July 2015, Issue 07
TRID: Changes and Tracking
If you've been following my newsletters and blogs on TRID, you should know by now that TRID is much more than the introduction of two new disclosures. The changes to mortgage lending resulting from the impact of the new TRID rules will reach far beyond the creation and issuance of the new Loan Estimate and Closing Disclosure; albeit the work required to meet the requirements of these forms is quite daunting for many.
Once the new rules become effective, for now that is October 3, 2015, lenders will be fully responsible and accountable for compliance. Compliance with all timing requirements, form structure and content, plus the fees and charges disclosed to a consumer in connection with their loan. The lender must ensure that what gets disclosed to the consumer in the new forms is not just accurate in every detail but is provided to the consumer in the prescribed timeframe. Here is where the rubber meets the road. Lenders face some new challenges...
Lender Challenges
First; issuance of an accurate and complete Loan Estimate within 3 business days of receipt of the application.
1. Do you have systems to identify when you have the 6 items which determine a loan application?
2. Who issues the LE; originator or disclosure unit? What if the loan is done via TPO?
3. How will you document the consumer's intent to proceed?
Second; changes to fees/charges during the process.
1. How will you identify a change and when it occurs?
2. If a change affects a fee how will you ensure a revised LE is issued within 3 business days of learning of the change?
3. How will this be documented?
Third: tracking and monitoring fees and changes.
1. Will your system have the capability to track each change from LE to LE to Closing?
2. How will you determine tolerance violations between the Initial LE, Intermediate LEs and the final Closing Disclosure?
3. How will you keep record of each disclosure issued, when changes are made, what changed, why and when each disclosure was issued or re-issued?
Fourth; coordination with settlement agents to obtain required closing information.
1. How will you gather the fees and adjustments from the closing agent, and realtor, required to complete the Closing disclosure and deliver it on time.
2. Who will issue the Closing Disclosure and how?
3. How will changes be tracked and handled once the Closing Disclosure is issued?
4. How will changes be handled that arise at the closing table?
As you can see it's much more than creating and issuing two new forms. It's a complete change in how business is done and in what must be monitored and maintained to protect a lender against future claims from consumers and potential findings, penalties and fines from regulatory audits. According to the Beatles' song, "It ain't easy."
Practical Example
Take a case where a consumer provides the 6 items for a loan application. The lender must know the date this is received so the Loan Estimate is issued within the 3 business day window. Otherwise they are in violation. Do you now always know when your originators have these items? You better find out.
How about when a borrower locks their rate? The lender must issue the required revised Loan Estimate within 3 business days of locking the rate. Accordingly, a lender needs a system to ensure a revised Loan Estimate is issued timely for all rate locks. Otherwise, any change of fees cannot be included in the loan closing. I think you get the picture.
Lenders must have the processes in place, supported by technology, to meet the challenges listed and discussed herein, and more, to have any chance at success. This can be done with planning, hard work, training, systems and the right technology partners. The journey doesn't end with the creation of two new disclosures; that is just the beginning. Lenders should be evaluating their current processes to determine what changes are needed and how to best implement them.
I heard it best described the other day during one of the many webinars I attend. Lenders need to be perfect in complying with an imperfect process. For now they need to be ready by October 3rd. Maybe with a little luck they'll get another reprieve, but I wouldn't count on it.
The game is changing; be ready to play different.
— Mike Vitali - SVP/Chief Compliance Officer
Mike Vitali is SVP/Chief Compliance Officer for LoanLogics. He has over 40 years of experience in all facets of mortgage lending. Just prior to coming to LoanLogics, he served for more than 12 years as an EVP and Chief Risk Officer for a major national lender. He also served as legislative chair for both the MBA of Greater Philadelphia and MBA of Pennsylvania, and is a member of several task forces dealing with compliance issues for the National MBA.
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This material is provided as a general information service by LoanLogics, Inc. and its applicable subsidiaries and affiliates ("LoanLogics"), and is not intended to provide financial, regulatory or legal advice on any specific matter. The information contained herein reflects the views of LoanLogics and sources reasonably believed by LoanLogics to be reliable as of the date of this publication. LoanLogics does not make any representation or warranty regarding the accuracy of the information contained in this material, and there is no guarantee that any projection, forecast or opinion in this material will be realized. Any links provided from outside sources are subject to expiration or change. © 2015 LoanLogics, Inc. All Rights Reserved.
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