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.

There are rarely perfect scenarios in real estate lending.  Sure, occasionally a transaction will go as exactly planned, but there are usually one or two quirks in the process that must be addressed to ensure the loan remains in compliance.  One of these quirks I continue to see lenders struggle with is when an appraisal fee is collected before closing, but the actual cost of the appraisal comes in below what the creditor collected.  

When a financial institution provides unnecessary Loan Estimates to applicants, this practice creates significant confusion regarding the “good faith” rules (i.e. the tolerance calculations).  For example, if a Loan Estimate is provided out of courtesy, the fees on the new LE cannot be used for calculating good faith (tolerances) under Regulation Z. This makes it very difficult for creditors, auditors, and examiners, to know which numbers are supposed to be used for good faith purposes. Therefore, it is important for every loan officer and loan processor to fully understand the changed circumstance rules so they know what exact conditions can reset the tolerances for determining good faith under TRID rules.