Recently, the Consumer Financial Protection Bureau (CFPB) released a collection of much anticipated changes to its TILA/RESPA Integrated Disclosure (TRID) rule. Once the changes were made public, a number of publications shared the news, along with their take on the development. Given the length of the document, we wanted to digest it fully before offering our comments to the industry.
What changed in TRID 2.0
After reviewing the changes and analyzing the rule with industry partners across the country and our take is that, overall, the changes in TRID 2.0 are beneficial and will clear up some of the confusion and some potential litigation risk for creditors. What is different in the final rule? According to the CFPB, some of the changes to TRID include:
- Tolerances for the Total of Payments: The CFPB is now including tolerance provisions for the Total of Payments that parallel existing tolerances for the finance charge and other disclosures affected by the finance charge. This change would make the treatment of the Total of Payments disclosure consistent with what it was prior to the TRID 1.0 rule.
- Housing assistance lending: The CFPB’s amendments would promote the partial exemption for housing assistance lending under Regulations X and Z by excluding recording fees and transfer taxes from the 1% limitation, thus permitting these charges to be made in any amount without losing eligibility for the partial exemption.
- Privacy and sharing of information: The CFPB is adding new commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.
However, in addition to these changes, many wanted to see substantial revisions to the mandatory disclosure forms. The final rule, however, makes no structural or formatting changes to either the Loan Estimate (LE) or the Closing Disclosure (CD).
Instead, the CFPB provided “patches” to its previous rule and included additional guidance that was not initially expected to appear in the proposed rule. The additional changes are based on more than 1,600 comments the CFPB received during the public comment period.
The best news is that the deadline for implementing the new rule is not until next year, which will give lenders and their partners’ time to update and test their systems. Creditors can begin implementing changes October 10, 2017, but these changes must be in place and production ready by October 1, 2018.
The good and the bad in TRID 2.0
From our perspective, the CFPB was wise to provide improved support for principal reductions on the forms. They also provided clearer guidance on how to calculate per diem interest and fixed problematic language concerning the Projected Payments Table on the LE/CD. This is a very positive development and has been well received by the industry.
That said, there was some disappointment with the CFPB’s deviation from their proposed rule requiring per diem interest to be “rounded to the nearest cent” to give creditors the option of either rounding up to, or truncating at, the second decimal place. This still leaves a lot of unsolved issues about rounding and truncating.
The CFPB also failed to provide clarification on what the phrase “paid by or imposed on” actually means.
Changes to the Calculating Cash to Close table calculations appear to provide the right “Cash to Close” amount in a wide variety of scenarios, which is an improvement. Changes to the Written List of Service Providers rules will also patch some tolerance issues, but we are still running scenarios on these.
There were a few other points that could have been improved in the new rule. For example, it would have been better to extend the finance charge tolerance rules to other items affected by finance charge, such as Total Interest Percentage.
Finally, we are still left with murky calculations for Closing Costs Financed and Down payment/Funds from Borrower. The CFPB concluded that these were high-level calculations, and that if consumers wanted to see finer details, they can review other parts of the LE/CD. From the mortgage industry’s perspective, when the numbers given to the consumer show a down payment and financed closing costs that do not line up with their expectations, it causes confusion and loss of their trust. This leads to a poor customer experience and needs to be rectified.
What happens between now and October 2018
Good or bad, at least we have information to guide the work ahead of us. Some of this was anticipated, so we have been developing several of these changes over the past months. However, much more work needs to be completed in the months ahead. For Docutech, we will be working on:
Modifying some system calculations for the following areas of the LE/CD:
- Calculating Cash to Close tables (particularly in regard to Total Closing Costs, Down Payment/Funds from Borrower, Funds for Borrower, and Adjustments and Other Credits); and
- Escrow Account tables on the CD.
Making changes to the way information prints in certain areas of the LE/CD, including:
- Providing support for printing the alternative tables for simultaneous, second lien loans;
- Support for additional language on principal reduction fees, since they can be disclosed in Sections K of the CD, as well as on an addendum (when necessary);
- Changing the consumer information disclosed on the first page of the CD, to only reflect consumers to whom “credit is offered or extended” for loans subject to the Right of Rescission;
- Support for creditor options to disclose specific-seller credits on the LE (whether as a lump sum with general seller creditors or ”itemized” by reducing the amount of each specific fee by the amount of the credit);
- Implementing the new rounding rules;
- Supporting various rules regarding payoffs and construction costs in various parts of the CD; and
- Supporting the option for clients to issue either an LE/CD OR a TIL/GFE for “home buying assistance” loans.
Our platform is already configured to work with our client’s LOS’, which will help lessen the amount of changes that need to be done on their part.
We will have all of our changes completed well in advance of the deadline, giving our clients ample time to “debug” the changes and make sure everything is in place and ready for full production by next October.