Wednesday, May 30, 2018

Six Compliance Topics from Lenders about TRID

Over time TRID has settled in to a routine set of policies and procedures. Even so, some questions persist, and we are in a good position to know about these topics because we get inquiries from our many clients. Because of our clients’ inquiries, we are able often to know what regulatory compliance issues are most important in the loan origination and servicing processes. Our experts respond case-by-case, but the overall research is shared, as needed, with our clientele. Our collection of research is huge and we offer our knowledge, experience, and expertise to our clients in order to ensure that they receive the very best guidance – a commitment that Lenders Compliance Group is recognized for keeping!

In this outline, we provide six topics that have been raised several times over the last few years.

1. The Basics: Loans Subject to 12 CFR 1026.19(e) and (f)
The TRID rule consolidates four previous disclosures required under TILA and RESPA for closed-end credit transactions secured by real property into two forms:

-a Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and

-a Closing Disclosure that must be provided to the consumer at least three business days prior to consummation.

The new disclosures apply to most closed-end consumer credit transactions secured by real property.

Credit extended to certain trusts for tax or estate planning purposes is not exempt from the TILA-RESPA rule.

However, some specific categories of loans are excluded from the rule. Specifically, the rule does not apply to home equity lines of credit (HELOCs), reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land).

You may not use the new disclosures on applications received before August 1, 2015, and you may not use them after August 1, 2015, on loans listed above that are exempt. Therefore, you cannot use them on reverse mortgages or on loans for mobile homes not attached to real property.

You must use existing forms and follow the rules in 12 CFR 1026.18.

2. Timing for Delivery of the Loan Estimate
Generally, the creditor is responsible for ensuring that it delivers or places in the mail the Loan Estimate form no later than the third business day after receiving the consumer’s application and seven business days before the consummation of the loan.

If a mortgage broker receives a consumer’s application, the mortgage broker may provide the Loan Estimate to the consumer on the creditor’s behalf. [12 CFR 1026.19(e)(1)(ii)]

If the broker provides the Loan Estimate, it satisfies your obligation; however, you are still responsible for any errors or defects, and so third-party provider management is crucial.

3. Waiver of the Seven-Business-Day Waiting Period
The consumer may modify or waive the seven-business-day waiting period after receiving the Loan Estimate if the consumer has a bona fide personal financial emergency that necessitates consummating the credit transaction before the end of the waiting period. See 12 CFR 1026.19(e)(1)(v) and its comment for examples of bona fide personal financial emergencies and information about how the waiver must be given to you.

4. Definition of an Application for Purposes of the Loan Estimate
This definition of an application is similar to the definition given under Regulation X. However, the Consumer Financial Protection Bureau (CFPB) eliminated the “catch-all” element of the old definition, that is, “any other information deemed necessary by the loan originator.”

An application means the submission of a consumer’s financial information for purposes of obtaining an extension of credit. For transactions subject to 12 CFR 1026.19(e), (f), or (g), an application consists of the submission of the following six pieces of information:

-The consumer’s name

-The consumer’s income

-The consumer’s social security number to obtain a credit report

-The property address

-An estimate of the value of the property

-The mortgage loan amount sought

You may collect additional information you need to extend credit, but when you receive these six items, you must deliver the Loan Estimate.

5. Content of the Loan Estimate [12 CFR 1026.37]
The Loan Estimate consists of three pages. Page 1 of the Loan Estimate includes general information about the creditor and consumer, a Loan Terms table with descriptions of applicable information about the loan, a Projected Payments table, a Costs at Closing table, and a link for consumers to obtain more information about loans secured by real property at a web site maintained by the CFPB.

Four main categories of charges are disclosed on page 2 of the Loan Estimate:

-A good faith itemization of the Loan Costs and Other Costs associated with the loan. [§ 1026.37(f) and (g)]

-A Calculating Cash to Close table to show the consumer how the amount of cash needed at closing is calculated. [§ 1026.37(h)]

For transactions with adjustable monthly payments, an Adjustable Payment (AP) Table with relevant information about how the monthly payments will change. [§ 1026.37(i)]

For transactions with adjustable interest rates, an Adjustable Interest Rate (AIR) Table with relevant information about how the interest rate will change. [§ 1026.37(j)]

Page 3 of the Loan Estimate contains Contact information, a Comparisons table, Other Considerations table, and, if desired, a Signature Statement for the consumer to sign to acknowledge receipt. See 12 CFR 1026.37(k), (l), (m), and (n). In this section of the Loan Estimate you will find the appraisal disclosures required by Regulation B and a statement of whether you will transfer servicing formerly required under RESPA for first liens. 

Furthermore, the Loan Estimate and Closing Disclosure along with the application and the security agreement also require the name and National Mortgage Licensing System (NMLS) number of the loan originator. [12 CFR 1026.36(g)] The identification (ID) required to be given to a consumer before a loan originator can act is required by the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), implemented by Regulation G [12 CFR 1007].

6. Closing Disclosure
For loans that require a Loan Estimate and that proceed to closing, creditors must provide a new final disclosure reflecting the actual terms of the transaction called the Closing Disclosure. The form integrates and replaces the HUD-1 and the final TIL disclosure for these transactions. The creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan. [12 CFR 1026.19(f)(1)(ii)]

The Closing Disclosure generally must contain the actual terms and costs of the transaction. You may estimate disclosures using the best information reasonably available when the actual term or cost is not reasonably available to the creditor at the time the disclosure is made. However, you must act in good faith and use due diligence in obtaining the information. You may, in most cases, rely on the representations of other parties in obtaining the information, including, for example, the settlement agent. You must provide corrected disclosures containing the actual terms of the transaction at or before consummation. In general, the Closing Disclosure must be in writing and contain the information set forth in 12 CFR 1026.38.