All in TRID

The CFPB has again updated the TRID FAQs on their website. This update incorporates five new questions and answers relating to providing loan estimates to consumers. As has been the case with the previously released FAQs, these five new questions don’t really tell us anything we didn’t already know. That said, we will be including a review of these FAQs in our 3Q 2019 Quarterly Compliance Update program (planned to be released sometime in October 2019.

On May 1, 2019, the CFPB issued a Fact Sheet discussing TRID applicability for assumptions.  This six-page document answers the question of whether Loan Estimates (LEs) and Closing Disclosures (CDs) are required for assumptions and contains two main parts: 1) a flowchart and 2) a narrative discussion. The flowchart is a quick reference that highlights the major questions to be answered when determining if a Loan Estimate and Closing Disclosure are required for the assumption transactions described above. The narrative discussion provides general information that may be useful when determining if a Loan Estimate and Closing Disclosure are required, including information related to each of the major questions set forth in the flowchart.

As you would expect

For years now, I have been advocating that there is only one reason why a revised Loan Estimate must absolutely be issued: when an initially floating rate is subsequently locked.

Sure, there are other reasons a financial institution can issue a revised loan estimate, such as when there is a valid changed circumstance, but the only time a revised Loan Estimate is absolutely required is when an initially floating rate is subsequently locked.

While this reason for a revised loan estimate may seem simple, there are actually some questions that arise with the requirement to provide a revised Loan Estimate from a rate lock.  For example, you may be asking one of the following questions:

  • Is a written rate lock agreement required for the revised Loan Estimate trigger?

  • Is a revised Loan Estimate required after a rate expiration or for a rate extension?

  • Is a revised Loan Estimate required when a rate is locked after a Closing Disclosure has been issued?

  • Is a revised Closing Disclosure required when a rate is locked after a Closing Disclosure has been issued?

I have spent a bit of time studying comedy.  I’m no expert by any means, but I’m always intrigued by the details of how things work, and comedy is no exception.  I figure that once I understand how something like comedy works, I will be able to better use it and appreciate it.

When we look at the art of comedy, there is one well-known element that seems to be….

(Click here to see how this post relates to the new TRID FAQs - and we promise it does!)

Though estimate tolerance rules have been around before TRID, “good faith,” tolerances, and refunds/cures seem to still be a challenge for many lenders and creditors.  This is concerning as tolerances/cures are one of the higher-risk areas (like rescission) that creditors really need to ensure they are doing appropriately as deficiencies can result in significant fines, penalties, and enforcement actions.  

In reviewing the challenges related to calculating “good faith” and providing appropriate refunds/cures, it appears that there still seems to be quite a bit of confusion relating to how a creditor must calculate tolerances in the 10% tolerance bucket.

The changes made by TRID 2.0 were interesting.  On one hand, a few things made significant changes to the way we have always done things.  On the other hand, however, the majority of changes were fairly minor in nature or didn’t seem to affect the majority of financial institutions.  One question we have received a few times relates to the new TRID 2.0 rules for total of payment tolerances.  When TRID 2.0 was first announced, this seemed to be one of biggest changes included in the rules. Now that TRID 2.0 is in affect, however, some may be wondering what all of the fuss was about relating to the TRID 2.0 tolerances for total of payments.

One of the significant changes in TRID 2.0 relates to how the “best information reasonably available” can affect calculating good faith and, ultimately, reimbursements.  Under Regulation Z, creditors are required to disclose fees that are anticipated for a loan transaction in “good faith.” Good faith depends on a number of factors (such as the type of fee and whether the fee goes to the creditor or their affiliate) and basically is calculated in one of three “buckets” as follows: The zero tolerance bucket, the 10% bucket, and the unlimited bucket.  While these tolerance “buckets” have been around for since the inception of TRID, TRID 2.0 has placed an even greater emphasis on disclosing fees based on the best information reasonably available.

Although TRID rules have been around for a while now, there still seems to be some confusion when it comes to understanding the TRID loan purpose that should be listed on the Loan Estimate (LE).  Much of the reason behind this confusion is that the rules actually contradict the loan purpose rules of Regulation C and the Home Mortgage Disclosure Act (HMDA). Therefore, it is important for each creditor to fully understand the TRID loan purpose hierarchy and when each TRID loan purpose should be listed on the Loan Estimate.

True or False: Lender credits should never decrease.

Well, the TRID best practice over the years has said that once a lender credit is listed on the LE, it should never decrease.  This philosophy seems to align with that of the CFPB who views a decrease of a lender credit to be the equivalent of an increase of a fee.  In fact, the preamble to the final TRID rule states that “lenders are not permitted to reduce the lender credits they provided to the borrower under current Regulation X.”

So, this means that a lender credit should never be reduced, right?  Well, not exactly.