Tuesday, January 20, 2015

TRID - It's Not Just a Disclosure, it's a Process

Update - 7/29/2015 - Corrections to Integrated Disclosure Rule continue!

The CFPB's newest "final" rule amended the TILA-RESPA Integrated Disclosure (TRID) Rule.

Changed the timing requirement for the issuance of a revised Loan Estimate resulting from a rate lock event to align with the timing requirement for all other changed circumstances - the third business day after the triggering event (the rate lock).

The rule announced yesterday also added

1.) Optional disclosure to the Loan Estimate for certain construction loans that are expected not to close until after more than 60 days from issuance of the Loan Estimate,
2.) Added the LE and CB to the list of documents requiring Loan Originator names and NMLSR IDs.

Disclosure AND Timing - 10/3/2015 Loan Estimate Process

While you have some time before you HAVE to be ready, the deadlines are quickly approaching.
Policy and Procedure Implementation Issues

Highlights of Actual Changes From GFE to Loan Estimate Process

TRID - Truth-in-Lending and RESPA Integrated Disclosure
LEAP - Loan Estimate Application Procedure

While many industry compliance experts toll the warning bells loudly and repeatedly that the sky is falling, the reality emerges that the new loan estimate process represents a refinement of the 2010 GFE process and the elimination of the TIL. Regulators should receive some credit for the difficult task they have accomplished involving combining two completely different laws into one unified customer facing document. Here we take the time to step backward and look at the real changes, and see where our actual policies and procedures will have to change to ensure and prove compliance.

First, from a conceptual framework, the process itself hasn't changed.  The industry has and continues to provide RESPA and TIL disclosures, and the procedure for resolving changes and errors remain the same.  The difference is that, because of the unified form, instead of having two separate paths (TIL and RESPA) we now have one. The benefits of a single track outweigh potential complications from misunderstanding.  Examining GFE 2010 and TIL/MDIA, and then identifying the components required from each, provides a framework for implementation.

Loan Estimate Differences
GFE 2010
Loan Estimate 2015
Six Items and anything else needed
Application Received
Six Items ONLY – cannot refuse to issue based on "Additional Info Needed"
Consumer Name
Consumer Address
Consumer Social
Property Address
Property Value
Mortgage Amount
Intent to Proceed

Intent to Proceed
No Change
3 Days/3 Days
3 Days/3 Days and 7 Days
3 Days/3 Days and 7 Days
7 Business days before consummation is the TIL Requirement
Changed Circumstance within 3 Days

Changed Circumstance within 3 Days
Cannot be based on information provided earlier, Revised Estimate within 3 business days
Lock in – Changed Circumstance
Reissue New TIL on lock date
Reissue LE within 24 hours of Lock-in
Financing Agreement signed FIRST, then revised Loan Estimate

Closing Disclosure
4 Business Days prior or mail 7 calendar days
HUD 1 prepared by Settlement Agent/Lender Review

Closing Disclosure prepared by Lender
7 days prior
Tolerance 0/10/100
1/8th or ¼ or
0/10/100 Costs and 1/8th or ¼ APR
No Change here, but if one or the other change, must issue. You must disclose at least 1 service provider
Initial Disclosure Provided by Broker and Lender
Creditor including Broker OR Lender
Creditor ONLY
Broker can issue, but becomes creditor, impossible in some states
Pre-Qual -Non-GFE Cost Estimate

“New Language”
“Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan.”
30/60 days to correct

30/60 days to cure
30 days to issue corrected closing disclosure
60 days to refund funds and corrected disclosure to cure

Document Preparation

Much of the concern and perception of upheaval comes from the complete reinvention of two of the forms we see most often; the GFE and TIL. We have less to worry about in regards to completing the new loan estimate and closing disclosure because the burden of integrating these falls on our Loan Origination Systems (LOS) and Doc Prep vendors. 

Ellie Mae is one vendor who has proactively addressed the Integrated Disclosures and has already completed its input screen and benchmark re-builds.  Examining their courses with respect to the updates, you can see only a few fields got added to account for the changes and record-keeping purposes. 

Integrating your Systems into Procedure

If your LOS or Doc Prep vendor has not provided you a roadmap for these elements, note that the compliance deadline nears.  You should allow yourself 60 days to update your procedures and alert your staff to several new definitions, as well as conducting some dry runs to ensure you can execute on August 1, 2015.  Working backwards, this means that your LOS and Doc Prep vendors should have information to you at least 60 days in advance of this. That means your vendors should have your products updated by April 1, 2015.  

Sample Procedures - Click here to Download Sample Policy & Procedure

Adopting this new regulatory scheme, unless your business focuses on reverse or home equity lending, means that the old TIL disclosure procedures take a distant back seat.  To amend your existing procedures, you will overwrite your GFE application process.  

Lenders will have to establish a proactive closing disclosure review process as a result of the need to deliver it 7 days prior to closing.  Operationally this simply means that the HUD-1 Review Process which normally happened in conjunction with the closing/funding process is 

If you do not have a 2010 GFE estimate procedure, or a HUD-1 review procedure, you need to address this matter separately, but the updates to Policies and Procedures can be be quickly amended by ensuring the following:

Loan Estimate Process

    1. Cost Estimate process (must state NOT a Loan Estimate - and look different)
    2. Deliver Loan Estimate and Settlement Providers within 3 days
      1. Property/transaction NOT mobile, Reverse, HELOC
      2. Customer provides 6 items
      3. Application received
    3. Intent to Proceed
      1. Customer acknowledges intent to proceed
      2. 10 Days pass - Loan Estimate expires
    4. Change of Circumstance
      1. Application Date > 8/1/2015? 
      2. Deliver Revised Loan Estimate within 3 days
    5. Lock-in 
      1. Application Date > 8/1/2015?
      2. If AT Application, Loan Estimate within 3 days
      3. If AFTER Application Deliver Revised Loan Estimate WITH Lock-in/Financing Agreement
    6. Closing Preparation 
      1. Application Date > 8/1/2015?
      2. 7 Days since Initial Estimate
      3. 4 Days since revised estimate received by customer
      4. 7 Days Prior Closing Cost Disclosure Review and Deliver to Borrower and Settlement Agent
      5. 24 hours prior deliver Final Closing Cost Disclosure
    7. Closing Audit 
      1. Application Date > 8/1/2015?
      2. Completed within 30 days
      3. Funds refunded (if necessary) with revised cost disclosure within 60 days
    8. Retention
      1. Application Date > 8/1/2015?
      2. Retain ALL documents for 5 years from date of consummation

If you do not have a procedure for GFE or Closing Docs Review to edit, we can provide this as part of our Lender or Correspondent Packages - or contact us for a stand-alone process document which we will issue in February.  

Additional Resources

Buckley & Sandler TRID Resource Center (Legal Perspective)
ProClose 10 Things (Doc Prep Vendor's Perspective)
Housing Wire Readiness Assessment
Dodd-Frank Update - Howard Lax Article


  1. One of the large changes I am seeing in this new process is the loan officers ability to gather information (ie...bank statements, purchase contract, paystubs, etc.) from the client prior to the Loan Estimate being provided. For mortgage companies with a centralized disclosure desk this would pose an issue if you are taking a face to face interview of your client and in order for the loan officer to be compliant with these new rules they would need to wait for the Loan Estimate to be done before collecting any of the documents from the client. Am I correct in my understanding of 1026.19(e)(2)(iii)?

    1. Great comment. Turn this reading around: the loan officer CANNOT hold back the estimate as a result of not having information (as under GFE 2010 rules) beyond the 6 elements. The combination of TIL and RESPA means that a discussion of a specific loan amount will drive the generation of a Loan Estimate. The writers INTENDED to require early disclosure. This shouldn't change current process too much as the intent to proceed process and expiration of the Loan Estimate still exists.

      The downside is that the estimate may precede an ACTUAL application pursuant to the lender's credit policy, so the magnitude scope of the potential change of circumstance situation vastly increases. Instead of waiting until he or she has everything needed to issue an ACCURATE estimate, the estimate will change when the borrower provides additional information.