TILA-RESPA Integrated Disclosure News

By Mike Patterson posted on June 26th 2015

Currently, many compliance audits can be performed before a loan is purchased by a simple review of the data on a loan's Good Faith Estimate and HUD I Settlement Statement. For covered loans closing with application dates on or after October 1, 2015, things change. The CFPB will require loan originators to document loan costs/fee variances between the original Loan Estimate and the final Closing Disclosure and any adjustment of the tolerances "off sheet" according to "a mechanism for tracking which disclosure controls for purposes of determining good faith". On May 26th the CFPB in their TILA-RESPA Integrated Disclosures Part 5-Common Questions provided the following common question and answer:

Common Questions - Revised Disclosures
Q: In a scenario where the creditor's estimate of closing costs changes, but the prior estimate remains "in good faith" for purposes of Section 1026.19(e)(3), is the creditor prohibited from providing the consumer with a revised disclosure?

Answer-See Comment 19(e)(3)(iv)(A)-1.ii:

Assume a creditor provides a $400 estimate of title fees, which are included in the category of fees which may not increase by more than 10 percent for the purposes of determining good faith under §1026.19(e)(3)(ii), except as provided in §1026.19(e)(3)(iv). An unreleased lien is discovered and the title company must perform additional work to release the lien. However, the additional costs amount to only a five percent increase over the sum of all fees included in the category of fees which may not increase by more than 10 percent. A changed circumstance has occurred (i.e., new information), but the sum of all costs subject to the 10 percent tolerance category has not increased by more than 10 percent. Section 1026.19(e)(3)(iv) does not prohibit the creditor from issuing revised disclosures, but if the creditor issues revised disclosures in this scenario, when the disclosures required by§ 1026.19(f)(1)(i) are delivered, the actual title fees of $500 may not be compared to the revised title fees of $400; they must be compared to the originally estimated title fees of $400 because the changed circumstance did not cause the sum of all costs subject to the 10 percent tolerance category to increase by more than 10 percent.

Q: The current HUD-1 has a comparison chart to show the applicable tolerance levels and how the charges compare. Where is the equivalent chart on the Closing Disclosure?

Here is the pertinent part of transcript from the CFPB webcast:

TILA-RESPA Integrated Disclosures, Part 5: Implementation Challenges and Questions
Tuesday, May 26, 2015
Slides 17, 18 and 19
From transcript: Minutes 24:20—29:23
(Emphasis added)
Pedro, in a scenario where the creditor’s estimate of closing costs changes, but the prior estimate remains “in good faith” for purposes of section 1026.19(e)(3), is the creditor prohibited from providing the consumer with a revised disclosure? No, Brian. Slide 18 please. As stated in comment (1)(ii) to 1026.19(e)(3)(iv)(a) the rule does not prohibit the creditor from issuing revised disclosures for informational purposes. When estimates change, section 1026.19(e)(3)(i)-(iii) determines whether the changes are in good faith. To be clear, throughout this answer, the phrase in “good faith” will refer to the good faith determination under that specific section 1026.19(e)(3). Bear in mind that the loan estimate is a disclosure to the consumer. The loan estimate alone will not indicate whether estimates are in good faith. To determine whether estimates are in good faith, the creditor must perform the analysis under section 1026.19(e)(3)(i)-(iii). If the creditor performs that analysis and determines that changed estimates are not in good faith then, under certain circumstances 1026.19(e)(3)(iv) and (e)(4), may allow the creditor to reset the estimates in order to be in good faith. When resetting the estimates under those circumstances, the rule requires that the creditor to provide the consumer with a revised loan estimate—or- in certain instances explained in comment 1 to 1026.19(e)(4)(ii) a closing disclosure. But even if the creditor determines the changed estimates remain in good faith the rule does not prohibit the creditor from issuing an updated disclosure reflecting the changed estimates-and a creditor has the option of doing so. However, keep in mind in that case, the updated disclosure would not impact the good faith analysis under section 1026.19(e)(3)(i)-(iii) and that the creditor must have a mechanism for tracking which disclosure controls for purposes of determining good faith. Let’s consider an example. The scenario and comment (1)(ii) to 1026.19(e)(3)(iv)(a) assumes that a creditor previously provided a $400 estimate of title fees. For purposes of determining good faith, title fees are generally included in the category of fees that in aggregate may not increase by more than 10%. This scenario further assumes that a changed circumstance increases the title fees from $400 to $500 and at the sum of all costs subject to the 10% tolerance category has not increased by more than 10%. Under section 1026.19(e)(3)(ii) the prior estimate remains in good faith. Therefore, the rule does not permit the creditor to reset the estimate since the total charges in the 10% tolerance category are still in good faith. However, the creditor has the option of providing the consumer with an updated disclosure reflecting the increase in title fees and when the creditor performs a good faith analysis under section 1026.19(e)(3)(i)-(iii) the actual title fees of $500 may not be compared to the revised estimate of $500. Instead, they must be compared to the originally estimated title fees of $400 because the changed circumstance does not cause the sum of all costs subject to the 10% tolerance category to increase by more than 10%. Thank you very much, Pedro. If we can have slide 19 please. Danya, this is a question for you. The current HUD I has a comparison chart to show the applicable tolerance levels and how the charges compare. Where is the equivalent chart on the closing disclosure? There is no chart on the closing disclosure equivalent to the HUD I comparison chart. The creditor is responsible for tracking charges “off sheet” to ensure that the amounts disclosed on the loan estimate were made in good faith and that the charges at closing do not exceed the applicable tolerances. To the extent there are any refunds from the creditor to the consumer for violation of the good faith standard, the refund should be disclosed with lender credit on page 2 of the closing disclosure. As shown on the slide, any refund should be itemized in a manner as shown in form H25(f) of appendix H.

Link: https://www.webcaster4.com/Webcast/Page/577/8180

Re multiple changed circumstances increasing the 10% tolerance, the commentary to Section 1026.19(e)(4)(i) indicates that multiple changed circumstances, each of which increases the 10% bucket by less than 10%, can be taken together to determine a breach of the 10% threshold:

ii. Assume a creditor receives information on Monday that, because of a changed circumstance under § 1026.19(e)(3)(iv)(A), the title fees will increase by an amount totaling six percent of the originally estimated settlement charges subject to § 1026.19(e)(3)(ii). The creditor had received information three weeks before that, because of a changed circumstance under § 1026.19(e)(3)(iv)(A), the pest inspection fees increased by an amount totaling five percent of the originally estimated settlement charges subject to § 1026.19(e)(3)(ii). Thus, on Monday, the creditor has received sufficient information to establish a valid reason for revision and must provide revised disclosures reflecting the 11 percent increase by Thursday to comply with § 1026.19(e)(4)(i).

After October 1, 2015, purchasers of covered loans should require from the loan originators those "off sheet" calculations and confirm that any fee variances complied the new integrated disclosure requirements.

To assist loan originators, investors and warehouse lenders we have developed a free "TILA-RESPA Integrated Disclosure 10% Baseline Calculator" that can provide the necessary analytics and loan specific certification: http://www.ppdocs.com/Calculators/TRIDBaseline.aspx

A sample certification is included below.

Your LOS system may track these variances on loans you produce directly, however your system may not track third party originations in a similar manner. You will need an affirmative representation that you have been provided all the Loan Estimates and Closing Disclosures from the loan originator as well as a way to document any adjustment of the tolerances "off sheet" according to "a mechanism for tracking which disclosure controls for purposes of determining good faith". If you purchase third party originated loans and want to direct your correspondents to our site to run this calculation and produce a certification on the loans you are considering for purchase we would be glad to add your name to the “Investor Pick List”. Otherwise they can still use the calculator and create the certification by choosing the “Other” option and typing in your name (Loan Purchaser) in manually.

Again--this service is free.

By Jerry Bribiesca posted on May 28th 2015

Here at PPDocs we realize that your LOS or any other third party vendor may not be ready for October 3. These solutions may be very tightly integrated with your "brand". Why wait for them to limp across the finish line. Use our "tools" and "collaboration" branded to your needs.

You can use your own company logo, and color scheme.

TILA-RESPA Integrated Disclosures (TRID) Branding

Any email notifications out of our system to your settlement agents, or users will also be branded with the same color scheme.

By Jerry Bribiesca posted on May 28th 2015

By now everyone should be familiar with the rules that are effective October 3, 2015. Most lenders are waiting for their LOS system to release a test platform for the LE/CD Disclosures. However, have you thought of the other problems you may face? Do the words "10% baseline", "Simultaneous issue of Owner and Lender Title Policy", and "Filing Fee Calculator" make you nervous?

Once again, PPDocs is ahead of the game and working on calculators to ease these issues.

  • 10% Tolerance Calculator - This calculator will help you track changed circumstances to alert you when you can "reset" your 10% baseline.
  • TRID Title Insurance Calculator - In many states, a consumer is entitled to a discount on loan title insurance policy when an owner’s policy will be simultaneously issued. When both a loan and owner’s title insurance policies will be purchased (“simultaneous issuance”), the Rule requires the lender or settlement agent to disclose the title premiums on the Closing Disclosure in a way different than actually charged. Specifically, the Rule requires:
  • Filing Fee Collaborating Calculator - With this tool, you will be able to ask the settlement agent for an exact fee for pages to record. We will then help you calculate how many pages are "recordable" and calculate an accurate fee.

By Jerry Bribiesca posted on May 27th 2015

As everyone is aware, October will bring big changes to the way mortgage industry operates. TRID is not just about 2 new disclosures, it's changing the way lenders and settlement agents conduct business.

Here at PPDocs, we have been working around the clock to perfect these changes. Since November of 2014 we took a stance to do away with HUD line numbers and instead mimic the forms. We feel that these forms are here to stay, there is no reason to continue with the old.

Take a look at the screenshots below to see how we accomplished this task:

Loan Estimate:

TILA-RESPA Integrated Disclosures (TRID) Closing Costs

Simply click Add Item and you may start typing a fee name and we will automatically suggest the appropriate name and pre-fill certain conditions for the fee on the fly.

TILA-RESPA Integrated Disclosures (TRID) Add Item

Depending what section you are adding a fee in. We show/hide different fields to further simplfy the ordering process.

Closing Disclosure:

TILA-RESPA Integrated Disclosures (TRID) Closing Costs

TILA-RESPA Integrated Disclosures (TRID) Closing Costs

By Jerry Bribiesca posted on May 1st 2015

With Bank of America and Wells Fargo announcing that they will produce the Closing Disclosure, most banks will follow in their footsteps. How will you get the Settlement Agents data? Emails that get buried in their inbox? Faxes that you can't read clearly? How about an integrated solution that allows you to collaborate with settlement agents in real time? PPDocs, inc. has developed a solution that allows the Lenders to send an invitation to any settlement agent to input their fees.

TILA-RESPA Integrated Disclosures (TRID) Collaboration

All we need is an email address and you are ready to stay compliant with the new rule. No special software is needed, no need to get your IT department involved. We do all the heavy lifting.

Settlement Agents, or anyone else you want to collaborate with will receive an email that will give them access to the collaboration.

TILA-RESPA Integrated Disclosures (TRID) Collaboration

From there, all they need to know is a few things about the loan and they are on their way to collaborate.

TILA-RESPA Integrated Disclosures (TRID) Collaboration

We know our site is easy to navigate, but we take it one step further with an online video showing the invitee exactly what to do.

TILA-RESPA Integrated Disclosures (TRID) Collaboration

Already have the data in your system? As long as you can export a MISMO file, we can take that file and input the information for you! Don’t worry! We will let you export it back into your system once the collaboration is approved by the lender.

Once the settlement agents have submitted their proposed changes, the lender will receive an email detailing what has changed and options to accept or reject those changes.

TILA-RESPA Integrated Disclosures (TRID) Collaboration

Settlement Agents will receive a detailed report of what was accepted and rejected.

With our collaboration tool, our goal from the beginning was to make it as easy as possible. No need for costly training, and IT infrastructure changes.

All of this is available now on our site for testing.

By Venessa Snell posted on April 27th 2015

The major changes taking place for TRID come October 3, 2015, are bearing down on the industry. Now that most have a generalized concept of the larger cogs in this ticking clock, they are starting to dig deeper into the smaller components of the moving parts. One of these small components entails the tolerance categories we have become accustom to, are now facing restructure. The initial jolt of the new zero tolerance category, including items for which the consumer cannot shop (appraisals, credit reports etc…) is still humming steadily through group talks and forums. While Lenders may still be trying to grasp how the new zero tolerance will affect their business, one can’t forget that the 10% has also had an overhaul. The most readily apparent is that the new zero fees are being extracted from the current 10% tolerance, but that is not the only change to come. “Rebaselining”, has become a large point of discussion.

The baseline is the figures used when comparison testing for the zero and 10% tolerance aggregates. In a current transaction scenario, where a fee in your 10% category increases after initial disclosure, a lender may redisclose the GFE within the allotted time frame of 3 days from receiving the new information. The new GFE then takes the place of the previous disclosure and your comparison for 10% tolerance fees is “rebaselined” to align with the updated fee. Come October 3, 2015, this tolerance test will be enhanced with a few more moving targets. Take this same scenario and fast forward to a Loan Estimate. The rule does not permit “re-baselining” of the 10% tolerance bucket when a changed circumstance results in a fee increase that does not cause the aggregate fees in that category to increase by more than 10%. The Bureau determined that to allow such incremental “re-baselining” of the 10% tolerance category every time a changed circumstance occurred would effectively undermine the 10% tolerance threshold.

Accordingly, if a changed circumstance occurs that results in the 10% tolerance fees increasing by more than 10%, then the lender may issue a revised LE and “re-baseline” the 10% tolerance category. If, however, the changed circumstance results in a fee increase that is less than 10% (ie. within tolerance), then the lender may choose to issue a revised LE. . . but may not “re-baseline” the 10% tolerance category. Instead, the lender will have to continue to use the original LE’s 10% category baseline when calculating tolerances, regardless of the number of revised LEs that are issued (unless and until the 10% tolerance threshold is breached). Example: Section C- Survey Fee increased. When all are selected from the Written List of Providers (will move to Section B on Closing Disclosure). The 10% category was not breached therefore the original amount is used as your "baseline".

Baseline

PPDocs will not be able to track our clients’ internal redisclosures, but we will be providing informative prompts to assist in establishing a baseline when preparing a Closing Disclosure. It will be imperative to remember that numerical values from a final Loan Estimate may not necessarily be one and the same as those needed to run the final 10% tolerance test.

By Mike Patterson posted on January 27th 2015

An Independent Integrated Disclosure (TRID) Solution Is READY NOW

The new TILA-RESPA Integrated Disclosures (TRID) are required for all residential covered loans that have applications dated on or after Aug 1, 2015.

We are hearing that some loan origination software developers:

  • may not meet that deadline,
  • will not support all loan programs -- e.g. not construction, one-time close, step, or variable rate loans; or
  • will not be producing the new required Loan Estimate and Closing Disclosure forms at all!

We have also been told that the August 1, 2015 deadline WILL NOT BE EXTENDED by the CFPB!

If you are not testing your current software vendor's integrated disclosures RIGHT NOW, how can you be certain that they will be ready in time and will support all your loan programs -- and in time for your training needs? What if they aren’t ready in time? Who will be blamed? You???

Regulators Require Backup Contingency Plans

Financial regulators require lenders to have backup contingency plans in case of critical vendor delay/failure. Do you meet your regulator's expectations for your critical vendor business continuity programs? You cannot provide loans to consumers secured by their homes if you cannot disclose them properly. See OCC bulletin: http://www.occ.gov/news-issuances/bulletins/2013/bulletin-2013-29.html

Our integrated disclosure solution features:

  • Availability – it’s ready for you to test RIGHT NOW for FREE!
  • Supports construction, one-time close and other irregular loans; fixed, variable, and step interest rates;
  • Compliant with ALL CFPB announcements (including 1-20-2015) and other regulatory requirements;
  • Operates independently from other loan origination software systems;
  • A user can type directly into screens that look just like the LE and CD or they can import their loan data directly from their loan origination system via MISMO XML file version 2.6 or later (Version 3.3 is under construction);
  • Exports the amended MISMO XML file back to the loan origination system (under construction, ETA 1 month);
  • Collaborates electronically with settlement agents for their required data inputs for the Loan Estimate and Closing Disclosure via simple email invitation. Settlement agent does not need any extra software! Settlement agent offered inputs can then be compared-accepted-rejected by the lender throughout the closing process with the decision(s) sent back electronically to the settlement agent; and
  • Delivers the integrated disclosures electronically in full compliance with all applicable ESIGN Act requirements. Otherwise, normal email delivery of the disclosures without borrower prior consent is NOT compliant! This e-delivery method can shorten the disclosure delivery periods by 3 business days.
  • No long term contracts. Pay for what you use. Specific pricing is available on our website.
  • On The Drawing Board -- Within 2 months, we will be able to “ghost” this system under any brand or vendor name. Use our or your LE and/or CD with our “one of a kind” collaboration tool! Why re-create the wheel?

Don't get stuck with the blame if your software vendor drops the ball. Let us be either your Plan A or Plan B contingency. We don't mind sitting on the bench. When called in...WE WILL NOT LET YOU DOWN!

LEGAL NOTE: Our computer screens, code and collaboration methodology have been copyrighted. Any unauthorized use is strictly prohibited. Patent Pending.

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