Mortgage lenders continue to fear violating the disclosure requirements of the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosure Rule (TRID). TRID’s original inception was to streamline the mortgage lending process by condensing loan disclosure forms, revamping the timeline of the lending process, and ultimately helping buyers better understand their bottom line. While this is good news for consumers, it’s become a thorn in the side for lenders.
Compliance personnel, in-house counsel, mortgage companies, and settlement agents need to get up to speed on TRID and ensure compliance, as penalties for noncompliance range from $5,000 to $1 million per day!
Evolution of the Final Rule
While the CFPB provided informal guidance on certain issues prior to the October 2015 effective date of the final rule, ambiguities remain that impact accurate delivery of the Loan Estimate (LE) and Closing Disclosure (CD) in connection with applications for closed-end, real estate-secured mortgage loans.
The CFPB recognized that regulatory amendments were necessary to memorialize this informal guidance regarding the LE and CD to reduce the risk to lenders of TRID violations. On July 29, 2016, the CFPB proposed a number of amendments to TRID that would formalize some of its informal guidance points and make other technical changes to the rule.
Nearly a year later, on July 7, 2017, the CFPB announced its final rule amending TRID regulations and official interpretations. According to the CFPB, the 2017 TILA-RESPA Rule:
- Requires creditors to provide integrated disclosures for a closed-end consumer loan (other than a reverse mortgage) secured by a cooperative unit regardless of whether state law classifies cooperative units as real property.
- Amends and clarifies several disclosure provisions related to construction loans tolerances for the total of payments disclosure, including tolerances that apply for purposes of rescission.
- Amends and clarifies the application of the good faith standard under 12 CFR 1026.19(e)(3) and related tolerances for certain integrated disclosures. It also amends and clarifies when revised LEs or CDs are permitted or required.
- Amends and clarifies various calculations used to complete the Calculating Cash to Close table.
- Amends and clarifies several requirements related to the LE or written list of settlement service providers.
On August 30, 2017, the CFPB issued the 2017 TILA-RESPA Rule: Detailed Summary of Changes and Clarifications, which goes into even greater detail.
A Wrinkle in Time
The CFPB has declined to finalize certain proposals and is offering a new proposal with a 60-day comment period on the unresolved “black hole” issue. The big problem is with the lending timeline. A lender provides the buyers with the LE, but special circumstances allow a lender to use a CD within four days of closing, which resets the tolerance levels (an allowable percentage that a fee is allowed to change from the time of the loan estimate to the closing disclosure). All it takes is the buyer to delay closing, the four days are up, and the CD isn’t valid!
This metaphorical black hole has created a rift in the mortgage lending market since TRID came about. In an industry where everything runs on meticulous timing, the unfortunate four-day conflict between whether to use the LE or CD to reset tolerances has caused a great deal of frustration with lenders, especially considering closing dates aren’t set in stone.
Change Is in the Air
Looking for clarification regarding the sharing of borrower and seller CDs with parties to the transaction? You’re not alone. Many lenders want to know how the CFPB is addressing the “black hole” issue for resetting tolerances. As a financial lender you know that not all mortgage loans are the same and closing dates are prone to change. Lenders continue to seek guidance on how to complete the disclosures for construction-to-permanent mortgage loans, as well as what changes took place to certain disclosures on the CFPB’s LE and CD forms, including changes to the Cash to Close table and the disclosure of rounded numbers and percentages.
Get Educated on the Final Rule!
Consumer financial services attorney Holly Spencer Bunting addresses the black hole issue, as well as niggling issues not addressed in the final regulation in an audio conference for Eli Financial, “‘Know Before You Owe’ Changes Finalized: CFPB Amends TRID to Clarify Loan Estimate and Closing Disclosure Requirements.” Join this session with Holly and gain a strong working knowledge of the significant changes in this final regulation. She provides a summary of other significant clarifications to address ambiguities and resulting challenges under TRID. Learn how these changes will improve on the challenges that lenders currently face in providing accurate LEs and CDs to consumers, and become familiar with a new proposal to address fee tolerance issues.