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Richard Andreano, Jr.
Partner
Ballard Spahr, LLP
Richard B. Horn
Founding Partner
Richard Horn Legal, PLLC
TILA RESPA Inte...
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
ii
COPYRIGHT
©2015 Rich Horn Legal, PLL...
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
iii
AUTHOR BIOGRAPHIES AND INFORMATION ...
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
iv
Richard Horn is the founding attorne...
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
v
Contents
I. Summary of the Rule and C...
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
vi
2. Costs at Closing ...................
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
vii
2. Other Costs .......................
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
viii
M. Settlement Agents are Responsib...
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
ix
Format of the Closing Disclosure ......
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
1
I. Summary of the Rule and CFPB Suppl...
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
2
TRID. In August 2015 the CFPB posted ...
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
3
2. The CFPB's Proposal
Section 1032(f...
MBA Compliance Essentials℠:
TILA RESPA Integrated Disclosure (TRID) Resource Guide
4
revised Loan Estimate must be provide...
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MBA Compliance Essentials TILA RESPA Integrated Disclosure (TRID) Resource Guide

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The TILA RESPA Integrated Disclosure (TRID) rule represents a sea-change in our industry. Much broader than a set of requirements that bring along new forms, compliance with the new TRID rule demands major systems and business operations changes that extend beyond your company and impact all arrangements with third-party settlement services providers. The deadline for compliance with these new requirements is fast approaching, and will be here on October 3, 2015.

The MBA Compliance Essentials TRID Resource Guide addresses the key areas on which your company needs to be working in order to operationalize these new requirements into your business and ensure compliance by October 3. The Resource Guide covers not only the new Loan Estimate and Closing Disclosure in detail, but also outlines top issues with the rule, and provides a set of model policies and procedures along with checklists for implementation and working with technology providers.

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MBA Compliance Essentials TILA RESPA Integrated Disclosure (TRID) Resource Guide

  1. 1. Richard Andreano, Jr. Partner Ballard Spahr, LLP Richard B. Horn Founding Partner Richard Horn Legal, PLLC TILA RESPA Integrated Disclosure (TRID) Resource Guide 2nd EDITION (UPDATED 10/14/2015) MBA COMPLIANCE ESSENTIALS℠ mba.org/compliance ONE VOICE. ONE VISION. ONE RESOURCE. 14698 m ba.org/education
  2. 2. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide ii COPYRIGHT ©2015 Rich Horn Legal, PLLC and Ballard Spahr LLP. This book is being provided to you with a limited license for use solely within your organization. This book, its content and the link to it may be accessed by up to fifteen (15) members of your organization for each such person’s internal use of the materials. However, these materials may not be downloaded, reproduced, forwarded, or otherwise distributed in any form or by any means outside of your organization. Your organization will however, be entitled to comply with a subpoena or other validly issued administrative or judicial process that may request information from the book, to the extent required by law. Unauthorized reproduction, forwarding, distribution or display of this copyrighted work is subject to criminal and civil penalties under federal law. For information about extending this license to additional members of your organization, please contact: Jeffrey Schummer Vice President Education Development, MBA Education Mortgage Bankers Association 1919 M Street, NW Washington, DC 20036 (202) 557-2887 www.mba.org If you would like to order additional copies of this publication or would like to inquire regarding discounts for quantity purchases, please contact MBA. DISCLAIMER PLEASE TAKE NOTE: These materials have been produced by Rich Horn Legal, PLLC and Ballard Spahr LLP. These materials provide an overview of the TILA RESPA Integrated Disclosure (TRID). These materials are designed to provide the reader with a general overview and understanding of the provisions of the Rule along with model policies and procedures and other materials to help implement the Rule. These materials are not intended to and do not provide legal advice, and do not create an attorney-client relationship between the recipient and the firm of Rich Horn Legal, PLLC and Ballard Spahr LLP or its attorneys. Provisions of the Rule described herein are, in many instances, paraphrased, and a careful reading of the Rule and any formal interpretations thereof may reveal exceptions or different interpretations that may be applicable to a particular set of facts. The materials are not a substitute for consultation with qualified legal counsel regarding the manner in which the laws and regulations referenced herein may be interpreted and applied to particular facts or to particular business models. These materials are for informational and educational purposes only, and are not a solicitation and should not be construed as such. MBA is not responsible for the content of these materials. m ba.org/education
  3. 3. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide iii AUTHOR BIOGRAPHIES AND INFORMATION ABOUT THE FIRMS Richard J. Andreano, Jr., is a Practice Leader of the Mortgage Banking Group at Ballard Spahr, and a member of the Consumer Financial Services and Privacy and Data Security Groups. He has devoted more than 25 years of practice to financial services, mortgage banking, and consumer finance law. Rich advises the mortgage and settlement service industries on regulatory compliance and related matters, including issues concerning the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Real Estate Settlement Procedures Act (RESPA), Truth in Lending Act (TILA), Equal Credit Opportunity Act (ECOA), Fair Housing Act, Fair Credit Reporting Act (including FACTA), Home Mortgage Disclosure Act (HMDA), and Gramm-Leach-Bliley Act. He assists clients with preparing for and handling CFPB examinations and with regulatory issues, including implementation of the CFPB repayment ability to repay, loan originator compensation, appraisal, escrow and servicing rules. Rich is the author of the original MBA Compliance Essentials Loan Originator Compensation Resource Guide. Rich is Editor-in-Chief of Mortgage Finance Regulation Answer Book 2011-2012, published by the Practising Law Institute; author of its chapters on Dodd-Frank, HMDA and RESPA and co-author of its ECOA and TILA chapters. As legislation governing the mortgage banking industry evolves and government scrutiny intensifies, Ballard Spahr offers broad experience and strong industry relationships to help clients navigate uncharted territory and develop strategies for success. Our attorneys are at the forefront of rapidly changing regulatory developments, working with a wide range of clients in both the residential and commercial mortgage banking industries. Our Mortgage Banking Group is part of the firm's nationally recognized Consumer Financial Services Group. We combine broad regulatory experience with formidable skill in litigation and depth in enforcement actions and transactions. Our team represents clients worldwide, from start-ups to Fortune 500 corporations. Clients include:  Financial institutions, mortgage lenders, brokers, and servicers  Secondary-market investors  Insurance companies  Investment bankers  Settlement service providers  Auction platforms  Homebuilders We also advise industry service providers such as technology vendors, collection agencies, document preparation companies, telemarketers, loan fulfillment companies, and trade associations. m ba.org/education
  4. 4. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide iv Richard Horn is the founding attorney of Richard Horn Legal, PLLC. He is a former Senior Counsel & Special Advisor in the Consumer Financial Protection Bureau’s Office of Regulations. At the CFPB, he led the final rulemaking for the integrated disclosures under the Truth in Lending Act and the Real Estate Settlement Procedures Act (the TILA-RESPA integrated disclosures, also known as “TRID”). He also led the CFPB’s design of the integrated disclosures, as well as the qualitative and quantitative consumer testing of the disclosures. As a key architect of the TRID rulemaking, Richard is one of the most sought after experts on the rule. Prior to joining the CFPB, Richard was a senior attorney at the Federal Deposit Insurance Corporation (FDIC) in the New York Regional Office. At the FDIC, Richard worked on consumer compliance and risk management supervisory matters and enforcement actions. He worked on many issues facing banks such as TILA disclosure and advertising requirements; UDAP analyses of disclosures, advertisements, and other marketing materials; RESPA section 8 analysis of affiliated business arrangements and marketing services agreements; FCRA furnisher requirements; bank merger act applications; real estate activities; capital requirements and prompt corrective action; Community Reinvestment Act; and fair lending. Richard advises clients of all sizes, including banks, credit unions, non-bank mortgage lenders and brokers, title underwriters and agents, and technology vendors on all state and federal regulatory compliance matters for consumer lending. He advises on all regulations issued by the CFPB and other consumer finance laws, including TRID, RESPA, TILA, FCRA, UDAAP, state high cost lending laws, and state licensing laws. He also advises clients on regulatory examination preparation, investigations, and enforcement actions. Richard Horn Legal, PLLC is a law office formed by Richard Horn, a former Senior Counsel and Special Advisor at the Consumer Financial Protection Bureau (CFPB). At the CFPB, Richard led the TRID rule (the TILA-RESPA integrated disclosures). He also led the design and consumer testing of the TRID disclosures. Prior to the CFPB, he was a Senior Attorney at the Federal Deposit Insurance Corporation (FDIC). While at the FDIC, Richard worked on consumer compliance and risk management supervisory matters and enforcement actions, in areas such as TILA disclosure and advertising requirements, RESPA section 8, FCRA furnisher requirements, and UDAP. The office’s clients include depository and non-depository institutions, title companies, and technology vendors. The office provides the quality, expertise and experience of the larger firms, with exceptional value and personal attention. m ba.org/education
  5. 5. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide v Contents I. Summary of the Rule and CFPB Supplementary Information on the Rule.........................................1 A. Brief History.......................................................................................................................................2 1. Here We Go Again ........................................................................................................................2 2. The CFPB's Proposal....................................................................................................................3 3. The Rule........................................................................................................................................3 B. Scope ................................................................................................................................................4 C. The Forms.........................................................................................................................................4 1. The Loan Estimate ........................................................................................................................5 2. The Closing Disclosure .................................................................................................................6 D. Other Key Aspects of the Rule..........................................................................................................7 1. Tolerances.....................................................................................................................................7 2. Liability ..........................................................................................................................................7 3. Parallel Processes ........................................................................................................................8 4. The Longest CFPB Rule to Date...................................................................................................8 E. Summary Conclusion ........................................................................................................................8 II. Filling Out the Loan Estimate ..............................................................................................................9 A. Page 1 of the Loan Estimate...........................................................................................................11 1. Top of Page 1 of the Loan Estimate ...........................................................................................13 2. Header.........................................................................................................................................13 3. Loan Terms Table .......................................................................................................................19 4. Projected Payments Table ..........................................................................................................22 5. Costs at Closing ..........................................................................................................................25 6. Website Reference......................................................................................................................25 B. Page Two of the Loan Estimate......................................................................................................27 1. Loan Costs ..................................................................................................................................28 2. Other Costs .................................................................................................................................31 3. Calculating Cash to Close...........................................................................................................35 4. Adjustable Payment (AP) Table..................................................................................................37 5. Adjustable Interest Rate (AIR) Table ..........................................................................................39 C. Page Three of the Loan Estimate ...................................................................................................41 1. Contact Information.....................................................................................................................43 2. Comparisons Table .....................................................................................................................43 3. Signature Line .............................................................................................................................47 III. Alternative Loan Estimate .................................................................................................................47 1. Header.........................................................................................................................................52 m ba.org/education
  6. 6. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide vi 2. Costs at Closing ..........................................................................................................................52 3. Calculating Cash to Close...........................................................................................................52 4. Liability after Foreclosure ............................................................................................................54 IV. Loan Estimate Related Issues...........................................................................................................55 A. Effective Date of Rule .....................................................................................................................55 B. Guidance.........................................................................................................................................56 C. Transactions Covered and Excluded From Requirements .............................................................56 D. Use of Forms - Required or Model?................................................................................................58 E. Transition from the GFE/HUD-1 to Loan Estimate/Closing Disclosure...........................................59 F. Need to Maintain Both GFE/HUD-1 and Loan Estimate/Closing Disclosure Functionality Beyond October 3, 2015.......................................................................................................................................60 G. Special Information Booklet (Your Home Loan Toolkit)..................................................................60 H. Itemization of Amount Financed......................................................................................................61 I. Definitions........................................................................................................................................61 J. Pre-Application Cost Estimates.......................................................................................................66 K. Upfront Fee Restriction ...................................................................................................................66 L. Upfront Verification Restriction........................................................................................................68 M. Original Loan Estimate Timing........................................................................................................69 N. Revised Loan Estimate Timing .......................................................................................................72 O. Who Delivers the Loan Estimate.....................................................................................................76 P. Intent to Proceed.............................................................................................................................79 Q. Cost Estimate Rules........................................................................................................................80 R. Ability to Revise Loan Estimate (Change or Circumstance Exceptions) ........................................88 S. Written List of Providers ..................................................................................................................93 T. Itemization of Fees, But Limited Dedicated Lines...........................................................................95 U. Record Retention ............................................................................................................................95 V. State Law Preemption.....................................................................................................................96 W. Liability ............................................................................................................................................96 V. Closing Disclosure.............................................................................................................................99 A. Page 1...........................................................................................................................................102 1. Title and Header........................................................................................................................104 2. Loan Terms ...............................................................................................................................106 3. Projected Payments ..................................................................................................................106 4. Costs at Closing ........................................................................................................................107 B. Page 2...........................................................................................................................................108 1. Loan Costs ................................................................................................................................109 m ba.org/education
  7. 7. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide vii 2. Other Costs ...............................................................................................................................111 C. Page 3...........................................................................................................................................116 1. Calculating Cash to Close.........................................................................................................118 2. Summaries of Transactions ..........................................................................................................119 D. Page 4...........................................................................................................................................122 1. Loan Disclosures.......................................................................................................................124 2. Adjustable Payment (AP) Table................................................................................................127 3. Adjustable Interest Rate (AIR) Table ........................................................................................127 E. Page 5...........................................................................................................................................128 1. Loan Calculations......................................................................................................................130 2. Other Disclosures......................................................................................................................131 3. Questions ..................................................................................................................................133 4. Contact Information...................................................................................................................134 5. Signature Line ...........................................................................................................................135 VI. Alternative Closing Disclosure.........................................................................................................136 1. Header.......................................................................................................................................142 2. Costs at Closing ........................................................................................................................142 3. Closing Cost Details..................................................................................................................142 4. Calculating Cash to Close.........................................................................................................144 5. Payoffs and Payments ..............................................................................................................145 6. Contact Information Table.........................................................................................................147 VII. Seller-Only Closing Disclosure........................................................................................................147 VIII. Closing Disclosure Related Issues..................................................................................................152 A. Summary.......................................................................................................................................152 B. General Requirements ..................................................................................................................154 C. Timeline for Providing the Closing Disclosure for Consummation................................................156 D. Business Days - Measuring Timing Requirements.......................................................................160 E. Waiver of the Waiting Period.........................................................................................................160 F. How the Closing Disclosure Must Be Delivered............................................................................161 G. How to Apply the Mailbox Rule .....................................................................................................161 H. Post-Consummation Corrections to the Closing Disclosure .........................................................162 I. Examples of Closing Disclosure Delivery - Waiting Periods.........................................................165 J. Information on the Closing Disclosure ..........................................................................................169 K. Multiple Consumers ......................................................................................................................169 L. Who Prepares the Closing Disclosure? ........................................................................................170 m ba.org/education
  8. 8. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide viii M. Settlement Agents are Responsible for the Seller's Closing Disclosure.......................................172 N. How Do You Vet Your Settlement Agent? ....................................................................................173 O. Record Retention ..........................................................................................................................174 P. Liability ..........................................................................................................................................175 IX. A Word on Technology....................................................................................................................177 X. Model Policies and Procedures For CFPB TILA RESPA Integrated Disclosures Rule ..................178 SCOPE AND PURPOSE OF POLICIES AND PROCEDURES ...............................................................179 Scope of Policy and Procedures ...........................................................................................................179 Definitions..............................................................................................................................................179 Purpose of Policies and Procedures .....................................................................................................179 1.5 Vendors, Settlement Agents, and other Third Parties.....................................................................180 Scope of the Rule......................................................................................................................................180 PRE-DISCLOSURE RESTRICTIONS ......................................................................................................181 Preapprovals .........................................................................................................................................181 Pre-disclosure worksheets ....................................................................................................................182 Fees/Intent to Proceed ..........................................................................................................................182 Documenting the Intent to Proceed.......................................................................................................183 Verifying Documentation .......................................................................................................................183 LOAN ESTIMATE .....................................................................................................................................183 Overview................................................................................................................................................183 Application .............................................................................................................................................183 Information in addition to the six items; Withdrawal ..............................................................................184 Timing of the Loan Estimate..................................................................................................................185 Format of the Loan Estimate .................................................................................................................185 Electronic Delivery of the Loan Estimate...............................................................................................186 Mortgage brokers ..................................................................................................................................186 Written List of Providers for Settlement Services the Consumer May Shop For ..................................187 ACCURACY OF ESTIMATES/TOLERANCES/REVISED LOAN ESTIMATES........................................187 Categories of Tolerances; Overview .....................................................................................................187 Obtaining Accurate Estimates from Third Party Service Providers.......................................................188 Changed circumstances; Revised Loan Estimate.................................................................................189 Refunds; revised Closing Disclosure.....................................................................................................190 CLOSING DISCLOSURE..........................................................................................................................190 Overview; Company's Method of Delivery ............................................................................................190 Timing of the Closing Disclosure; Scheduling Consummation..............................................................191 m ba.org/education
  9. 9. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide ix Format of the Closing Disclosure ..........................................................................................................192 Anti-Deficiency Protections....................................................................................................................193 Partial Payments Policy.........................................................................................................................193 Signatures..............................................................................................................................................193 Post-Closing Corrections.......................................................................................................................193 MONITORING; TESTING/COMPLIANCE AUDITS..................................................................................194 Pre-Closing Monitoring..........................................................................................................................194 Post-Closing Monitoring ........................................................................................................................194 Monitoring Reports ................................................................................................................................194 TRAINING/MONITORING.........................................................................................................................195 RECORD RETENTION.............................................................................................................................195 Completed Loan Estimates and Associated Records ...........................................................................195 Completed Closing Disclosures and Associated Records ....................................................................195 MISCELLANEOUS....................................................................................................................................196 Escrow Closing Notice...........................................................................................................................196 Mortgage Transfer Notice......................................................................................................................196 XI. TILA RESPA Compliance Checklist................................................................................................197 m ba.org/education
  10. 10. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide 1 I. Summary of the Rule and CFPB Supplementary Information on the Rule On November 20, 2013, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule integrating the mortgage loan disclosures under the Truth in Lending Act1 (“TILA”) and the Real Estate Settlement Procedures Act of 19742 (“RESPA”) (the “Rule” or TRID).3 The Dodd-Frank Wall Street Reform and Consumer Protection Act4 (Dodd-Frank) sections 1032(f), 1098, and 1100A directed the CFPB to integrate the disclosures.5 The integration project has been named by the CFPB, “Know Before You Owe.” It is critical to view this rule as more than the combination of two disclosure regimes, because the Rule also imposes significant changes on the residential mortgage loan origination process. This booklet provides a detailed summary of the Rule so you can prepare to be compliant on that date and beyond. Originally the Rule was scheduled to become effective on August 1, 2015. On June 17, 2015 the CFPB announced that it planned to propose a delay in the effective date of the Rule based on administrative error by the CFPB and other factors.6 On June 24, 2015 the CFPB posted on its website a proposal to delay the effective date of the Rule until October 3, 2015, and the proposal appeared in the Federal Register on June 26, 2015, with comments due on July 7, 2015.7 The CFPB issued a final rule on July 21, 2015 establishing a new effective date of October 3, 2015, and the final rule appeared in the July 24, 2015 Federal Register.8 In addition to the integrated mortgage disclosure rule itself, and the supplementary information to the rule, the CFPB and CFPB staff have provided informal guidance. The CFPB website includes a page devoted to the rule.9 The page includes links to (1) a TILA-RESPA Integrated Disclosure rule Small entity compliance guide, (2) a TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure forms, and (3) links to versions of the model forms and sample forms, including a version of the both the Loan Estimate and Closing Disclosure that are annotated to show rule citations for the various sections of the forms. The CFPB revised the materials to reflect the change in the effective date of the Rule from August 1, 2015 to October 3, 2015. The page also includes links to the slides and recordings from a series of webinars in which the CFPB staff provided informal guidance on the rule and disclosure forms. The webinars were held on June 17, 2014, August 26, 2014, October 1, 2014, November 18, 2014 and May 26, 2015 that focused, respectively, on an overview of the rule, frequently asked questions, the Loan Estimate, the Closing Disclosure and implementation challenges. The CFPB also posted a calendar illustrating the time periods for the various requirements under 1 15 U.S.C. § 1601 et seq. 2 12 U.S.C. § 2601 et seq. 3 78 Fed. Reg. 79730 (Dec. 31, 2013) (to be codified at 12 C.F.R. pts. 1024 and 1026). 4 Public Law 111-203 (Jul. 21, 2010). 5 Dodd-Frank sections 1098 & 1100A codified at 12 § U.S.C. 2603(a) & 15 U.S.C. § 1604(b), respectively; Dodd-Frank section 1032(f) codified at 12 U.S.C. § 5532(f). 6 http://www.consumerfinance.gov/newsroom/statement-by-cfpb-director-richard-cordray-on-know-before- you-owe-mortgage-disclosure-rule/ 7 http://www.consumerfinance.gov/newsroom/cfpb-proposes-two-month-extension-of-know-before-you- owe-mortgage-rule/; 80 Federal Register 36727 (2015). 8 http://www.consumerfinance.gov/newsroom/cfpb-finalizes-two-month-extension-of-know-before-you- owe-effective-date/; 80 Federal Register 43911 (2015). 9 http://www.consumerfinance.gov/regulatory-implementation/tila-respa/. m ba.org/education
  11. 11. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide 2 TRID. In August 2015 the CFPB posted on its website an index of the various questions addressed during the webinars.10 MBA and the American Land Title Association (ALTA) hosted a series for forums in 2015 that included representatives from the CFPB. Each forum dealt with implementation issues current at that time. In the fall of 2014 the CFPB proposed to amend the rule to address the timing to issue a revised Loan Estimate when the rate is locked and the placement of a statement when a creditor reserves the right to issue a revised Loan Estimate in connection with a loan on new construction.11 The MBA submitted a comment on the proposal, which addressed both the specific proposed changes to the rule and other issues of concern to the industry.12 The CFPB adopted a final version of the amendments in January 2015 and took into account MBA comments regarding the timing of the revised Loan Estimate with a rate lock to conform to the timing to issue a revised Loan Estimate for other reasons.13 A. Brief History 1. Here We Go Again Only about five years before the CFPB issued the Rule, in November 2008, the Department of Housing and Urban Development ("HUD") issued its own rule that substantially revised the Good Faith Estimate ("GFE") and HUD-1 settlement statement ("GFE") forms and instituted accuracy requirements for cost estimates for the first time (i.e., the "tolerance" requirements).14 HUD's rule required use of the new forms beginning on January 1, 2010. In addition, in September 2010, the Board of Governors of the Federal Reserve System ("Board") published a rule requiring a new payment schedule on the early and final Truth in Lending ("TIL") disclosure.15 However, following these events, on July 21, 2010 President Obama signed Dodd-Frank into law. Dodd-Frank transferred rulemaking authority over TILA and RESPA to the CFPB effective July 21, 2011, and directed the CFPB to issue rules integrating the disclosures under these laws. The CFPB issued the final rule - the Rule - on November 20, 2013. Thus, just a few years after HUD's and the Board's revisions to the mortgage disclosures, the industry is required to implement a complete revamp of the process and forms at the heart of the mortgage transaction. 10 http://files.consumerfinance.gov/f/201508_cfpb_question-index-outlook-live-webinars-on-tila-respa- integrated-disclosure.pdf. 11 79 Federal Register 64336 (2014). 12 http://www.mba.org/Documents/mba.org/files/MBALtrtoCFPBUrgingModificationtoTILA- RESPAIntegratedRule.pdf] 13 http://www.consumerfinance.gov/newsroom/cfpb-finalizes-minor-changes-to-know-before-you-owe- mortgage-rules/; 80 Fed. Reg. 8767 (Feb. 19, 2015). 14 73 Fed. Reg. 68204 (Nov. 17. 2008). 15 75 FR 58470 (Sept. 24, 2010). m ba.org/education
  12. 12. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide 3 2. The CFPB's Proposal Section 1032(f) of Dodd-Frank mandated that the Bureau propose for public comment rules and model disclosures that integrate the TILA and RESPA disclosures by July 21, 2012.16 Prior to issuing the proposal, the CFPB conducted 10 rounds of qualitative usability testing of prototype disclosures with over 100 consumers and industry. The CFPB also posted prototypes of the disclosures as it tested them, to receive feedback from the public during the design process, as part of its "Know Before You Owe" initiative. The Mortgage Bankers Association ("MBA") provided input to the CFPB throughout this initiative. The Bureau issued the proposed rule and forms on July 9, 2012 (the “proposal”). The CFPB received over 2,800 comments to the proposal. The MBA submitted a comment letter on the proposal, too. After issuing the proposal, the CFPB conducted a large-scale quantitative validation study of its integrated disclosures with 858 consumers, which concluded that the CFPB’s integrated disclosures had on average statistically significant better performance than the current disclosures under TILA and RESPA (i.e., the GFE, HUD-1, and early and final TILs), about 29 percent on average. The Mortgage Bankers Association also submitted a comment to the CFPB on the design of the study. Although Congress directed that the CFPB propose the Rule by July 21, 2012, it did not specify a date by which the Rule had to be finalized or implemented. 3. The Rule Sections 1098 and 1100A of the Dodd-Frank Act also require the CFPB to issue final integrated disclosures.17 The CFPB issued the Rule on its website on November 20, 2013. The Rule was then published in the Federal Register on December 31, 2013, and weighed in at no less than 637 pages (we recommend you print it out double-sided). The Rule integrates the early TIL and the GFE into the "Loan Estimate," and the final TIL and the HUD-1 into the "Closing Disclosure." The new integrated disclosures include much of the same information as on the current disclosures, but also include new information, and are far more complicated to complete. The disclosures require significant changes to software systems for both the lending and title/settlement industries. The Rule does more than integrate the RESPA and TILA disclosures. The Rule makes substantive changes to the origination process itself, including revising the definition of "application", imposing additional "tolerance" requirements for the cost estimates on the Loan Estimate, requiring new timing requirements for the disclosures, and placing the requirement to issue the Closing Disclosure on the lender. In addition to adopting new forms and imposing new procedural requirements for the origination and closing of mortgage loans, the Rule implements the provisions of the Dodd-Frank Act requiring a post-closing partial payment policy disclosure, and a post-closing escrow cancellation disclosure. The Rule creates new rules for the special information booklet under RESPA. The Rule is briefly summarized below, to provide you an overview before we dive into the details in subsequent chapters. As noted above, the Rule was amended by the CFPB twice since its issuance. In early 2015, the CFPB amended the Rule to make two substantive changes: (1) revise the period in which a 16 Dodd-Frank section 1032(f), codified at 12 U.S.C. § 5532(f). 17 Dodd-Frank sections 1098, 1100A, codified at 15 U.S.C. § 1604(b) and 12 U.S.C. 2603(a). m ba.org/education
  13. 13. MBA Compliance Essentials℠: TILA RESPA Integrated Disclosure (TRID) Resource Guide 4 revised Loan Estimate must be provided in the event of a rate lock; and (2) provide for construction loan language to appear on the Loan Estimate to comply with the tolerance requirements. In addition, on July 24, 2015, the CFPB published a final rule delaying the effective date of the Rule to October 3, 2015. These amendments are discussed in further detail below. B. Scope The Rule applies to closed-end credit transactions secured by real property, other than reverse mortgage transactions. The Rule applies to loans secured by property of 25 acres or more, loans secured by vacant real property, and construction-only loans (i.e., short-term loans that finance only the construction of a new dwelling and are not used as permanent financing). Though these loans are currently exempt under Regulation X, they will require provision of the integrated disclosures. The Rule also applies to loans secured by a consumer’s interest in a timeshare plan (but applies modified timing requirements to these loans). The Rule does not apply to open-end credit (i.e., home equity lines of credit) or mortgages secured by a dwelling but not real property (i.e., loans on mobile homes that are not also secured by the underlying real property or loans on house boats). The Rule also only applies to “creditors” as that term is defined under Regulation Z, and thus, generally does not apply to loans made by a creditor who makes five or fewer mortgages in a year (although a party that makes high-cost loans can be a “creditor” by making one or two of such loans, depending on the circumstances). Loans not covered by the Rule remain subject to their current disclosure requirements. Note that for reverse mortgages, the Rule amends the instructions for the Good Faith Estimate and HUD-1 settlement statement under Regulation X to include the guidance with respect to reverse mortgages contained in HUD’s RESPA FAQs. An issue related to the scope of the Rule that has come to the forefront of implementation challenges relates to loans secured by cooperatives. As noted above, the rule applies to loans secured by “real property,” which is not defined in TILA or Regulation Z. Therefore, under the regulation, lenders are required to look to state law for the definition of the term. This means that lenders originating loans secured consumer interests in cooperatives will need to look to state law to determine whether the loan is considered “real estate” and covered by TRID. If the loan is not covered by TRID, the loan is subject to the current disclosure requirements under TILA and RESPA. There is no “conservative” method of complying with this aspect of the Rule; either the current or TRID disclosures must be provided. In many states, consumer interests in cooperatives are considered personal property, because consumers purchase shares in the cooperative association that entitle them to a lease of their dwelling. However, some states may treat interests in cooperatives as real property for certain specific state laws, such as tax laws. Accordingly, this state law analysis may be murky at best. The MBA has requested formal guidance from the CFPB regarding this issue, but it has not been forthcoming. C. The Forms Under the Rule, there are two integrated disclosures: the Loan Estimate provided at application, and the Closing Disclosure provided at closing. As mentioned above, the Loan Estimate integrates the GFE and the early TIL, and the Closing Disclosure integrates the HUD-1 and the final TIL. These integrated disclosures will replace the current disclosures for loans subject to the Rule. m ba.org/education
  14. 14. View more MBA Compliance Essentials resource guides at mba.org/compliance m ba.org/education

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