Norman Roos, Robinson and Cole LLP William McCue, McCue

TRID
with
Norman Roos, Robinson and Cole LLP
William McCue, McCue Mortgage Company
Lawrence Garfinkel, Hunt Leibert Jacobson P.C.
Jeremy Potter, Norcom Mortgage
Agenda
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Introduction
Overview and Framework
10 Things Realtors Need to Know
Lender’s Perspective
Settlement Service Provider’s Perspective
Helpful Information
Q&A
What is the CFPB?
• Created by the Dodd-Frank Act
• Mission: “to make markets for consumer financial products
and services work for Americans.”
• The Bureau regulates mortgage lending transactions
• What has the Bureau done?
o Researched and surveyed consumers
o Determined mortgage disclosures should be easier to
understand
o Solution: integrate the three main disclosure forms
1. Truth in Lending (TIL)
2. Good Faith Estimate (GFE)
3. HUD-1 Settlement Statement
CFPB Authority in our Industry
• Alternative Mortgage
• Home Ownership and
Transaction Parity Act
Equity Protection Act of
• Consumer Leasing Act of
1994
1976
• Real Estate Settlement
• Electronic Fund Transfer
Procedures Act of 1974
Act*
• S.A.F.E. Mortgage
• Equal Credit Opportunity
Act
Licensing Act of 2008
• Fair Credit Billing Act
• Truth in Lending Act
• Fair Credit Reporting Act*
• Truth in Savings Act
• Home Owners Protection
• Omnibus Appropriations
Act of 1998
Act of 2009*
• Fair Debt Collection
Practices Act
• Interstate Land Sales Full
Disclosure Act
• Federal Deposit Insurance
Act*
• Mortgage Reform and
• Gramm-Leach-Bliley Act*
Anti-Predatory Lending Act*
• Home Mortgage
*IndicatesAct
that portions
Disclosure
of 1975of this Act transferred to the CFPB
4
while other portions did not.
CFPB Goals
• Consumer Protection means transparency
• Improved consumer understanding
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Short-term and long-term costs
Monthly payments
Comparisons of competing loan offers
Shopping for closing costs
• Avoiding costly surprises at the closing table
• Easier comparisons of the estimated and final loan terms of
the loan
• More time to consider choices
• Limits on closing cost increases
CFPB Leniency
• “I'm pushing hard for it to happen before
October 3. I'd hoped that it would happen before
today. It is going to happen.”
• "There will be time for them to work to get it right
and not have to be perfect on the first day.”
- Richard Cordray, CFPB, September 28, 2015
Liability- Administrative
CFPB enforcement under Sec. 1055 of Dodd-Frank Act
• May hold administrative proceedings or bring
court actions for violating any provision of
“Federal consumer financial law”
• Relief may include
o Contract rescission/reformation
o Refunds or return of property
o Restitution
o Payment of damages
o Public notification regarding violation
o Civil money penalties (accumulate for as long as
violation exists or failure to reimburse continues!)
What is TRID?
TILA RESPA Integrated Disclosure Rule
• For those keeping score at home, that’s an
acronym of an acronym
• Loan Estimate (LE) replaces Good Faith Estimate
(GFE) and Initial Truth-in-Lending (TIL)
• Closing Disclosure (CD) replaces HUD-1 and Final
TIL
• Implementation date is October 3rd!
Yes, this is real.
Loan applications submitted on or after
Use Current Disclosures
October
3rd
Use New Disclosures
New Terms to Know
• Lender is the “creditor”
• Borrower is the “consumer”
• Changes to charges disclosed on the new
disclosure forms are “variations”
• “Consummation” is not the same thing as
settlement and closing
#1
• All new loan applications as of
Saturday (10/3) under the new
rules
o All lenders
o All residential mortgage loans
o Everyone in the country
Loan Estimate
• The New Forms Must Be Used with Respect
to Any Residential Mortgage Applications
Received on or After October 3, 2015
• No change for the following:
o Cannot Impost Fees (Except for credit report) Before Consumer
Receives Loan Estimate and Indicates Intent to Proceed
o Cannot Require Submission of Verification Documents
• We were not allowed to use the New
Forms before Effective Date
Delivery of Loan Estimate
• LE must be delivered or placed in mail no later than the third
business day after loan application received by creditor
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When is an application “received” by the creditor?
o When consumer gives the following information to creditor:
1.
2.
3.
4.
5.
6.
Name
Income
Social security number (for credit report)
Property address
Estimated property value
Mortgage loan amount sought
• The Loan Estimate must be delivered no later than 7th business
day before “consummation”
creates “waiting period”
o May only be waived for a bona fide financial emergency
(requires written statement by consumer)
#2
• Lenders cannot require
verification documents or charge
fees other than credit report fees
Loan Estimate
• LO can ask consumer for other information
beyond 6 items, but not verification
documents
• LO can stage information collection to
avoid or delay triggering event
• But as soon as LO receives sixth item, it is an
“Application”, whether the LO requested it
or not
• LO can not charge for fees except for
credit report
#3
• PreQualifications and
PreApprovals still available
• *just a little more complicated
Loan Estimate
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What about PreApprovals/PreQualifications?
OK to ask for account numbers, balances, etc.
OK to ask for employment information
But cannot REQUIRE verification documents
o VOD, VOE, etc.
o Voluntary submission ok
• OK to ask about purchase terms
• But cannot ask for copy of Purchase & Sale
Agreement
#4
• Lenders must finalize everything
include interest rates and
adjustments much earlier in the
process
When Must You Give the
Revised Loan Estimate?
• Revised loan estimate may not be
provided on the same date (or after)
the closing disclosure is provided
o Closing disclosure must be received by
consumer no later than three business days
(Sundays and holidays) before closing
o Be careful of this prohibition if closing disclosure
is provided early
o Important for lenders that allow consumer to
rate lock during application
#5
• New receipt of disclosure
requirements increase demands
on lenders and consumers alike
Closing Disclosure
• Creditors are responsible for CD’s:
o Accuracy
o Delivery to consumer
• Several lenders intend to handle
preparation and delivery
• Some lenders may use settlement agents
for prep and delivery
The keys to compliance are
communication and collaboration!
Delivery Methods
1.
In Person: “received” on day of delivery
2.
USPS or Private Courier
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The “Mailbox Rule”: receipt by consumer presumed three
days after mailing through USPS
•
No Mailbox Rule for private couriers – burden on sender to
prove receipt by consumer
3.
Email:
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Mailbox Rule applies unless creditor obtains evidence of
receipt by consumer (then treated same as In Person)
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Must comply with Federal E-Sign requirements
Consumer’s consent to communicate
electronically required
Must protect NPI (encryption)
#6
• New Closing Disclosure (CD)
includes additional federal
contact details and
lender/broker/agent contact
information
Closing Disclosure Page 5 - top
§ 1026.38(o)-(q)
24
Closing Disclosure Page Five (cont.)
§ 1026.38(r)-(s)
Signature
25
#7
• Delays are possible (at first!) but
most won’t be dictated by the
rules
Closing Disclosure
• How are changes before consummation
handled?
When change occurs between delivery and consummation, revised
form provided to consumer at or before consummation
EXCEPT
Creditors must provide a new CD and an additional 3 day waiting
period when the following changes occur:
1. APR changes 1/8 of a percent generally, and ¼ for
irregular loans
2. Pre-payment penalty added
3. Different Loan product (e.g., adjustable rate to
fixed)
#8
• Trusted business partners have
never been more important
Importance of Providers
List
• List must be provided within same timeframe as Loan Estimate
o But separate from Loan Estimate
o New “Model” list provided by CFPB
• Identified services must match Services
Identified as Shoppable on Loan Estimate
Form
• Dictates whether consumer can choose
the attorney or settlement agent
#9
• 30 day closing is not a thing of
the past but might be rare in first 2
months
Purchase and Sale
Contracts Concerns
• Revised contracts or amendments
o GHAR
o CBA
• Adjustments
o Oil Adjustments
o Water and Sewer
o HOA
• Mortgage Contingency Date and
Closing Date
o 30/45  45/60
#10
• Last minute changes pose
serious logistical challenge
Walk Through Inspection
Concerns
• CFPB stated emphatically on June 3, 2015 that
this will not cause delays
• However that may or may not be true:
o Investor Guidelines?
o Large Repair Items (Chimney, Roof, Electrical, Plumbing, etc.)
• Repair items should not be completed “prior to closing”
• They should be completed 15 days before the closing date
in the contract
Suggestion: Schedule a walk through to check on the repair
items
• Who is making the changes to the CD?
• Do a walkthrough the day before the closing, not
the day of
o This will allow the lender to make changes for any repair items
What else do you need to
know?
• What lenders are using?
o http://www.consumerfinance.gov
• What settlement agents are using?
o http://www.alta.org
• What can we expect in the future?
o Additional guidance (at some point)
o Secondary market overlays
o Clarification on certain loan products, if necessary
Will the Loan Estimate be
Revised?
• Generally, creditors cannot revise LE once
provided to consumer, even when technical
errors identified after delivery
• LE may only be revised for “changed
circumstance,” which is:
o Extraordinary event beyond control of an interested
party; or
o Info creditor relied on for LE becomes inaccurate; or
o New consumer-specific info available, which creditor
must rely on to provide LE
Permitted Revisions
• As a “general” rule cannot issue a revised
loan estimate disclosure to correct
o Technical errors or omissions
o Miscalculations
o Underestimated charges
• A revised loan estimate is permitted if the
borrower requests revisions to the “credit
terms” or “settlement”
o But only if the requested revision causes an
estimated charge to increase
Three Day Rule Chart
Provided by American Land Title Association
CD Form
Closing Disclosure
• How are changes after
consummation handled?
• Creditor must correct CD and redisclose when:
o Numeric Error Discovered. Re-disclose within 30 calendar
days of discovery.
o Non-numeric clerical error discovered. Re-disclose within
60 days of consummation.
o Tolerance violation discovered. Re-disclose within 60
days of consummation.
Seller’s Closing Disclosure
Protecting Non-public Personal Information (NPI)
• Settlement agent must provide CD to
seller by or at consummation
• Buyer CD discloses NPI about consumer
and mortgage loan
• Protecting NPI – seller’s CD does not
disclose buyer’s transaction
Challenges
• Selling and buying on the same day?
• Stacked closings?
• Paralegal is not making the changes,
Lender is making the changes
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How responsive?
Where is the processing center?
Last day of the month?
After 5 PM or before 9 AM?
Helpful Tips
• Commission Statements
o We will need them early so send with contracts
o Include Name and Address of Company as well as
Company License Number, Agent License Number, Agent
Phone Number & Email Address
• Homeowners Insurance
o Encourage Buyers to start looking for an Insurance Agent
when they start looking for a house
o Encourage Buyers to contact Agent and procure
insurance once the contract is signed
Closing Thoughts
• Closing Date
o Will be smoother if Closing Date is not last day of the
month
• Have as much of the negotiations
put into the contract as possible
• Know how your buyers want to
receive the disclosures
o Are the tech savvy?
• Email? Log into Portal?
o If not, the Disclosures will have to be mailed add one
week
The Keys to Success
Communication
Collaboration
Questions?