January 2016 –
Touted as the “Oracle of Compliance” Mitch Kider, Chairman and Managing Partner of Weiner Brodsky Kider PC shares his compliance insights for 2016.
As a practicing attorney, Mitch represents his clients in investigative and enforcement matters before the United States Consumer Financial Protection Bureau, Department of Housing and Urban Development, the Department of Veterans Affairs, the Department of Justice, the Federal Trade Commission, Ginnie Mae, Fannie Mae, Freddie Mac, and various state and local regulatory authorities.
Mitch Kider, Chairman and Managing Partner of Weiner Brodsky Kider PC, helps lenders make the most of TRID.
TRID is a process-driven disclosure rule, Kider explains, intended to simplify disclosures for the borrower, improve borrower understanding, and prevent surprises at the closing table. For the lender, the rule informs the loan officer of how and when to disclose information to the borrower.
While TRID has a similar structure to what is currently in place through TILA and RESPA, it is significantly more nuanced and can be complicated if the loan officer has not adequately prepared for the changes. The three key elements to compliance include that loan officers must 1) provide a consistent customer experience throughout the process, 2) document every action and the reason for those actions, and 3) provide the required disclosures at the appropriate time.
TRID begins from the moment of initial contact with the prospective borrower. Prior to receiving all of the information needed to complete the borrower application, TRID allows loan officers to communicate pre-disclosures of rates and other information, provided that they document their actions and disclose to the consumer that any information provided may change in the loan estimate.
Any information given to the borrower should include a disclosure that says, “Your actual rate payments and costs could be higher. Get an official loan estimate before choosing a loan.” For Mortgage Coach users, loan officers can communicate through the Edge web and mobile application, which includes automatic documentation and appropriate disclosures.
Once a customer provides all the information needed to fulfill the application, the loan officer must provide the borrower with an official loan estimate within three days of the completed application. Because the typical homeowner moves or changes loan terms within a five to seven year period, TILA has adjusted the disclosure time period to be more reflective of this term. The closing disclosures will still include the total cost of the loan over the life of the loan, but the loan estimate should reflect the cost of the loan over a five-year period. For Mortgage Coach users, the five-year loan estimate has always been integrated in the borrower experience.
After the official loan estimate is provided, the borrower has ten days to make the decision to move forward with that quote. Prior to the completion of those ten days or the point in which the consumer demonstrates an intent to proceed with the loan, the loan officer cannot require that borrowers provide any supporting documentation. This requirement is in place to protect the consumer from undue burden during a time in which the borrower may choose to shop and compare other rates. Lenders and Realtors can, however, suggest that the borrower voluntarily provide supporting documentation to move through the process more quickly.
Under TRID, lenders cannot collect any fees until the borrower has demonstrated a documented intent to proceed with the loan. The only fee that may be collected, Kider explains, is a “bonafide and reasonable credit report fee.”
Within the closing documents, TRID requires that loan officers disclose the lender’s rate and the owner’s policy in the title insurance premiums. The loan officer must subtract the full lender’s rate from the simultaneous rate, disclosing the full lender’s rate and the incremental cost of the owner’s policy.
Lastly, loan officers should provide the borrower with the closing disclosures three days prior to signature and closing of the loan. Once the disclosures are provided, the loan estimate cannot be adjusted. Therefore, while there are no restrictions as to how early a borrower may sign the closing documents, the disclosures should not be provided to the borrower until the loan officer is confident that the analysis included is accurate.
Communication with Realtors
Most lenders have not adequately prepared their loan officers to communicate and set expectations with borrowers and Realtors regarding the upcoming changes in disclosures.
One of the most important ways that loan officers can ensure smooth transition into TRID requirements is proper communication with lender partners. Realtors should know about the time requirements and understand when the borrower receives the loan estimate.
The loan officer will need to provide consistent and ongoing information to the borrower and the Realtor, notifying them of the status of the loan and keeping them informed in the process. Realtors may also be able to assist the loan officers in managing borrower expectations and educating the borrower on the timeline of the process.
If communication is proactive and effective, loan officers can leverage their compliance as a competitive advantage through an increase in referrals from Realtors and an improved borrower experience.