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According to Fitch Rating, investors may be a little too picky when it comes to denying loan purchases because of a TRID document not being prepared exactly per the new rules (TRIDSlips).
The amount of data required to appear on each new disclosure, coupled with the requirements for how it should be reported, creates some major challenges for a lender. In many cases, loan purchasers are rejecting loans only because the document isn’t completed exactly as required under the “letter” of the law.
Richard Cordray, CFPB’s Director, attempted to alleviate the industry’s fears through his letter to MBA on December 29, 2015 (CFPB Letter). Unfortunately, this letter is not official CFPB commentary. So, the debate over the effects of technical violations rages on.
This is something that lenders need to work out with their investors. The law provides for “curable” conditions related to non-numerical errors, so lenders can make certain technical corrections to the documents after a closing. The keys to compliance lie in the accurate and timely disclosure of all loan terms, fees and charges related to the loan. These should be the main areas of concentration for a lender.
Not to say the technical completion of the forms is not important, but that is not what is going to get lenders, or their investors, into trouble. The “gotchas” lie in the timing and accuracy of loan information, fees and costs.
Lenders need to concentrate on complying with the “spirit” of the law. A consumer must receive an accurate Good Faith Estimate based on the loan they will receive, the terms of the loan and what the loan will cost them.
Pretty simple, give a consumer sufficient information to shop for the best deal and, if that is yours, then deliver what you promise.
As usual, the industry is addressing the issue of the technical compliance with the new rules. A working group of made up of MBS issuers, attorneys, and due diligence firms are all working together on a proposal to develop an acceptable industry standard for the treatment and acceptance of certain minor errors related to the new forms. Time, effort and a little common sense will prevail.
In the meantime, lenders need to concentrate on issuing the new disclosures on time, and in having the fees disclosed as accurately as possible. Processes should be modified to ensure the immediate identification of issues that may change the fees and/or terms so that a revised disclosure may be issued in a timely manner to update the consumer, and the closing agent. Don’t forget them.
The closing agent is an important partner in the process so an open line of communication should be established, early and often, and maintained throughout the loan process. This will help to avoid those last minute changes which could cause problems and delays.
Last, but surely not least, don’t overlook your pre-closing reviews. This is where you can detect and correct any formatting errors, so you can issue a clear, concise, and timely final Loan Estimate and your initial Closing Disclosure. The time and effort you take to ensure accuracy in pre-closing reviews will pay big dividends after the loan closes. You will also detect potential problem areas with other loans being processed in the pipeline.
Don’t take short cuts in the manufacturing a quality, compliant loan.
