TRID FAQ etc (insurance, loan officer, escrow, 2015)

[Pfhtex]

Pack a lunch.....


Questions and Answers

Q1. What is TRID?

A1. TRID is an acronym for TILA/RESPA Integrated Disclosure. It is the new integrated disclosure rule that is effective for applications received by the loan originator on or after October 3, 2015. Under this new rule, a new disclosure form called Loan Estimate (LE) replaces the existing GFE and initial TIL disclosures (and Appraisal and Servicing notices—See Questions 24 & 25). Also, a new disclosure called Closing Disclosure (CD) replaces the existing HUD-1 and final TIL disclosures at closing. These changes are effective with all applications taken on or after October 3, 2015.

Q2. Does the MDIA seven (7) day waiting period still apply from date of initial disclosure until first available close date?

A2. Yes, there is still a 7-day waiting period. On all loan types, the waiting period would commence when the initial disclosure (LE) is delivered, either in person or placed in the mail to the applicant.

Q3. Do the existing GFE tolerances still apply to the LE?

A3. Yes, but there are some differences. For example, under the new rules, some categories of fees that are today included in the 10% tolerance category will become zero tolerance fees under TRID. For example, any up-front MI premium (including VA Funding Fee, FHA UFMIP, USDA Guarantee Fee), Appraisal fees, and any fee charged or collected by an affiliate of either the creditor or broker are now zero (-0-) tolerance.

Q4. The new integrated disclosures require a time zone be specified. Will Bank require a specific time zone be used?

A4. Yes, Bank has determined that the time zone we will require on all Loan Estimates and rate locks will be CST.

Q5. Has the timing for sending the Loan Estimate (LE) changed from the GFE?

A5. No, the new rule has the same timing requirements as the GFE. The initial LE must be sent to the borrower by the broker/originator within 3 business days of the application date.

Q6. If we are a branch office, which address do we need to use on our documents?

A6. You must use a consistent address throughout your documentation. In other words, you must use the same address printed on the applicant’s 1003 as you use on the Loan Estimate (LE).

Q7. I noticed the Loan Estimate (LE) has a signature line. Does an applicant’s signature on the LE indicate an ‘intent to proceed’?

A7. No, the signature line on the LE is only used to document the receipt of the LE. This is not to be considered intent to proceed. Please obtain a written EMAIL or and LOX from your borrower indicating and Intent to proceed ---that is signed and dated. A completed and returned loan package will also be considered an intent to proceed. Please share this with your borrowers at application.

Q8. I don’t see where the aggregate adjustment is on the LE. Where should it be listed?

A8. There is no place for the aggregate adjustment to be listed. Therefore, your ‘cash to close’ will be an estimate.

Q9. What is considered an ‘application’ that triggers the timing for the Loan Estimate (LE)?

A9. An application consists of the submission of the following six (6) pieces of information: name; income; Social Security number; property address; and estimate of the property value (or sales price); and, the loan amount. The discretionary 7th item has been removed. You may not add a requirement for another item.

Q10. What if the creditor or broker does not have the exact information to calculate various costs at the time they receive enough information to have an application?

A10. You are required to act in good faith and exercise due diligence in obtaining the information necessary to complete the LE. In instances where the information is unknown, you must use estimates. For categories that are subject to tolerance, those tolerances still apply. However, even for categories that are not subject to tolerance, unreasonable estimates are no longer tolerated under the new rules. For example, intentionally under-disclosing a reasonable estimate for taxes or insurance to give the borrower the appearance of a lower payment is not allowed. Likewise, if the property is in a location that is likely to require flood insurance, this should also be disclosed on the initial disclosure.

Q11. Is there a model form for ‘Changed Circumstances?

A11. No. Bank will be using the Encompass set up for the COC. Note: Counter to RESPA which had 4 primary COC reasons, TRID has three:
• Extraordinary event beyond the control of any interested party or unexpected event specific to the consumer or transaction.
• Information specific to the consumer or transaction that the creditor relied upon that was found to be inaccurate or changed after the Loan Estimate was provided.
• New information specific to the consumer or transaction that the creditor did not rely on when providing the Loan Estimate.

Q12. Is the APR issued on the initial LE binding on the creditor?

A12. While the APR disclosed on the initial LE by the loan originator (including the broker in a wholesale transaction) is not the binding APR for the loan, it is important that steps are taken to ensure your LOS is properly setup to disclose the APR accurately for all loans. Note that properly marking fees as Prepaid Finance Charges (PFC’s are fees that are included in the APR calculation if paid by the borrower) in your LOS is critical. Additionally, you must ensure that the proper amount of any MI premium (either up front
or monthly) is disclosed and calculated in your LOS in the APR calculation, including the accurate MI termination date if applicable.

Q13. When is the Closing Disclosure (CD) required to be provided to the borrower?

A13. Creditors must ensure that the borrower receives the CD at least 3 business days prior to consummation. Note that if the CD is mailed to the borrower, an additional 3-day mail time waiting period (explained below) applies under the rules. This will require proper coordination between lender and closing agent to mitigate closing delays. Additionally, loan originators are encouraged to allow adequate time to process, underwrite, clear conditions, coordinate docs/CD delivery and accommodate the new waiting period when scheduling a closing date. Be sure to share this information with your realtor/builder partners so that they are also aware.

Q14. If we have to have the CD to the borrower at least 3 business days prior to consummation, does it matter how it is provided to the borrower?

A14. Yes, the clock starts at different times based on the method of delivery. If the CD is handed to the borrower, the clock starts and closing may take place on the third business day after the CD was handed to the borrower. If the CD is mailed, you must use the ‘mailbox’ rule. When the CD is placed in the mail, allow 3 business days for receipt, 3 business days for review, and consummation may take place on the 6th business day after the CD was placed in the mail. If the CD is delivered electronically through an approved Esign vendor , the ‘mailbox’ rule still applies unless there is evidence the borrower has received it earlier than the 3 business days (such as e-sign vendor audit trail). The creditor may then rely on that evidence and consider it to be received on that date.

Q15. Are there any limits on fees that may be charged prior to receipt of the LE and the Intent to Proceed?

A15. Yes, you may only charge the bona fide, reasonable fee for obtaining the credit report.

Q16. We may ask the applicant to supply us with a credit card number and expiration date so we may order the appraisal without waiting for their documentation. Is that still allowed?

A16. No, you may not request this information. You are unable to impose a fee, other than a reasonable credit report fee, until the Intent to Proceed is provided. You may receive the credit card information for the purpose of obtaining the credit report only. A fee is “imposed by” a person if the person ‘…requires a consumer to provide any method for payment, even if the payment is not made or processed (i.e. predated check, or the request of credit card information) at that time.’


Q17. What is considered a ‘business day’ for the Loan Estimate for timing of delivery within 3 days of application?

A17. A ‘business day’ is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions. Note that this definition of days for waiting period/timing is different than that for other waiting periods. Bank will not be counting Saturdays in BUSINESS DAY calculations.


Q18. What is considered a ‘business day’ for the Closing Disclosure (CD) for timing of delivery 3 days prior to closing?

A18. A ‘business day’ is the same as a business day under right of rescission. It includes all days except Sunday and legal public holidays.

Q19. Do we still need to provide the Mortgage Servicing Disclosure Statement?

A19. This is now included on the Loan Estimate (LE) and is no longer a separate document for any applications after OCT 3,2015.

Q20. What about the appraisal notice for Regulation B and HPML rules?

A20. The initial disclosure notice is now included on the LE form and therefore a separate document is no longer required. Be sure to setup your LOS system to continue to provide this disclosure for applications taken PRIOR TO October 3, 2015, and you may remove it after. HOWEVER, NOTE THAT IF BORROWER ELECTS TO WAIVE THEIR APPRAISAL RECEIPT WAITING PERIOD, SOME INVESTORS (i.e. Platinum) MAY REQUIRE THIS ELECTION IN WRITING. THEREFORE, THE APPRAISAL WAIVER ELECTION FORM MAY STILL BE REQUIRED.

Q21. How should the “Servicing” section of the LE be disclosed?

A21. Always check the box that reads “to transfer servicing of your loan”.

Q22. When can a revised LE be issued?

A22. A revised LE may be issued in the event of a valid change in circumstance, which is similar to the existing GFE re-disclosure rules. A new LE may be issued for a fee in the 10% aggregate category if the total fees in the 10% aggregate category do not increase by 10%. However, the tolerances for those fees may not be reset unless the 10% is exceeded.

Q23. How accurate will the appraisal fee and the credit report fee have to be on the LE?

A23. These fees will have a zero (-0-) tolerance because the applicant is not allowed to shop for the service. You will need to insure you perform your due diligence on the cost of these items when you disclose.

Q24. Will the tolerance for Service Provider’s change with TRID?

A24.TRID rule: See 1026.19(e)(3) Yes. There are some changes to the tolerances.
a. Values must be included and the services provided on the form as well as contact information for the providers.
Written list of providers. If the creditor permits the consumer to shop for a settlement service, § 1026.19(e)(1)(vi)(C) requires the creditor to provide the consumer with a written list identifying at least one available provider of that service and stating that the consumer may choose a different provider for that service. The settlement service providers identified on the written list required by § 1026.19(e)(vi)(C) must correspond to the settlement services for which the consumer may shop, disclosed pursuant to § 1026.37(f)(3). See form H-27 of appendix H to this part for a model list.

Identification of available providers. Section 1026.19(e)(1)(vi)(C) provides that the creditor must identify settlement service providers that are available to the consumer. A creditor does not comply with the identification requirement in § 1026.19(e)(1)(vi)(C) unless it provides sufficient information to allow the consumer to contact the provider, such as the name under which the provider does business and the provider's address and telephone number. Similarly, a creditor does not comply with the availability requirement in § 1026.19(e)(1)(vi)(C) if it provides a written list consisting of only settlement service providers that are no longer in business or that do not provide services where the consumer or property is located.


The services listed on the Service Providers List of services the consumer can shop for should be a one-for-one match of the services listed on the Loan Estimate in Section C. In the sample for H27B, the Bureau gave an example in which the lender had the seven title services split between two providers. If you only include one provider for all of the title services, you would still have to list each of the individual services, but they could all be covered by the one provider.

Title - Search & Exam: $200
Title - Mortgage Policy: $150
Title - Alta Coverage: $100
Title - Closing Fee: $225

Problem:
Title co A, quoted on SSP
Title - Search & Exam: $200
Title - Mortgage Policy: $150
Title - Alta Coverage: $100
Title - Closing Fee: $225

The borrower uses Title b and their fees are named slightly different:

Title - Search Fee: $250
Title - Lender's Policy: $140
Title - Alta 22-06 Location: $90
Title - Settlement Fee: $300

Would we be in violation since the services we listed on the LE don't exactly match the descriptions on the CD? Possibly
What if the borrower doesn't choose our listed provider and they have an additional title service disclosed (let's say Title - CPL fee: $50) that we didn't put on the LE. Is this a violation or is it allowed since they picked elsewhere? Should be allowed as they went elsewhere.

Communication with TITLE CO to “map” fees and or to comply with our terms is vital.

Q25. If we electronically disclose to the borrower and we have evidence that the borrower received and opened the documents that day, do we still have to wait 3 days to reissue an LE or to issue a CD?

A25. No, if you comply with ESIGN and provide the documents electronically, then you may consider the disclosures received if the borrower notifies you of its receipt.

Q26. If we electronically disclose to the borrower and our system tracker does not show the borrower accepting the documents (receiving them) for a reissued LE… does that expire? What if the borrower “receives/accepts” the documents 7 days after we send them. Do we still go by the assumed 3 day, mailbox rule?

A26. Yes, (as long as you have complied with ESIGN), then the mailbox rule applies. The consumer is considered to have received the disclosures in 3 business days from the day you either sent them or placed them in the mail.
Q27: In a situation as to where we the lender have reissued a 2nd LE and we can send the LE either overnight or via fax and the borrower calls us and verbally gives the intent to proceed and shows us how to mark that correctly. Is this something we are prepared to allow on the re disclosure only of the LE?

A27:. We would not permit verbal acceptance of any disclosed docs. The investors we deliver to request proof from time to time on delivery and we need to adhere to the electronic delivery via Encompass or overnight via courier with tracking information we could provide if needed.

Q8: HOW ARE HOME PROGRAM LOAN DISCLOSED?

A28: Home program loans with a second mortgage (ADDI, Neighborhood investment loan, soft second DPA, etc) are hybrid loans that use both 2015 and 2010 documents. The 2010 docs are not going away.. they are just being used judiciously and for specialized circumstances.
Where the subordinate loan meets the partial exemption qualifications under Section 1026.3(h), then such a transaction does not trigger the Loan Estimate and Closing Disclosure as indicated in the citation below. However, such a loan does require a TIL to be provided to the consumer as indicated in Section 3(h)(6) below.
(h) Partial exemption for certain mortgage loans. The special disclosure requirements in § 1026.19(e) Loan Estimate, (f), Closing disclosure and (g) do not apply to a transaction that satisfies all of the following criteria:
(1) The transaction is secured by a subordinate lien;
(2) The transaction is for the purpose of:
(i) Downpayment, closing costs, or other similar home buyer assistance, such as principal or interest subsidies;
(ii) Property rehabilitation assistance;
(iii) Energy efficiency assistance; or
(iv) Foreclosure avoidance or prevention;
(3) The credit contract does not require the payment of interest;
(4) The credit contract provides that repayment of the amount of credit extended is:
(i) Forgiven either incrementally or in whole, at a date certain, and subject only to specified ownership and occupancy conditions, such as a requirement that the consumer maintain the property as the consumer's principal dwelling for five years;ii) Deferred for a minimum of 20 years after consummation of the transaction;
(iii) Deferred until sale of the property securing the transaction; or
(iv) Deferred until the property securing the transaction is no longer the principal dwelling of the consumer;
(5) The total of costs payable by the consumer in connection with the transaction at consummation is less than one percent of the amount of credit extended and includes no charges other than:
(i) Fees for recordation of security instruments, deeds, and similar documents;
(ii) A bona fide and reasonable application fee; and
(iii) A bona fide and reasonable fee for housing counseling services; and
(6) The creditor complies with all other applicable requirements of this part in connection with the transaction, including without limitation the disclosures required by § 1026.18.

Q29. What is the Intend to Proceed page in Encompass for? It isn’t mentioned in the instructions. Do we enter this manually before we send the revised LE, or when is it used (it looks like this may be part of exercise 3)?

A29.The intent to proceed page is detailed in the information portion I mentioned above. The intent to proceed is required to be received prior to you moving forward on the loan. You can and must disclose the LE within 3 days of receipt of the 6 application Triggers from an applicant. You may request what you require to complete the information you need to get them your initial docs as well, but you cannot hold up the LE / docs disclosure to them waiting on this additional information. You are required to give them a GOOD FAITH ESTIMATE within 10% of the cost of anything they apply for.
The intent to proceed information must be updated once the borrower has expressed their intent to proceed (this must be after the disclosures have been disclosed). Before this is entered in the system/ received… no fees may be charged and no monetary information may be collected (CC info for appraisal), and no services may be ordered.

Q30. Do all lender credit have to be allocated to a specific closing cost?

A30.No. But they cannot be taken away

Q31 We had something come up that is confusing us a bit. Reg Z commentary 1026.4(a)(2)2 says the following about "finance Charges"...
Required closing agent. If the creditor requires the use of a closing agent, fees charged by the closing agent are included in the finance charge only if the creditor requires the particular service, requires the imposition of the charge, or retains a portion of the charge. Fees charged by a third-party closing agent may be otherwise excluded from the finance charge under §1026.4. For example, a fee that would be paid in a comparable cash transaction may be excluded under §1026.4(a). A charge for conducting or attending a closing is a finance charge and may be excluded only if the charge is included in and is incidental to a lump-sum fee excluded under §1026.4(c)(7).
As we all know that with TRID, we cannot Lump these fees together. So my thoughts are that we will have to look at each itemized fee to determine if it would be a "Finance Charge" as defined by Reg Z.

A31: That is a correct statement. Under the old RESPA rules unless there was a third party involved or State law required an itemization, all of these charges were normally lumped together in title services. Now, they have to be broken out and by doing that, the settlement fee becomes a finance charge and maybe a few others depending on what is being tacked on by your providers.



ZERO TOLERANCE FEES
Fees paid to Creditor
Fees paid to Broker
Fees paid to an Affiliate of Creditor or Broker
Fees Paid to an Unaffiliated Third Party if shopping is not allowed1
Fees paid to Unaffiliated Third Party and the service is required by Creditor but provider list not given
Transfer Taxes
Other Government fees and or/ Taxes that are not transfer taxes2
FHA UFMIP, VA Funding Fee, USDA Guarantee Fee
Lender Credit

1 INCLUDES APPRAISAL FEES & CREDIT REPORT FEES
2Includes GRMA Fee

10% AGGREGATE INCREASE
Fees Paid to an Unaffiliated Third Party if shopping is allowed and the consumer selects the provider on the list.
Recording Fees

VARIATIONS PERMITTED
Prepaid Interest
Property insurance premiums
Amounts placed in Escrow
Fees paid to Third party service providers not included on the written list of providers3
Fees paid to third party service providers for services not required by the creditor
Prepaid Property Taxes- Not Escrowed

3IF PAID TO AN AFFILIATE OR IF A PROVDER LIST IS NOT GIVEN—AND THE SERVICE IS REQUIRED BY THE CREDITOR- THEN 0% TOLERANCE


****There's no way you read this far, but if so, it might be clear that lenders are taking on a TON of work and responsibility that had formerly rested with Title companies. As such, lenders will be doing a significant amount of additional work. My company has added personnel so as to get this work done in accurate and timely fashion.

The kicker? Lenders will justifiably increase fees, while Title companies do not reduce theirs. Hence, added expense to the consumer, who is allegedly being protected with this mountain of procedural fine print.

[MsVulcan500]

Thank you for taking the time to post all of that! I'm sure the average borrower's eyes are glazed over and rolling back in their heads, but I am a closer who was on vacation when we had our TRID training and I am going to the makeup class Tuesday. I have been trying to read up on everything I find in the meantime.

You have a lot of useful information in here, so again, thank you.

[I love boots.]

I have a feeling a whole lot of transactions aren't going to close on time or at all.

[thebigW]

On the appraisal side, we've seen some lenders increase our standard fees so that we will accept some of the more complex jobs without an increased fee. However, there are some jobs that we will have to either get higher fees or just refuse the job.

Considering a LO can't call an appraiser to ask the fee, can an LE be revised when an appraisal costs more than estimated?

Just remember... this is your tax dollars at work.

[SmartMoney]

Originally Posted by thebigW

On the appraisal side, we've seen some lenders increase our standard fees so that we will accept some of the more complex jobs without an increased fee. However, there are some jobs that we will have to either get higher fees or just refuse the job.

Considering a LO can't call an appraiser to ask the fee, can an LE be revised when an appraisal costs more than estimated?

Just remember... this is your tax dollars at work.

No, and that is the issue, no revisions. So, let's say job turned down, loan denied. Now the LO knows the charge and the borrower can reapply. And everyone won't understand why fees for loans are going up?

The problem here is the consumer hasn't complained. Sorry, but the appraisal industry brought much of this on themselves with running to Cuomo and Rachel Dollar. They put a stop to the loan officer calling them, just as they made certain the loan officer didn't place the appraisal order. HVCC, the Old Testament of AI, was penned by appraisers. Unfortunately, this is a classic case of be careful what you wish for, as the AMC model rose like a gigantic Phoenix from this platform.

No one listened to the banks and brokers that complained.....they were the guilty ones (didn't matter if they weren't guilty, association made them so), what did they know? The MBA and other like organizations lobbied, but they didn't have a chance.

AND NAR? They led their charge with "we must raise dues for lobbyists so what happened to the lenders doesn't happen to us.". They didn't care what happened with the CFPB, as long as they didn't fall under the new regulations. (Didn't quite work, did it?)

But the consumer has been silent. Why? You have to know what's going on before you can complain about it. And like anything else, once it's no longer a problem, there is no incentive to complain. Someone has a ***** of a time closing and goes through 2 weeks of hell? Call them the day after closing, they are so over thinking about the hell they just went through, it's all good now. So, I never see that front being successful.

We made our collective beds and we just have to find a way to make it work. Regulation has driven so much talent out of this industry, in 15-20 years no one will voluntarily chose to appraise or get into lending. By then, the CFPB should have their claws deep into NAR, so people may avoid RE sales, too.