 1 percent threshold calculation.

The bureau believes that excluding recording fees and transfer fees will increase the availability of low-cost, non-interest bearing, subordinate-lien loans to low- and moderate-income borrowers.

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