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All in TRID
In this Compliance Clip (video), Adam explains how the rule changes for completing the expiration date for a revised Loan Estimate could quite possibly be the biggest change to TRID 2.0. This is definitely something every creditor needs to review and ensure they understand the new rules so that they don't end up with violations during their next audit report.
Section 1026.19(e)(3)(iv)(D) of Regulation Z requires a creditor to provide a revised Loan Estimate within three business days after the date an interest rate is subsequently locked on a loan where an initial LE was issued without a (signed) rate lock agreement in place. In other words, if a rate was initially floating and is later locked, a revised LE must be provided within three business days of the rate lock.
One of the key provisions of TRID rules relates to the “good faith” requirement, which essentially provides certain tolerance thresholds that must be honored for applicants who are quoted certain fees on the Loan Estimate (LE). Tolerance requirements actually pre-date TRID but were a big part of the consumer protection requirements of TRID. TRID 2.0 has made two minor revisions to the original rules regarding using a revised estimate in calculating good faith requirements.
As the Loan Estimate (LE) rules have been around for a few years now, there still seems to be some confusion about the good faith requirements in regards to tolerances and cures. In my experience, much of this confusion is a result of financial institutions reissuing too many LEs and not fully understanding the revised Loan Estimate requirements. The reality is that many financial institutions provide far more revised Loan Estimates than are necessary. This “overdisclosing” of the LE creates more work for mortgage processors and creates confusion for customers.
Since the inception of TRID, it has not been completely clear for creditors whether they may reset tolerances if a consumer provides an intent to proceed after the 10-business-day period, but within a longer period that a creditor disclosed on the original Loan Estimate. This confusion is due, in part, by the way the original language of Regulation Z is worded as it…
On April 26, 2018, the CFPB released a second set of TRID amendments which address when mortgage lenders with a valid reason may pass on increased closing costs to consumers and disclose them on a Closing Disclosure instead of a Loan Estimate. “Specifically, a timing restriction on when the creditor may use a Closing Disclosure to communicate closing cost increases to the consumer could prevent a creditor from charging the consumer for those cost increases despite a valid reason for doing so, such as a changed circumstance or borrower request. This article takes an in-depth look at the new rules and how they apply to community banks and credit unions.
For years, financial institutions have struggled with how to disclose the expiration date for disclosed fees on a Loan Estimate when a new Loan Estimate is issued. Well, the latest revision of TRID has clarified this for us, and it is probably not what you expected to hear.
While logic would tell us that a definition should be consistent from one regulation to another, reality tells us that this is anything but the truth. When I teach compliance schools where we work through regulations from top to bottom, I always make an effort to point out the difference in the definition of “business day” as the definition varies - sometimes greatly - from one regulation to another. In fact, Regulation Z actually has two different definitions for business day: the precise definition and the general definition.
While most seem to fully understand the rules regarding the disclosure of an initial Loan Estimate, many seem to have a more difficult time understanding when a revised loan estimate is required. For example, I have heard the following questions asked many times:
Construction loans have proven to be anything but simple under TRID. The CFPB gave very limited guidance for construction loans first came out and much of the guidance they have provided isn’t as clear as it should be. For this reason, many financial institutions still seem to struggle with TRID disclosures for construction loans. For example, disclosing the correct “Product” for a construction loans can
