On December 6, 2017 the Consumer Financial Protection Bureau (CFPB) published an updated version of the “TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure forms”. The new guide included updates and amendments, which the CFPB hoped would provide illustrations for how the final rule is issued in July 2017 should be implemented.
We applaud the CFPB for providing this much-needed final rule, but we find that little has fundamentally changed for a lender operating in a fully-compliant manner. The purpose and intent of TRID has not changed, nor have the best practices for compliance.
Ultimately, consumers will decide whether TRID was helpful in both shopping for a mortgage and in better understanding the costs of closing one. Regardless of the conclusions they reach, lenders will find it most beneficial to their future success to comply with the spirit of the rule, by making very clear the costs of closing starting with the initial Loan Estimate, going all the way through the Closing Disclosure, and ultimately to the closing table.
Exercising TRID Due Diligence
Compliance with TRID requires the lender to know as much as possible about the actual costs of closing a mortgage through all stages of the loan process and disclosing those costs to the borrower on the Loan Estimate(s) and Closing Disclosure(s).
Because the lender may not know all of the expenses involved in closing at the time they issue the Loan Estimate within three business days of application, the lender is required to provide estimates in good faith to fully inform the borrower of the costs they can reasonably expect to incur, if they choose to proceed with the loan. On the Closing Disclosure, the standard of compliance is higher, as lenders are required to disclose the actual terms of the transaction; estimates based on good faith are only permitted if knowledge of the actual terms are not reasonably available to the lender, at the time the Closing Disclosure is issued.
It’s also important for the lender to demonstrate due diligence in its compliance efforts, because there is still a fair amount of ambiguity in the rule, even after the publication of the new guide.
Seeing through to the spirit of the rule
The rule update in July did clear up some of the ambiguities and inconsistencies in the earlier version of the rule, but there are still enough ambiguities to permit industry participants to reasonably disagree on interpreting certain points. Industry participants we work and associate with, whether clients or other software vendors, still have many questions which remain unanswered officially.
By going back to the CFPB’s stated purpose for TRID, we see that the government wants lenders to provide accurate information about costs to the borrower in a timely fashion so that, during the initial phases of obtaining a loan, they can shop among creditors before making a commitment to a particular loan. Again, during all the other phases of the loan process, the intent is for lenders to keep consumers apprised of their expected costs, so that when closing occurs, consumers know exactly what they are committing to. Compliance problems can be mitigated by ensuring that the lender is meeting statutory timelines and providing good information to the borrower.
Unfortunately, providing accurate closing cost information is still a major hurdle for many lenders as they are required to gather cost data from parties and systems that are not within their control and disclose it to the borrower. We’re seeing more growth in vendor collaboration portals to help provide this information to lenders.
There have been many questions about curing TRID violations. The fact that the CFPB did not include specific cures for specific violations within the rule has caused a great deal of concern among lenders. However, specific cures are provided for some violations within TRID and broad cures are provided in the Truth in Lending Act (TILA), the statutory law which TRID and Regulation Z implement. In short, if the lender discovers an error before the borrower and provides a refund in an attempt to correct the error within a reasonable amount of time, the lender is in a good position to avoid other non-compliance penalties. There are still no specific cures for violating the TRID timeline.
To learn how ConformX, Docutech’s dynamic document engine can help your lending operation maintain compliance, schedule a demo.