CFPB Director Richard Cordray downplayed the risk of legal liability for failure to comply with new Know Before You Owe mortgage disclosure rules in a Dec. 29 letter to Mortgage Bankers Association President/CEO David Stevens.

The CFPB chief pointed out that while the KBYO rule integrated TILA/RESPA disclosures, it did not change the prior, fundamental principles of liability under the existing TILA or RESPA laws. Therefore, he continued, according to United States Code, the following legal protections apply to non-high-cost mortgages:

• There is no general TILA assignee liability unless the violation is apparent on the face of the disclosure documents and the assignment is voluntary.
• By statute, TILA limits statutory damages for mortgage disclosures, in both individual and class actions to failure to provide a closed-set of disclosures.
• Formatting errors and the like are unlikely to give rise to private liability unless the formatting interferes with the clear and conspicuous disclosure of one of the TILA disclosures listed as giving rise to statutory and class action damages.
• Disclosures that give rise to statutory and class action damages do not include either the RESPA disclosures or the new Dodd-Frank Act disclosures, including the Total Cash to Close and Total Interest Percentage.

“While complete and accurate use of the Regulation Z forms is the ultimate compliance goal, we recognize that a certain level of minor errors in the early days of implementation is to be expected. As noted above, we, other regulators and the GSEs have publicly stated that we are looking, in these early days, for good faith efforts to come into compliance,” Cordray wrote.

“Moreover, in light of the points made above about the existing provisions for cure under TILA, the specific cure mechanisms in the Know Before You Owe mortgage disclosure rule, and the limits of private liability under TILA, we believe that risk of private liability is negligible for good-faith formatting errors and the like.”