The TILA-RESPA Integrated Disclosure, a rule known as TRID, was created to better inform borrowers about mortgage costs before their closing date. The rule requires timely and accurate delivery of the Loan Estimate (LE) and Closing Disclosure (CD) forms to borrowers, which helps to highlight the differences between the estimated and closing amounts. The initial implementation of the rule required vendors to make significant changes to their systems and continues to challenge some lenders due to the technical nature of the rule.
Related: How to Build a Strong Fair Lending & Redlining Compliance Management System
In the past, the Federal Reserve published its observations of common TRID violations it has found in its Consumer Compliance Outlook.
Here are four of the most common TRID violations:
1. Missing general loan information
The Federal Reserve found many TRID violations involved missing general loan information on the LE and CD. The most common fields left blank were the loan identification number, settlement agent, and file number.
Related: How Robust Is Your Lending Compliance Program?
2. Missing closing cost details
There were three types of violations that the Federal Reserve frequently observed in the Closing Cost tables on both the LE and CD. The first was failing to indicate the number of months the homeowner's insurance would be paid. The second was failing to identify the person receiving payment for closing costs. The final violation was failing to disclose which government entities taxes and other government fees were disbursed to.
3. Inaccurate cash to close calculations
The Federal Reserve noted inaccuracy in completing the Did This Change? column in the Calculating Cash to Close table of the LE and CD. The table outlines the amount of cash needed to close by referencing total closing costs and adding or subtracting other amounts. Lenders failed to accurately complete the Did This Change? column when comparing amount changes from the most recent LE.
Related: Supervisory Highlights: What We Can Learn from Others to Avoid Getting in Trouble
4. Missing contact info
The final violation outlined by the Federal Reserve was omitting portions of the required contact information on the CD. TRID requires full contact information for all parties the borrower has personal contact with—including the lender, mortgage broker, consumer’s real estate broker, and the seller’s real estate broker.
The FDIC also highlighted a commonly seen TRID violation in its Consumer Compliance Supervisory Highlights: issues with VA loans.
When providing Veterans Administration (VA) Loans, institutions failed to comply with the “best information reasonably available” and due diligence standards under TRID requirements. Institutions were identified issuing LEs based on unavailable interest rates and loan terms. Additionally, examiners observed potentially deceptive practices when institutions represented certain terms for loans that were not generally available.
While many LOS systems can generate TRID disclosures, some lenders do not have an effective process in place for identifying missing or incomplete information. For smaller lenders, TRID can be especially burdensome. Compliance EAGLE includes an automated review for TRID requirements to help ensure calculations are accurate. Contact us today to learn more!
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