or how not to get tripped up by TRID

Enter Congress

Major Components Created Financial Stability

Oversight Council Reformed mortgage,

securitization and derivative markets

Established Consumer Financial Protection Bureau

“Sweeping overhaul of the United States financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.“ – President Barack Obama

Consumer Financial Protection Bureau

Purpose: “Protect consumers by carrying out Federal consumer financial laws.”

Protecting the Consumer is Everything

CFBP Complaint ProcessComplaint Portal on www.consumerfinance.gov Homepage

First Order of Business

Replace the existing disclosures required by RESPA and TILA with a single disclosure.

The New Forms

Starting point

10

CFPB’s GoalsImproved consumer understanding

○ Risk factors○ Short-term and long-term costs○ Monthly payments

Better comparison shopping○ Comparisons of competing loan offers○ Shopping for closing costs

Avoiding costly surprises at the closing table○ Easier comparisons of the estimated and final loan terms of the

loan○ More time to consider choices○ Limits on closing cost increases

When do you use TRID

Most consumer mortgages, EXCEPT: home-equity lines of creditReverse mortgagesMortgages secured by a mobile home or

dwelling not attached to landNo-interest second mortgage made for

down payment assistance, energy efficiency or foreclosure avoidance

The Name of the Game

How do we get there?1. Importance of Communication and Collaboration among Lenders

and Title/Closing Agent.

a) Managing and sharing transactional information

b) How will you get provider fees?

2. Managing the CD delivery and receipt calendar

a) Delivery method

b) Timing

c) Evidence of compliance

3. How will to the closing or signing ceremony flow?

a) How will last minute changes work

b) The sellers side of the transaction

4. Some Lenders will not want to/be able to take on creation and delivery of the CD. How will Title/Closing Agent handle different lender requirements?

• TRID places two requirements on the Lender related to the Borrower's Closing Disclosure:

1. Produce the Closing Disclosure (CD) and ensure accuracy of the information. [§ 1026.38(t).]

2. Ensure the CD is received by the consumer at least 3 business days before Consummation. [§ 1026.19(f)(1)(ii).]

While the lender can partner with the title/closing agent to perform these tasks, it is at lender’s discretion and the lender is ultimately responsible

Who will produce the Closing Disclosure

Collaboration Will Be Key• While RESPA and TILA Information is combined on a single

form, the underlying information is still located in two separate systems:• Loan-centric information – lender’s loan origination

systems (LOS)• Property – centric information: settlement agent’s system

• Key Questions:– When will data be moved?– How will data be moved?– Who decides when data is “final”?– Pre-closing v. Post-closing collaboration

• No Matter What – Consumer must get a single complete CD from someone

Loan Estimate Similar but different than today

EarlierMore accurate

How will creditors and brokers obtain data to meet this goal?Many costs are transaction specific (like title)Past data may not reliableProcess to capture changes to fees

Tip: learn about changed circumstances

Three-Day RulePolicy: Consumers must receive their Closing Disclosure

at least three business days before closing .– Business day = Every day but Sundays and Federal Holidays

Proposal: Must re-disclose and restart three business day clock if something changes. Some limited exceptions.

Final: Only have to re-disclose and restart clock in limited circumstances.– APR changes– Product changes– Addition of prepayment penalty

How to Count the Three Days

How Will CD Get To Consumer?

1. What Are The Potential Methods Of Delivery?– Hand Delivery– Courier/Express Mail– Electronic – Must Comply With Consumer Consent And Other

Applicable E-sign Provisions– Postal Service

2. What Does Evidence Of Delivery Look Like?– Optional Confirm Receipt Line On Cd– Mailbox Rule - Presumption Of Receipt Three Business Days After

They Are Delivered Or Placed In The Mail– Evidence Of Actual Receipt– Audit Trail

Getting CD to Consumer

3. Can the consumer waive?– Bona fide personal financial emergency

– Example: imminent sale of home at foreclosure auction

4. What about multiple borrowers/obligors?– Who is the “consumer”? In general and in rescission

situations. Different rules for spouses/tenants in common vs. guarantors/obligors

– Multiple consumer situations—primary liability concept

Disclosure of Title Fees Lenders policy:

Services you can shop for categoryHow to calculate: Full premium without any

adjustment that might be made for the simultaneous purchase of an owner’s title insurance policy.

Can use enhanced policy or endorsements if the lender knows that these products will be purchased.

Owners policyOther category Must be listed as “optional”How to calculate: Full owner’s title insurance

premium, adding the simultaneous issuance premium for the lender’s coverage, and then deducting the full premium for lender’s coverage.

What does it mean to allow consumer shopping• Shopping = Choosing

someone not on the lenders list

• This matters for tolerances– On list: 10% bucket– Off list: no limit– If affiliate of creditor or

broker: 0% bucket

• RESPA & state Law put limits on prohibiting shopping

Written Provider List The written list must identify:

At least one available provider of that service

Include a clear statement that the consumer may choose a different provider for that service

Provide sufficient information for the consumer to contact an identified provider such as the name under which the provider does business and the provider's address and telephone number.

How will QC work for shopping?

The Other Consumer What about the

SELLER!• Separate disclosure - Model

H-25(i)

Delivered by the settlement agent

Lender(creditor) must be given a copy!

Does NOT contain a signature line!

Final Disbursement

• Rule does NOT prohibit a separate form from being used

• Lenders have expressed concern regarding too many different forms!

but

Acknowledgment and acceptance of final figures and disbursement is CRITICAL

ALTA Settlement Statement• Developed to serve as a template

• Provides actual buyers/sellers debits and credits

• Authorizes final settlement

• Adaptable for all markets

Post Consummation Room• Corrected Disclosure (not redisclosure)

changes that actually affect the amount paid by a consumer( including seller)

i.e. taxes, HOA fees, recording fees just to name a few! Including tolerance

violations

Must be made within 30 days of consummation!

CONSUMER IMPACT

Loss of earnest money Back to Back closing failures Inaccurate disclosure of costs Delay in closing EXTREME FRUSTRATION with all real

estate professionals Collaboration is Critical with all RE

professionals

How Will TRID Change Your Market

Where do you get your Where do you get your business?business?

Big BanksBig Banks Credit Unions/Community Credit Unions/Community

BanksBanks Non-Bank lendersNon-Bank lenders

TRID Prepare, Ask Questions, Train

Have you set expectations for all involved (consumers, lenders, title, real estate agents)?

How will lenders get title rates before the LE is delivered? Owner’s Title Insurance is listed as “Optional” on the LE;

what are you doing to get to consumers before they come to closing?

Who (lender/settlement agent) will prepare the CD? How will information on the CD be exchanged? How are you demonstrating evidence of compliance? How will simultaneous issue title rates be disclosed? Are your Closers trained on what to say about the value of

title insurance? Are your Closers trained on what to say to various

versions of the CD? How are you providing lenders actuals for a final CD?

Our Biggest TRID Challenges TILA Liability Rest with Creditor

Includes Private Right of Action

Inaccurate Disclosure of Title Policy Fees We Can Figure Out How to Handle the Calculation Will the Consumer Understand? Do You Have a Plan to Get to the Consumer in

Time? ALTA Created a Model “ALTA Settlement

Statement” We are preparing our case for a post-

implementation change

Owner’s Title Insurance is Optional

Its all about salability

Keys to a good Compliance Management SystemConsistencyDocumentationTesting

Tip: Only vary from your process if you really love the loan, because odds are you’ll be holding it on your books

And staying out of CFPB jail

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