TILA/RESPA Integrated Disclosure (TRID) Rule Ken Markison, Vice President, Regulatory Counsel, MBA Jerra H. Ryan, Vice President of Compliance, Cherry Creek Mortgage Alex Karram, Attorney, Weiner Brodsky Kider PC
Background • For more than 30 years, TILA and RESPA have required creditors & settlement agents to give consumers applying for mortgage loans different but overlapping disclosures regarding terms and costs • The duplication has long been recognized as inefficient and confusing for both consumers and industry, with HUD having authority over RESPA and the Federal Reserve Board over TILA • Efforts to integrate the disclosures began in 1996, when Congress directed HUD and the Board to simplify the disclosures • In 1998, HUD and the Board issued a Joint Report to Congress concluding that “meaningful change could come only through legislation” from Congress • HUD and the Board continued to revise their respective disclosures separately (HUD’s 2008 rule revising the GFE & HUD-1, Board’s 2010 rule implementing the MDIA timing requirements), stating they would work towards integrating the two disclosure regimes • Congress enacted the Dodd-Frank Act in July 2010 • Transferred rulemaking authority under TILA & RESPA to the CFPB • Directed the CFPB to integrate the mortgage loan disclosures 2
Overview CFPB Issued Final Integrated Disclosure Rule Nov. 20, 2013 • Effective date: August 1, 2015 • Goals of New Rule: • Easier to use mortgage disclosure forms • Improve consumer understanding • Aid comparison shopping • Prevent surprises at closing table • Implements requirements in TILA’s Regulation Z • Finalizes 2 new disclosure forms: • Loan Estimate (3 pages): • To replace the GFE/Initial TIL • Closing Disclosure (5 pages): • To replace the HUD-1/Final TIL • Includes new timing requirements, tolerance levels, and pre-disclosure requirements, among other things 3
Overview Coverage • Applies to most closed-end consumer mortgage loans • Does not apply to: • Open-end HELOCs, reverse mortgages (will still use GFE/HUD-1/TIL), & mortgages secured by mobile homes or by dwellings not attached to property • Loans exempt from TILA altogether, such as business-purpose loans, creditors that make five or fewer mortgage loans in one year • Partial exemption for certain second lien down payment assistance loans if current TIL is provided & meets certain requirements (e.g., no interest, limited closing costs, forgiven or deferred payments) • If the Rule applies, creditor can no longer use the GFE or HUD-1 forms for the transaction Effective Date • Applies to closed-end mortgage transactions for which the creditor or mortgage broker receives an application on or after August 1, 2015 • Except the restrictions on pre-disclosure activity are effective on August 1, 2015, without respect to whether an application has been received 4
Loan Estimate (LE) • LE must be delivered or mailed within 3 General Business Days after application & not later than 7 Specific Business Days before consummation • General Business Day is any day the creditor’s (or broker’s) offices are open to the public for carrying on substantially all of its business • Specific Business Day means all calendar days except Sundays & federal holidays • Application is triggered when the consumer submits 6 pieces of information • Name • Income • Social security number • Property address • Estimated Value • Mortgage loan amount sought • LE is not required if the consumer withdraws or the creditor denies the application before the end of the 3 day period 5
Definition of Application TRID amends definition of application to remove 7 th “catch all” provision of: • “any other information deemed necessary by the loan originator” in current Reg X • Online applications (Save vs. Submit) • Impacts ability to require information as part of online application • No guidance on how to deliver LE when insufficient info is provided • LE may need to be issued based on assumed defaults (loan type • Creditors may sequence the request of information • But cannot refuse the consumer’s submission of information – LE is triggered once the 6 pieces of information are received 6
Definition of Application & Sequencing • Create a “sequence” request other relevant information before obtaining the 6 pieces of information for an application • The “RESPA 6” does not include important details necessary for an accurate disclosure • Cautioned not to use sequencing as a way of avoiding or delaying providing LE, but as a way to best serve the consumer, e.g., “request SSN last • Receipt of purchase contract is not required for “submission of property address” • What is your process for pre-application fee sheets? • What is your process for providing the consumer pre-approval letters? • Do they reference a purchase price, loan amount and property address? • ” 7
Delivery of LE • Either the creditor or mortgage broker may provide the LE, but the creditor is ultimately responsible for ensuring the LE is provided timely and correctly • Mailbox Rule: • If the LE is not provided to the consumer in person, the consumer is considered to have received the LE 3 Specific Business Days after it is delivered or placed in the mail, unless the creditor relies on evidence the consumer received the LE earlier (e.g., signature for receipt) • LE must be delivered or placed in the mail not later than the 7 th Specific Business Day before consummation • Waiting period begins when the LE is delivered or placed in the mail, not upon the consumer’s receipt • Waiver of waiting period only permitted if the consumer requests it in writing for a “bona fide personal financial emergency” – CFPB interprets this narrowly and should only be waived in the “most stringent of circumstances” (e.g., to avoid foreclosure) 8
Delivery of LE • LE may be provided on paper or electronically • Issues • Face-to-Face – need evidence disclosure is actually provided • Electronic receipt – what is sufficient to demonstrate receipt? • Compliance with ESIGN for electronic delivery • An encrypted PDF attached to an Outlook email is typically not compliant with consumer consent and provisions of the E-SIGN Act. • The E-SIGN Act applies to electronic delivery, whether or not the consumer is actually “signing electronically” • If delivery does not comply with ESIGN requirements, then creditor did not comply with the timing requirements for delivery • Have systems that maintain how and when disclosures are sent/received; document E-SIGN compliance 9
Delivery of LE - Wholesale Wholesale Transactions • Broker or Creditor may provide the LE • Creditor cannot duplicate or correct Broker LE • Creditors responsibility for LE issued by Broker • Concerns if Broker issues LE without Creditor’s authorization • Broker to make good faith effort to identify Creditor on LE • How will industry handle? • Creditor to provide LE • Creditor to support Broker’s provision of LE by info, system, platform, etc… • Broker to go it solo (with risk of Creditor pushback if no Creditor is disclosed) • Loan identification number issue • Same issues for initial & revised LEs • Will you limit the brokers you work with? • Develop procedures for managing disclosure of the LE, tracking application dates, etc.,—will you provide a centralized disclosure desk for wholesale? 10
Other Application Disclosures • Written list of settlement service providers with the LE • Required if the creditor requires the service and the consumer is permitted to shop for that service • Must be provided separately from, but at the same time as, the LE • Whether a consumer is permitted to shop affects tolerances • A consumer is permitted to shop if the creditor gives the consumer a written list identifying at least 1 available provider for that service and stating the consumer may choose a different provider that is not on the list • Consumer is not permitted to shop if the creditor selects the provider or the consumer is required to choose a provider from the creditor’s list • Special Information Booklet / Toolkit • Must be provided with the LE, no later than 3 General Business Days after application • If the consumer uses a mortgage broker, the mortgage broker must provide the Booklet and the creditor need not do so 11
Restrictions on Pre-Disclosure Activity • Fee Restrictions • No fee may be imposed on a consumer in connection with an Application before the consumer has received the LE and indicated an intent to proceed with the loan described in the LE • Limited exception for a bona fide & reasonable credit report fee • So, except for credit report, you can’t impose upfront fees. • Concept of impose is addressed in Commentary to address what CFPB believed was conduct intended to get around current upfront fee restriction. • Solutions: • No postdated checks • Do not retain credit card or similar info used for Credit Report • Request Deposits/Obtain Payment Method or Info only after receipt of LE and Intent to Proceed • Intent to Proceed • Consumer may indicate an intent to proceed in any manner the consumer chooses, unless a particular manner is required by the creditor (silence is not sufficient) • Communication must be documented for recordkeeping rules 12
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