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Maybe secondary market investors and correspondent lenders can take a page out of Fannie’s and Freddie’s rep and warrants book. These agencies are not delaying the purchase, holding up funding or denying the purchase of loans originated and closed under the new TRID rules. They buy the loans originated by lenders for sale and delivery to them; either whole loan or pool.
Their agreement with the lenders is for compliance with all rules and regulations governing mortgage originations. These include TRID. If it turns out later that Fannie or Freddie may suffer, or suffers, a loss as a direct result of the lenders failure to comply, they require the lender to indemnify against any loss or repurchase the loan. Simple and direct. No muss, no fuss. You do business with them, these are the rules.
So, if these major secondary market sources can operate this way why can’t correspondents and other market sources? Are they paralyzed by a fear of the unknown? By what might happen if a TRID form isn’t completed exactly as required by the letter of the law? Could a borrower sue a loan purchaser because the fees aren’t in alphabetical order in Section B? If so, for how much? What are the damages? Can’t be much.
Let’s get the process moving again. Loan purchasers should step back and take a hard look at their exposure when purchasing TRID loans. Most lenders have worked extremely hard to comply with the law. Because of its complexity and exactness, there are bound to be some minor errors. These, however, should not create a major problem or loss for the loan’s buyer.
Maybe loan purchasers can vet the lenders from which they purchase loans to determine the quality of the loans delivered, as well as, the processes they have in place to ensure such quality. Once satisfied with the lender’s loan quality and financial stability, they can enter into an agreement for reps and warrants from the lender to protect the purchaser in the event of a compliance failure that may cost them money. Seems to work for the agencies…
Don’t have analysis paralysis. Look at the big picture. Protect against compliance failures. But, don’t throw the loan out with the TRID review!
