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.

Among the many changes in TRID 2.0 - which went into effect on October 1, 2018 - the CFPB has provided a few changes in relationship to the written provider list.  The final amendments to the written provider list are significantly better than what the CFPB originally proposed and provide creditors with guidance on how to deal with circumstances where a creditor did not provide the written list of providers or failed to disclose a required service on the list. The changes, however, can be quite confusing upon initial review. Therefore, it is important for each financial institution to fully understand the TRID 2.0 changes that relate to the written list of service providers.