1. Countdown to TRID: Top 7 Things Lenders Should Do Now to be Prepared
By: John Vong & Donald Lampe
April 10, 2015-- The clock is ticking. On August 1, less than four months from today, the Truth in Lending
Act/Real Estate Settlement Procedures Act Integrated Disclosure (TRID) rule goes into effect. Given the
sweeping changes that will be required, time is quickly becoming a mortgage lender’s worst enemy.
The country’s largest banks have been working on their TRID solutions for more than two years.
However, based on our discussions with lenders, leading loan origination system providers and document
vendors, we believe that many mid-sized and smaller lenders are still behind in terms of readiness.
Some lenders are still in the process of selecting new vendor partners; others are waiting for new
solutions from existing service providers before beginning their testing, training, and educational efforts.
Although there is still time to do this, there may not be as much time as they think. So what can a lender
who hasn’t already started the process do now to prepare?
With less than four months to go, here are seven essentials for your “to do” list.
1. Make sure you have the right technology…and secure it fast!
Under TRID, a lender will have significantly greater liability for the timing, completeness, and accuracy of
the Loan Estimate and Closing Disclosure. It’s a game changer. Investors and mortgage insurance
companies know this, and we suspect that they will be even more thorough in their compliance reviews,
refusing to purchase or insure loans with even minor TRID defects. Non-compliant loans that are missed
during the initial screenings will likely be put back to lenders if errors are later discovered.
For the most part, compliance will be measured against four criteria:
• Were the disclosures provided on the proper forms (i.e., the LE and CD)?
• How were the disclosures delivered to the borrowers?
• Were they given to borrowers on time?
• Was each disclosure item on the LE disclosed within “variation” tolerances on the CD?

2. While it is theoretically possible for a small lender to manage this process manually, realistically,
prudence suggests that technology is needed to automate and “back-stop” compliance. The right
technology will help lenders gather the data that goes into the LE from various vendors; compute the LE
accurately; deliver it in a timely (and trackable) fashion to the borrower and compare the initial LE against
the final CD to make sure that variances are within tolerance. Moreover, the right technology will connect
and communicate with numerous parties. Connectivity, or the ability to obtain and transmit accurate data
in a timely fashion, is extremely important because TRID requires many detailed, individual figures to be
imported into the disclosure forms.
One area where we see connectivity as a significant issue is between the lender and the settlement
agent. Even at the closing table, data often needs to be transmitted between the settlement agent and the
lender. Because this is a two-way process and everything needs to be auditable, “eyeballing” the data
isn’t going to cut it. Proper connectivity allows last-minute changes to be detected, validated, and audited
in real time, so that the closing disclosures can be completed in a timely manner.
Ideally, the right technology should also be compatible with Mortgage Industry Standards Maintenance
Organization version 3.3 and the Uniform Closing Dataset (UCD). Some mortgage technology systems
used by the industry have not yet upgraded and will be using work-arounds. This is unfortunate because
MISMO 3.3 and UCD were designed for TRID and its multiple disclosures structure. We believe MISMO
3.3 will play a critical role in getting disparate systems to communicate with each other.
Finally, the Consumer Finance Protection Bureau is driving an overall, end-to-end electronic workflow for
residential mortgage loans--not just e-signatures or e-delivery, but entirely electronic processes. So
having the right technology, whether built or bought, will be the number one task for a lender’s TRID
preparation.
Having said that, it’s time to stop shopping! Once you’ve selected an LOS vendor, compliance system, or
document provider, it can take some out-of-the-box vendors weeks, not days, to negotiate and close the
deal, and up to another two months, depending on the requirements, to integrate the solution into your
platform and then train your IT, operations, and loan production teams. In the case of
ComplianceAnalyzer, implementation typically takes two to four days for a mid-sized lender that uses one
of ComplianceEase’s LOS partners.
So counting back from August 1, a lender needs to be closing the deal now. Also, keep in mind that many
vendors are adding new customers and are still working around the clock to be TRID ready, so the queue
may be much longer than usual.
2. Ask the “tough” questions now, rather than face tough times later.

3. If a lender is planning to rely on a vendor--LOS, title/settlement service provider, document preparation
company or workflow management provider--for TRID compliance, time is of the essence.
In a recent survey of ComplianceEase customers, we discovered that less than 15 percent are very
confident that their LOS would be completely “TRID ready” by August 1.
Lenders need to do their due diligence and press for answers to key questions. Here are a few to ask
current and prospective partners:
• How will your solution be modified to accommodate TRID? Will the solution be adequate in terms of
scope and functionality?
• What is the scope of the offering? End-to-end TRID compliance, including generation of compliant
disclosures, or just components?
• When will it be ready for testing?
• Will it be MISMO 3.3 and UCD ready? If not, what extensions will be used from MISMO 2.6?
• Will it provide real-time connectivity with major vendors?
• Will your solution test for disclosure delivery timing, fees variance, valid changed circumstances and re-
disclosure requirements, loan product features comparison, projected payments table and APR and
amount financed calculations?
• Will compliance with federal and state consumer credit laws and regulations based on lender’s license
types and exemptions be audited?
• How will your solution handle and flag last-minute changes at the closing table?
• Will system architecture support the special requirements of TRID, such as time stamping and retaining
each and every disclosure and revised disclosure?
• Are system results capable of being reproduced easily and audited later by lenders, investors, and
regulators (like banking agencies and the CFPB)?
• Do you have the necessary customer service bandwidth, particularly as the go-live date approaches and
in the early days post-August 1?
3. Allow plenty of time for testing.
The testing environment matters--document delivery systems and interconnectivity with other parties
should be tested and ready before August 1.

4. Anyone who has ever used new tools to perform unfamiliar tasks knows how important it is to have a test
environment and a period of time in advance of actual implementation to actually perform testing. Lenders
will need a proper internal testing strategy to make sure that their results are compliant, so that they’re
ready to go on August 1. Since testing is data driven, lenders will need to make sure that data is available
and properly input, and that the output matches the input. We believe that the testing environment is
going to be very important, particularly when lenders need to verify that the data that’s initially input into
the LE accurately translates into the CD. This isn’t new, but under TRID, the forms are entirely different
from what lenders have been used to and the stakes of getting anything wrong are higher.
Lenders--big and small--should leave themselves adequate time to perform internal testing and then
make any adjustments that need to be made. Timing varies based on a lender’s loan volume, but one
thing is clear: testing shouldn’t be done merely days before TRID’s effective date. In fact, some larger
lenders have been testing since the beginning of 2015.
4. Develop a communications plan for all key players…And don’t forget the borrowers!
Technology is only part of the solution. Having internal and external communications plans prepared
before the first of August will be important.
From an internal standpoint, lenders will need to educate and train all staff on the revised policies and
procedures for the new workflow. Additionally, users should practice using the new system so that they’re
fully up to speed on any new technology and understand how to implement TRID in advance of its
effective date.
An external communications plan will also have a significant role simply because of all the people
involved in a mortgage loan transaction, particularly a purchase transaction: the buyer, the seller, the loan
officer, the real estate agent, the title company and the settlement agent.
Anyone who has ever purchased a home with a mortgage knows that changes, such as the water heater
needing repairs or need for escrow, can occur all the way up to and including at the settlement table. In
the current environment, there’s a relative degree of flexibility for the buyer and the seller to bargain for
different settlement-related fees and charges all the way to the closing table. However, the new rule says
negotiations need to be locked down three days prior to closing.
Buyers, sellers, and real estate agents will need to understand that there will be less flexibility built into
the settlement process. Any changes made too close to the closing date may cause delays in the
settlement process. A purchase contract can expire and the whole transaction could fall apart because of
very strict TRID rules. So lenders need to communicate this now, not three months from now, so there
won’t be any unpleasant surprises. Plan to set the right expectations on last-minute changes from day
one!

5. 5. Consider using fewer (but better) title and settlement agents.
Many lenders are winnowing down the number of title and settlement agents that they are using in the
origination process, focusing on strong suppliers who can deliver accurate, dependable data
electronically.
Using settlement agents that “get the new rules” and have more advanced software to interface with
lenders is another step that should be considered. Remember: The biggest lenders are going a step
further and doing their closings internally.
6. Don’t forget the “off ramp.”
Know the rule well. Under TRID, if any figures in the final CD wind up not being correct, lenders have the
ability to correct the figures and make refunds of potentially excessive fees and charges. We call these
correction measures that can be taken after closing the “off ramp.” It’s very important, particularly for
small to mid-sized lenders, to be aware that they’re able to limit liability and preserve the salability of the
loan if they take the “off ramp” shortly after the loan is closed.
Specifically, the new rule says that violations of “good faith disclosure” requirements for the LE may be
cured if the lender takes action within 60 days of consummation (not necessarily closing). If, for example,
the borrower actually pays more on the final CD than is disclosed on the LE, the lender then may refund
the increased amount to the borrower and submit a new (revised) CD to the borrower.
Lenders and settlement agents should have clear understandings on re-disclosure duty and who pays the
refund. That said, lenders will need to review any current LE/CD problems to determine what their “off
ramp” costs could be. A recent look at ComplianceEase’s loan production statistics have shown that
under current RESPA guidelines there is an error rate of 16 percent. So, be careful: the “off ramp” option
could be an expensive crutch, which lenders may not want to add to the cost of future volume.
7. Remember: August 1 isn’t just the goal line--it’s also the beginning.
Lenders can’t just “set it and forget it” when it comes to compliance. They’ll need to be fluid. Ongoing
vendor management will be important for banks and non-banks alike. Given the enhanced liability for
TRID violations as well as new operational challenges (e.g., connectivity and data transfer), lenders may
desire to shorten their lists of approved title and settlement agents. They’ll also need to reconsider their
budgets: Should buyback and indemnity reserves be adjusted? How does current incidence and the cost
of issuing post-closing-corrected RESPA disclosures compare with future expectations?

6. Large institutions began their TRID preparation two years ago. Their resources allowed them to build or
implement new compliance technology, employ testing environments, and begin educating their staff on
the changes to policies and procedures. Small and mid-sized lenders who haven’t had the time or
resources to prepare for TRID may have some difficulty adjusting. But, as Yogi Berra said, “It ain’t over ‘til
it’s over.” By taking these steps now, there is still time to be prepared by August 1.
____________________________________________________________________________________
John Vong is co-founder and president of ComplianceEase, a provider of risk management solutions to
the financial services industry. He is responsible for the company's day-to-day operations; leads the
implementation of the Board of Directors' strategies and policies; and serves as a liaison coordinating the
activities of the Advisory Board.
Donald Lampe is a partner in the Financial Services Group of Morrison & Foerster. He represents banks,
mortgage companies, automotive finance companies, insurance underwriters and agents and other
financial service providers in a variety of financial services and bank regulatory matters. He is a former
member of the Mortgage Bankers Association’s State Legislative and Regulatory Committee.