TRID Hits Consumers as Industry Cries "Uncle"

(Thanks to several readers who sent this note from Santa along.)

I was going to deliver presents on the 25th of December as usual, but due to hidden messages within TRID, I now have to follow proper guidelines. That being said below is my revised holiday schedule.

Please make sure you submit your initial list at least 14 days prior to the 25th. This list will be called your IPD (Initial Present Disclosure.) You will then have 3 days before the expiration to modify or change that list.

If you change your IPD wish list, my EDT (Elf Disclosure Team) will send you a COCPL (Change of Circumstance Present List) which must have a valid reason such as, "I no longer want a waffle maker, but would like a healthy shake maker instead."

At that point, once everything is confirmed, we will issue you a final SPD (Santa Present Disclosure) which will go out to everyone immediately, including closers and funders. Yours will go out 24-48 hours after others. At that point, you have 3 days to decide if you want your presents or decline.

Then I will mount my sleigh and deliver the presents. You will have to wait 3 more days to open your presents, but if you're not in a NEW home, you will have 3 more days to return the presents and forget the entire thing, 

HO HO HO Happy Holidays, 

SANTA

 

 

Yesterday I posted some USDA rural housing updates, and received a couple notes from astute readers on a couple errors. The upfront guarantee fee is not 2%, as was reported in a mortgage publication. The fee is currently 2.75%. And the same article reported that, regarding the maximum legal note rate, one can round the USDA fee up to the highest quarter. Currently, the USDA fee is allowed to be rounded up to the nearest quarter of one percent. If a lender locks the loan above the maximum legal note rate the loan is not eligible to be insured. Here is guidance from the USDA 3555 Handbook: "The lender and the borrower are free to negotiate any mutually acceptable fixed interest rate, as long as it does not exceed the interest rate cap established by the Agency. This cap is 100 basis points (1.00 percentage points) over the following: Current Fannie Mae yield for 90-day delivery (actual/actual) for 30-year fixed rate conventional loans, rounded up to the nearest one-quarter of 1 percent. The Fannie Mae website can be used to confirm acceptable interest rates."

 My cat Myrtle observed that if we aren't there already, ever so slowly the residential lending industry approaches the point where more people regulate it, audit it, survey it, and provide vendor services than actually do the lending. There are some that hope the CFPB will make an announcement in the next few days regarding TRID and loans, perhaps specifically non-agency loans to help alleviate the issues the industry is having - it would be nice to think that the last thing that the CFPB is wants is to be universally thought of as the cause of bringing residential lending to its knees.

 

"The share of mortgage-related home sales that took longer than expected to close increased slightly in November compared with the previous month, according to results from the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. The uptick in the share of delayed closings and the total time mortgage-related transactions took to close suggests that new disclosure requirements from the Consumer Financial Protection Bureau that took effect in early October had an impact on the housing market. However, the impact appears to be limited as the majority of mortgage-related home sales continued to close on time under the CFPB's Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure (TRID) rule."

 Questions of how violations can be cured are being hotly debated. Theoretically TRID mistakes are TIL violations and as we all know violating TIL is no joke with fines of thousands per day. Seeing what is happening in residential lending Dan Goldstein penned a story about how the "New Rules to Protect Home Buyers are Starting to Add Delays and Costs."

 Industry vet Joe Garrett asks, "TRID gives borrowers three days to think about whether they want to proceed with the mortgage or not. I guess the idea is that they'll have plenty of time to ask questions and read everything. Do borrowers actually do this? On refinances, how often does this actually happen? Or is this a solution to a non-existent problem?"

 Recently this commentary noted that a sizeable and growing percentage of loans, especially jumbo loans, were being rejected by investors. The question among lenders is naturally, "Why?" The themes as to what the problems/violations are include calculation issues. From seemingly small stuff like how to round the results of various fields to more complex closing and financing calculations - there are many new calculations that have been created - all of which create an opportunity for error.

 The forms are a big one. Many of the fields needed to be dynamic to be able to hold the proper number of fields and/or amount of information. Because the permutations of possible rate, fee, product, etc. outcomes go into the thousands, I am hearing stories of form failures (not enough columns, data going into the wrong fields, etc.).

 Chase posted a TRID FAQ to help answer policy and procedure questions. Clients of Digital Risk Clayton could contact them as they are right in the middle of this since many non-agency loans that aren't going into a bank portfolio go through them.

 And Wells Fargo informed its correspondent clients on common defect trends it has observed for loans regulated by the TILA-RESPA Integrated Disclosure (TRID) rule. (This is meant as a summary; for specific details see Wells' actual announcement.) Wells developed a TRID best practices sheet for addressing common suspense issues - talk to your Wells rep about obtaining a copy.

 Common Closing Disclosure (CD) errors include the CD missing (all copies of the CD disclosed to borrowers must be included in the closed loan package), and CDs being used as a communication tool between settlement agents and lenders and not necessarily disclosed to the consumer(s). The final CD signed and dated at Closing is missing - Wells considers the "final CD" the CD signed by the borrower(s) at consummation.

 Materially incomplete or inaccurate CDs are being disclosed to consumers: a CD that is disclosed to a consumer and is materially incomplete or inaccurate will likely result in non-purchase. (As a reminder, regardless of who prepares the CD, the creditor is responsible for the accuracy of all disclosures provided to the borrower.)

 

Lender credits listed as negative fees in the Borrower-Paid column of the CD. Lender credits used toward specific fees in the transaction must be itemized under the "Paid by Others" column and identified with an "L." Lump sum lender credits should be shown in the Lender Credits field in section J. TOTAL CLOSING COSTS (Borrower-Paid). HOA dues must be included in the Estimated Taxes, Insurance and Assessments section of the final CD, when the information is known to the lender prior to Closing.

 Fees associated with the transaction (including those paid for by the seller), must be reflected on the borrower's CD, even if a separate seller's CD is provided. And Wells is seeing that a Borrower's total Closing costs do not match - The J. TOTAL CLOSING COSTS (Borrower-Paid) on page 2 and the Total Closing Costs (J) on page 3 of the CD signed at closing must be consistent.

 Common Loan Estimate (LE) errors are similar. All copies of the LE disclosed to borrowers must be included in the Closed. Wells will not accept a Loan where the LE was provided to the consumer on or after the date the CD was issued. Any seller credits, either lump sum or for specific fees, known at the time of delivery of the LE, must be disclosed on the LE as a total amount. The LE DATE ISSUED field must be completed in order to validate accuracy of the timing requirement.

 Wells is seeing examples where the initial LE was not disclosed within three business days of the REG Z application date. Or the appraisal disclosure verbiage is missing from the Other Considerations section. It must be included in the Other Considerations section on page 3 of the LE. And the LOAN ID # field must be completed on page 1 of the LE. Another problem is that lender and/or mortgage broker (as applicable) contact information is not complete. Email address(es) and phone number(s) must be provided with other data required under "Additional Information About This Loan" on page 3.

 Wells reports that there are other common errors. For example, the Application Date field is blank on the Wells Fargo Funding Loan Submission. Regarding the Summary (LSS) - The Reg. Z application date must be provided on the LSS (in addition to completing the DATE ISSUED field on the LE) in order to validate accuracy of the timing requirement.

 Checks to borrowers must be included in the Closed Loan Package to evidence the proper refund was made within the required timeframe. The correspondent group is seeing tolerance violations not supported by changed circumstance documentation, or changed circumstance documents missing - they must be included in the Closed Loan Package.

 Turning our attention to the bond markets & rates, Monday, market-wise, was a great example of holiday trading: up some, down some, ending unchanged. Fed-watchers heard Atlanta Fed President Lockhart say that he more likely sees a rate hike at every other meeting than at every meeting. The market expects even fewer rate hikes than that, looking for less than the four indicated by the FOMC's "dot plots" Frankly I'm a little weary of the press talking about the Fed. Give it a break!

 Today we've had the third look at the 3^rd quarter's GDP (headline GDP was expected +1.9%, it came in at +2.0%). Coming up is the FHFA Housing Price Index and November's Existing Home Sales. We saw a 2.20% close Monday on the 10-year T-note, where it's been pretty much all year and equaling Friday's close. This morning it is waffling around 2.21% with agency MBS prices worse a smidge.