Educate Yourself On TRID
By Ginger Bell
It’s critical that loan originators and others involved in the mortgage industry have a clear understanding of the new TILA RESPA Integrated Disclosure (TRID) rule that the Consumer Financial Protection Bureau (CFPB) recently announced will now be effective as of October 1, 2015.
As previously highlighted, TRID consolidates several disclosures required for most mortgage transactions. A Loan Estimate (LE) is replacing the initial Good Faith Estimate (GFE) and the Truth In Lending (TIL) disclosures; and a Closing Disclosure (CD) will replace the final TILA and the HUD-1. Lenders must provide The Loan Estimate to borrowers no later than three business days after they submit a loan application.
A recent poll conducted by Morf Media, Inc. on TRID Trivia revealed that 71 percent of respondents did not know the correct definition of business day for providing the Loan Estimate to the borrower.
The question was posed to a group of approximately 2,500 originators across the country:
Which is the correct definition of Business Day for the Initial Loan Estimate?
Additional trivia questions showed that 69% knew that the Closing Disclosure was replacing the HUD-1 and Final Til, 44% knew that a creditor has 10 days to refund any amounts paid by the borrower at closing that exceeded the amounts disclosed on the Loan Estimate beyond the applicable tolerance threshold and a less focused point but important none-the-less, revealed that only 16% knew that penalties for “Knowing” violation of TRID is $1,000,000 per day.
What does this say? Basically that we are not yet trained and ready for the implementation of TRID.
The definition of a business day for purposes of providing the initial Loan Estimate is a day on which the creditor’s offices are open to the public for carrying out substantially all of its business functions. (Comment 19(e)(1)(iii)-1, § 1026.2(a)(6))
This means that if your office is generally open for business on a Saturday, then you would count Saturday as a part of the timing for delivering the initial Loan Estimate. The same would apply if you are open for business on a Sunday. This business day definition is the same as exists today for providing initial disclosures.
If an application is denied or withdrawn during the three business day period, the creditor does not need to provide the consumer with the disclosures.
Mortgage Broker Loan Estimate Business Day Definition
Mortgage brokers will need to work closely with their wholesale lenders to meet the days that they are using for business days. This is because the definition of a business day for proposes of providing the initial Loan Estimate applies to the day on which the “creditor’s” offices are open to the public for business. This means that is will not matter what days a mortgage broker is open for business but rather that mortgage brokers will be using the definition of business day for the wholesale lenders are using. So, if a mortgage broker is working with ABC Wholesale Lender and that lender is only open Mon-Fri, then the mortgage broker will not use Saturday and Sunday as a part of the three business days for providing the initial Loan Estimate.
Important Areas of Focus
There are a few key areas to focus on for providing the Loan Estimate to the borrower on time. First, the Loan Estimate must be provided within three business days after application.
Application is received when you have received information from the borrower for the following six items. If you remember the word ALIENS you can always remember the six items for an application.
Address of Property
Estimated Value of the Property
Social Security Number
6 Items for Application = Loan Estimate in 3 Business Days
It does not matter how you receive the six items of information for an application. It can be in person, on the phone, on the internet, at a soccer game or on Facebook. The bottom line is that once you have the six items of information, you have an application and you must provide a Loan Estimate to the borrower within three business days. Again, those are the days in which a Creditor is open to the public for generally carrying out its business functions. To complicate the matter; let’s say that you are a non-delegated lender who typically counts Monday through Saturday as your business days for providing an initial Loan Estimate, but you have a borrower who is going to do an FHA loan that you are going to broker to a wholesale lender. Your business days to provide the initial Loan Estimate will be based on your wholesale lenders business days which are typically Monday through Friday and not your business days of Monday through Saturday.
Policies and Procedures
It is important to have policies and procedures and training in place and communicated to your staff. This should outline the variations of definition of business day when you are the lender and when you are the broker on loans. Be certain to communicate these policies and procedures to your staff and be sure to also monitor that these policies are being followed. Monitoring is one of the most important aspects of your Compliance Management System.
Train and Educate
As a part of your Compliance Management System, you should be conducting training on the various rules and regulations of our industry. The new TILA/RESPA Integrated Disclosure is one that you should be training your staff on now. Attending one or two webinars is simply not enough. You must really dive into the requirements for an understanding of the changes.
Once you have your plan in place and have your policies and procedures written, you must train your staff on those changes. You must also train them on what is required of them as it relates to their job. They should have a thorough understanding of the regulation, what is required and your implementation plan. You can hold webinars, small informational meetings or attend more in-depth live or online training. If you need help in planning your training you can look to experts like Morf Media Inc. and their compliance partner Strategic Compliance Partners to help develop a training plan. There is much to do to prepare and you want to be sure to be working with lenders and vendors who are aware of the change and what needs to happen.
Plan, Train and Communicate
Now is the time to start educating yourself and staff. The numbers reveal that we are not yet ready for the changes. The hard lesson to learn is when you have not provided a Loan Estimate to the borrower within three business days of application and you have a whole lot of problems, beginning with a loan that is out of compliance. If you are brokering that loan, you have no place to send it. If you are the lender you have an un-sellable loan and that is just the beginning of the problems. So, continue planning and preparing but make sure that you are also training and understanding what the new requirements are.
If you would like to register to participate in the TRID Trivia daily questions please go to www.TRIDTrivia.com to register.
Ginger Bell is the best-selling author of “Cracking the Success Code,” co-authored with Brian Tracy, and a well known education specialist in the mortgage banking industry. She is SVP e-Learning for Morf Media, an international gamification software development firm. A previous Dale Carnegie Training Consultant, Ginger has been awarded the Presidential Award by both the California and the Oregon Association of Mortgage Professionals, and the Professional Woman of the Year” award by the National Association of Professional Women.