In a study by technology-focused provider of Business Process Outsourcing MetaSource, it was revealed that mortgage lenders found the federal "Know Before You Owe" mortgage disclosure rule (also know as known as TRID) to be the source of most of their quality control (QC) headaches in 2016, the first full year of the rule's implementation.
The implementation of TRID, which went into effect in October 2015, caused no small amount of consternation among mortgage lenders and other stakeholders in the industry.
According to provider MetaSource, TRID accounted for 12 of the top 15 findings of quality control (QC) issues in 2016.
The CFPB and TRID
The U.S. Consumer Financial Protection Bureau created TRID (TILA [Truth in Lending Act]-RESPA [Real Estate Settlement Procedures Act] Integrated Disclosure) and put it into effect in 2016, intending to better inform potential homeowners of their financing options.
"These findings demonstrate the impact TRID has had on us and the industry," said Mary Kladde, SVP of Mortgage Services for MetaSource. "TRID was such a significant change and many loan origination systems weren't completely ready for it. Additionally, QC was largely left out of the thought process. Overall, it has been a major pain point throughout 2016, although it does seem to be leveling out.”
"One source of confusion was the time sequence of new documents required for fee changes between the initial and final Closing Disclosure [CD] and Loan Estimate [LE], especially when they had the same date," Kladde said. "We've worked extensively with lenders to get the information we needed to validate accurate findings. We also have educated our clients on what they needed to do to prevent these findings in the future."
Six top findings were TRID issues
The six most frequent findings were issues with TRID requirements. The first two in rank order were:
1/Correspondence of information listed in the Calculating Cash to Close table on page 3 of the CD to the information cited on the last disclosed LE.
2/Receipt by the borrower of a CD at least three business days prior to consummation.
"The top two findings deal with difficulty in calculating the homebuyer's income. FHA [Federal Housing Administration] and Fannie Mae [Federal National Mortgage Association] have often found these to be problems as well," Kladde added.
Findings dealt with:
- Providing the CD in the file for review
- When fees within the zero-tolerance category increased without a valid reason, curing them on the final CD
- Supporting all required revised LEs by documentation of a valid Change of Circumstance (COC) and providing it to the borrower within three business days of receiving information sufficient to establish a reason for re-disclosure
- Providing LE to the borrower not more than three business days after receipt of application
The leading non-TRID issue, seventh on the list, was providing Verbal Verification of Employment per Automated Underwriting System requirements. The other non-TRID issues were ninth, providing matches of buyer income figures, and twelfth, providing verification of assets for review, an issue FHA and Fannie Mae also encountered.
The full list of findings appears on the MetaSource Mortgage Blog here.