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Ben Giumarra
Back in the summer of 2017, federal regulators finalized a significant set of updates to the TILA-RESPA Integrated Disclosure (TRID) rules. While this regulation has been updated many times, this update was so significant that many industry folks refer to it as “TRID 2.0.”
TRID 2.0 included 560 written pages of clarifications and changes to the existing regulation. As of Oct. 10, 2017, all of those changes were optional and lenders could choose whether to implement or follow prior rules. But as of Oct. 1, 2018, the changes in TRID 2.0 become mandatory. The lengthy optional phase should soften the blow of conversion now; many lenders have already implemented much of TRID 2.0 over the past year.
Here are some issues worthy of double-checking one last time.
Rate Lock Within Three Days
TRID 2.0 officially requires a loan estimate to be disclosed within three days of rate lock, even if nothing else has changed. The only exception to this is if a closing disclosure has already been disclosed (or will be disclosed within three days). Even TRID 2.0 doesn’t require a lender to ever lock a rate. So, if the rate is locked after the closing disclosure has been delivered, this alone does not trigger the need for an updated closing disclosure because this disclosure, unlike the loan estimate, does not include information about the rate lock.
First, make sure everyone is clear that a revised loan estimate is needed within three days of locking the rate on a loan that was initially floating, even if nothing else has changed. Second, don’t be forced into locking the rate just because of this regulation.
Housing Assistance Loans
This one is easy to pass over if your team was focused on more important components of TRID 2.0. The regulation makes two changes that impact non-interest bearing subordinate liens, such as the ones commonly used to provide homeowners with down-payment assistance.
First, it makes it easier for these loans to qualify for a partial exemption from TRID by increasing the amount of fees that may be charged to the consumer at closing. Second, it clarifies that loans that qualify have the choice to either disclose the normal TRID disclosures or avoid the loan estimate and closing disclosure by providing instead the so-called “cost of credit” disclosure pursuant to Truth in Lending Act section 1026.18. This was important because it clarified that lenders do not need to continue providing the GFE and HUD-1.
It is important to understand two things about this partial exemption.
First, from a practical perspective, this largely benefits the smaller, nonprofit housing assistance programs that lack the systems to produce dynamic forms as TRID require and prefer to complete the cost of credit disclosure without modification, and even manually if needed. Any bank or mortgage lender that does residential lending on a regular basis already has the systems to produce the TRID disclosures, so it is unlikely for them to see a benefit here and instead will just complete the normal TRID disclosures.
Second, lenders should pay close attention to who the “creditor” is. With TRID, the “creditor” is responsible for TRID compliance, although it may allow others to do so on their behalf. The creditor is determined simply by who the loan is payable to at closing – in other words, who is shown on the note. If the housing agency or other organization is technically the creditor, then lenders should defer to their decisions on how the disclosures are prepared. Even if lenders prepare the TRID disclosures as a courtesy to such an agency, that agency remains liable for any mistakes. Lenders should have an elevated amount of oversight and control when instead the lender is the creditor.
10 Percent Aggregate Tolerance
This issue makes the list because it might prevent unnecessarily providing refunds for tolerance cures. According to TRID 2.0, an individual loan cost subject to 10 percent tolerance may be added in the first place to the closing disclosure, instead of the loan estimate, if it relates to an item disclosed on the loan estimate and all charges are in good faith.
This is easier to explain in an example. Assume the loan estimate discloses generally the following fees that are subject to the 10 percent tolerance: settlement agent fee for $400, title insurance fee for $500 and recording fees for $100. On the closing disclosure, the same fees are disclosed but a courier fee of $75 is added, which relates to the settlement agent fee. In this scenario, the $75 fee is still “in good faith” even though it had not been disclosed before because we stay within the 10 percent aggregate tolerance.
Ben Giumarra is an attorney and director of legal and regulatory affairs at Embrace Home Loans. He may be reached at bgiumarra@embracehomeloans.com.
