In a letter to the Consumer Financial Protection Bureau Director Richard Cordray written by the Association of Mortgage Investors, the group’s executive director, Chris Katopis, calls out TRID as being “well intentioned” but described an atmosphere of “legal uncertainty” that’s risen from the “Know Before You Owe” rule’s implementation. He provided examples to support his claim.
“As lenders are implementing TRID, there are mistakes made,” Katopis wrote.
The association’s letter organized its collection of common TRID errors into three appendices – frequent loan estimate defects, frequent closing disclosure defects, technical and minor errors frequently cited as TRID violations – and offered bulleted instances that help define the scope of the reported problems.
Here are some common examples AMI provided:
1. LE Defects
- The Lender name and address information are missing from the top of the LE form.
- The Loan Terms table lists incorrect information or is incomplete (e.g., inaccurate Product Type description).
- The Estimated Closing Costs are not calculated in the same manner as the Total Closing Costs disclosed on page 2 of the Loan Estimate.
- The Prepaids table does not include the applicable time period covered by the amount to be paid by the borrower and the total amount paid.
- The Contact Information table is incomplete for the creditor and/or mortgage broker.
2. CD Defects
- Missing or incomplete Closing Information (e.g., missing closing date, missing settlement agent name, file number), Transaction Information (e.g., seller name and address), and Loan Information (e.g., missing loan ID number).
- Numerical computation errors (e.g., itemization of Loan Costs do not total the Total Loan Costs on page two of the Closing Disclosure, Loan Costs and Other Costs do not total Closing Costs in the Costs at Closing table on page one of the Closing Disclosure).
- The Initial Escrow Payment at Closing table does not include the amount escrowed per month for each item, the number of months collected at consummation and the total amount paid.
- Fees listed under the Closing Cost Details section of the Closing Disclosure do not match Closing Cost Details on the most current revised Loan Estimate issued.
- Loans closed prior to three day waiting period.
3. Technical and Minor Errors
- Calculation discrepancies resulting from inaccurate rounding and misplaced decimal points.
- The use of inappropriate abbreviations, such as CPL for “Closing Protection Letter.”
- Loan calculation discrepancies and fees listed incorrectly.
The full letter, first published by HousingWire, can be found online. It includes a more extensive list of errors and defects.
AMI asks for change
It is not the expressed intent of Katopis and the AMI to repeal the TRID rule, but rather the association, on behalf of its members, would like “formal guidance clarifying whether the statutory authority for each TRID requirement is under RESPA or TILA, as well as the scope and applicability of TRID’s cure mechanisms.”
Specifically, Katopis asked for:
“Clarification over liability sought”: The AMI executive director worries public comments Cordray made regarding “listing disclosures in 16 U.S.C. § 1640(a) that give rise to statutory and class action damages” not including RESPA disclosures or Dodd-Frank disclosures, are “neither legally binding nor do they clarify the legal uncertainty around liability for violations of TRID.” The AMI is asking for the Bureau to “more clearly (define) the contours of TILA liability for violations.”
“Description of Process and Background”: A concern primarily for “secondary market investors that buy mortgages from primary lenders,” Katopis described the securitization process for loans with TRID errors, pointing out due diligence firms are recording TRID errors on loans as material exceptions to rating agency and investor compliance criteria “because they are considered to be non-compliant with TRID.” The issue becomes these errored loans end up receiving skewed rating agency grades. Without the appropriate “cure mechanisms,” investors are saddled with the decision of whether to purchase a loan with a TRID error, “regardless of its materiality of impact to the consumer.” The AMI wants clarification on these mechanisms.
Ultimately, Cordray concluded his letter explaining that the AMI wants to “constructively engage the bureau about opening a meaningful dialogue, introducing certainty and clarity to the framework for liability for TRID violations, and developing a reasonable series of corrective steps toward the end of preserving private capital in the U.S. mortgage market.”
In the meantime, lenders and mortgage investors should consider the common errors laid out in AMI’s letter and work to expect, avoid and correct them.