Knowledge and Insights

Effective October 3rd, 2015, creditors will be required to comply with the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosures Rule, also known as the TRID Rule. As with any new rule implementation, there are compliance challenges that come along with it. The TRID Rule will affect lenders, title companies, mortgage document software providers, and the like. The new rule will apply to closed-end loans secured by real property with the exception of home equity lines of credit (HELOCs), reverse mortgages, and loans secured by a dwelling that is personal property not attached to real property. Applications received on or after October 3, 2015 will close using the new forms.

Below are five key components related to the implementation of the TRID Rule, of which you should be aware:

• The Rule will consolidate four existing disclosures currently required under the Truth-in-Lending and Real Estate Settlement Procedures Acts into two forms.

1) The Loan Estimate, which combines the current initial Good Faith Estimate and Truth-in-Lending disclosures and;

2) The Closing Disclosure, combining the current final Truth-in-Lending disclosure and the HUD-1 Settlement Statement.

• The definition of an application has been revised to include the receipt of six items (name, income, social security number, property address, estimated property value and mortgage loan amount). Banks no longer have discretion to determine if they received an application based on whether or not any other information deemed necessary by the loan originator is received by the applicant.
• There are new timing requirements for the Loan Estimate and Closing Disclosure.
  • Those for the Loan Estimate mirror current regulatory requirements to provide the delivery of the disclosures no later than the third business day after the application is received.
  • The revised Loan Estimate must be provided within three business days of a bona fide changed circumstance, no later than four business days before consummation.
  • The closing disclosure is required to be delivered no later than three business days before consummation.
• There are new tolerance levels for disclosed estimates. There have been additional items added to fees that cannot change – they are subject to zero tolerance – including creditor and mortgage broker fees, fees paid to an affiliate or the lender/creditor, and fees for services you cannot shop for.

The above are just a small portion of the new requirements that need to be adhered to. To ensure compliance with the new TRID Rule, it is recommended that financial institutions perform an analysis of the regulation and identify any gaps within its policies and procedures. Systems need to be updated as well in order to address the new regulatory requirements. Training staff within the loan department is encouraged to ensure that employees are knowledgeable of the new rules issued by the CFPB. Unfortunately, early implementation is not allowed, and, therefore, testing the roll-out of the new forms and effectiveness of employee training will be challenging.

Mercadien provides regulatory compliance advisory services to help banks adjust to the new requirements. We can engage in real-time disclosure reviews to ensure documents are in compliance, and provide training on the new TRID Rule to prepare management and staff for the upcoming changes that will affect your institution. For more information, contact Salvatore Zerilli, Managing Director, at [email protected], or Raji Sathappan, Director, at [email protected] or call 609-689-9700.