What Concerns Me Most About TRID Compliance

August 4, 2015 at 9:28 am Leave a comment

What Concerns me most about the integrated disclosure requirements  that take effect in October isn’t the new disclosures or the timeline for providing them,   as troublesome as they are.  No, what concerns me most about TRID is encapsulated nicely in a headline in this morning’s American Banker:” Realty Agents, Builders Clueless about New Mortgage Disclosures.”

Why does this concern me? Because to correctly  and cost effectively  implement TRID your credit union must establish a new framework for dealing with third parties ranging from real-estate agents to mortgage brokers all of whom must understand that the mortgage world has fundamentally changed.  If they understand why   new procedures are being put in place you can get on with mortgage lending.  If you don’t get their buy-in than you can bet that they will blame you for every inevitable bump along the mortgage road and your credit union’s reputation will unfairly suffer.

For example, I’m sure many of you know that TRID generally requires a  closing disclosure to be received three business  days before a mortgage loan is consummated.  What happens if your member’s real estate agent doesn’t know this or doesn’t care? The first time one of her clients has a closing delayed she will start looking for other lenders to whom she can refer clients.

What about the erstwhile closing attorney who you have used for years? You have always strived to accommodate his schedule. His last second rushes to get closing disclosures to you is office legend.  At the end of the day his closings take place and we all live happily ever after.

In the post-TRID  world  the attorney can no longer drive the ship.  If he doesn’t get the closing material to you on time the closing can’t take place.  This means that you have to reassess what can and should be done by the credit union’s staff.  In addition, you should not assume that your closing attorney has had the time to dissect TRID and fully understands its practical implications.  Amendments to your retainer agreements may even be in order so that the attorney is on the hook for the cost of closing delays caused by his tardiness.

What about the appraiser and title agent your credit union always recommends? The new early disclosures have even stricter rules about when and by how much the price of a service disclosed on the Loan Estimate  can vary from the amount ultimately charged the member in the Closing Disclosure depending on how closely you work with your third-party service providers.  For instance, if you require members to use a specific appraiser than  the amounts disclosed on the initial loan Estimate  and the amount charged on the Final Disclosure can’t vary. There is a bit more disclosure flexibility provided to lenders who permit your mortgage applicants to shop for settlement services (§ 1026.19(e)(1)(vi)).

But no matter what approach you take the onus is on you to put your providers on notice that the days of increased charges for unexpected glitches are over   As the  Bureau recognized in the TRID  preamble  a “creditor originating a loan in a geographical area with which it is unfamiliar may have less familiarity with the mortgage market in that area, but the Bureau believes that the creditor nonetheless has better access to information than the consumer about settlement service providers in the geographical area.”

Here are just three examples of how simply educating your lending staff about TRID does not go far enough.  Real estate agents don’t care about compliance as much as they do about closing the deal; they are going to recommend the originator that can close the quickest.  Vendors want to be paid for the work they perform and lawyers don’t like to be told how to do their job.  By explaining how the new rules impact your credit union’s obligations you may  avoid a race to the bottom in which third parties give their business to the mortgage lender must willing to bend the rules.

Happy Days Are Here again?

As an unabashed member of the “Glass is Half Empty Club” when it comes to the economy I’m not all that surprised by the latest economic news as summarized by the WSJ “Personal spending, which measures what consumers spend on everything from doughnuts to dishwashers, rose 0.2% from a month earlier, the smallest gain since February, the Commerce Department said Monday. In May, spending rose a revised 0.7%” In addition personal income grew a less than inspiring 0.4%.  (http://www.wsj.com/articles/u-s-consumer-spending-up-0-2-in-june-1438605172)

 

 

Entry filed under: Compliance, Economy. Tags: , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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