As the October 1, 2018 compliance date of TRID 2.0 is now upon us, it is important for each financial institution to ensure that all applicable changes to the integrated disclosure rules have been both understood and effectively implemented. Released on July 7, 2017, the 2017 final rule (known as TRID 2.0) amends and clarifies certain mortgage disclosure provisions implemented in Regulation Z. These changes are required for any application received on or after October 1, 2018.
Checklist of TRID 2.0 Changes
A checklist of the TRID 2.0 changes can be summarized into fifteen categories as follows:
Post-Consummation Notices include the partial payment disclosure and the escrow closing notice. Both of these have slightly new applicability under TRID 2.0.
Loans Secured by Cooperatives now require Integrated Disclosures, regardless of whether they are considered real or personal property under state law.
Loans to Certain Trusts saw changes in TRID 2.0 where trusts established for estate planning purposes are considered to be extended to a natural person.
The Partial Exemption for Certain Housing Assistance Loans received two main changes including what fees can still be assessed under the exemption as well as what fees are excluded from the cap on total costs payable by the consumer.
Construction Loans saw significant changes in TRID 2.0 including rule changes for both construction-permanent loans disclosed as a single transaction, as well as those disclosed as multiple transactions. Clarification was also provided for things like disclosing the purpose of a construction loan. As this section contains about a dozen different main changes from TRID 1.0, creditors offering construction loans should be sure to review the applicable changes.
Simultaneous Subordinate Lien Loans saw changes in TRID 2.0 where a creditor can now utilize alternative disclosures when a seller’s transaction is disclosed on the CD for a first-lien mortgage loan.
New Tolerances for the Total of Payments Disclosure were established under TRID 2.0.
The Good Faith Standard and Provisions for Revised Disclosures saw both amendments and clarification including eight main changes such as resetting tolerances with a loan estimate, when a creditor does not disclose a specific settlement service on the written list of providers, rate locks and revised disclosures, resetting tolerances based on closing cost expiration date, disclosing the fee expiration date for fees on a revised loan estimate, and how the “best information available” standard applies when a consumer is permitted to shop for third party services.
Decimal Places and Rounding Rules were modified under TRID 2.0.
The Calculating Cash to Close Table saw a number of both amendments and clarifications. Changes included guidance on down payments/funds from borrower, listing specific seller credits as a lump sum, using the most recent LE (even if it was only an informational LE) for calculating the cash to close table, several other items.
Other Changes to the Loan Estimate and Written List of Providers occurred through a number of revisions including:
Clarification regarding the written list of providers and how to disclose applicable settlement services and providers.
The proper use of the model form H-27 (including any permitted changes) for the written list of service providers provides a safe harbor, though a creditor is not required to use the model form.
If there is no seller and the creditor has performed its own estimate of the property value by the time the disclosure is provided to the consumer, the creditor must disclose its own estimate rather than disclose an estimate provided by the consumer.
Payoffs of existing liens and unsecured debts are included in the Payoffs and Payments amount or factored into the Funds for Borrower or Adjustments and Other Credits amount in the Calculating Cash to Close table.
The Loan Amount disclosed in the Loan Estimate is the face amount of the note.
If multiple changes to periodic principal and interest payments may occur in a single year, the creditor combines the changes and discloses them as a single range of payments.
If accurate, a creditor can indicate that a portion of taxes, insurance and assessments will be paid with escrow funds.
Consistent with the terms of the legal obligation between the creditor and consumer, both specific and general lender credits are included in the disclosure labeled “Lender Credits” on the Loan Estimate.
The Total Interest Percentage includes prepaid interest that the consumer will pay, but does not include prepaid interest that someone other than the consumer will pay. Also, clarifies that prepaid interest that is disclosed as a negative number must be included as a negative value when calculating the Total Interest Percentage.
Other Changes to Closing Disclosure Rules include:
Providing details regarding the disbursement date to be used in the Closing Disclosure.
Providing that only the names and addresses of the persons to whom credit is offered or extended are disclosed at the top of the first page of the Closing Disclosure with the label “Borrower.”
Addressing the itemization requirement for disclosure of taxes and other government fees.
Providing that the creditor should disclose “$0.00” (not “$0”) for prepaid interest if, based on the best information available, the creditor does not believe it will collect prepaid interest.
Providing that a creditor may use the 12-month period beginning with the initial payment (instead of consummation) for certain escrow account disclosures under 12 CFR 1026.38(l)(7).
Providing that a creditor may include ongoing payments for mortgage insurance in certain escrow account disclosures under 12 CFR 1026.38(l)(7).
Providing that a creditor may use an addendum if additional lines are needed to complete the escrow account disclosures under 12 CFR 1026.38(l)(7).
Sharing Disclosures with Various Parties During the Origination Process was the next change under TRID 2.0. This change clarifies that a creditor may provide separate disclosure forms to a consumer and seller if state law prohibits sharing information in the disclosure form as well as in any other situation where the creditor chooses to provide separate disclosures. The 2017 Rule also clarifies the three methods that a creditor may use to make modifications to the Closing Disclosure in order to separate consumer and seller information.
Technical Corrections and Clarifications have been made to wording throughout several provisions of Regulation Z, which are considered to be minor changes.
Closing the TRID Black Hole was technically TRID, 2.1 (or maybe 3.0) and went into effect in the 2nd quarter of 2018, but we thought we would include this in our checklist of TRID changes as the change is a revision from the original TRID rules that should not be overlooked. The final amendments for resetting tolerances do a number of things. First, the final rule removes the “four-business day limit” that appeared to cause the “back hole” in regards to resetting tolerances. In addition to this, the rule clarifies that a Closing Disclosure (initial or revised) can be used to reset tolerances regardless of when the Closing Disclosure is provided to the consumer relative to consummation. Check out our article on Resetting Tolerances With A Closing Disclosure for more information on this topic.