90% Of Mortgages Originated Since Oct. 3 Have TRID Violations

Posted by Patrick Barnard on December 11, 2015 No Comments

A report from Moody’s shows that more than 90% of the mortgages originated since the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosure (TRID) rules went into effect on Oct. 3 contain violations, however, many of the errors are only technical in nature.

The report’s findings are based on third-party reviews of about 300 loans from random, unidentified lenders. Some of the new forms included wrong spelling conventions for counterparties’ names, such as not including a hyphen in someone’s last name. Though such errors might seem immaterial in nature, they could be enough to get the attention of regulators. Worse, they could potentially result in lawsuits and mortgage buybacks should borrowers go into default.

However, Moody’s adds that, ‘the extent to which a secondary market purchaser, such as an RMBS trust, would bear damages or costs from delayed foreclosures is still unclear without further court or CFPB interpretation.’

The firm’s report is in contrast with recent comments made by Richard Cordray, director of the CFPB, to the effect that implementation of TRID has, thus far, gone smoothly and that lender fears and concerns over the new rules were overblown.

During the Consumer Federation of America convention held Dec. 3 in Washington, D.C., Cordray compared the fears and concerns over TRID with the fears and concerns that were raised by the American public during the lead up to Y2K in 2000.

‘Reports from participants across the market seem to be indicating that implementation of the new rule is going fairly smoothly,’ Cordray said. ‘So, it seems that these anxieties were much like the errant predictions of technological disaster stemming from Y2K, which, of course, never materialized.’

To access Moody’s report, click here.

Reagrdless of how the CFPB handles enforcement of TRID violations, it appears the new set of rules is going to have a permanent impact on the industry in terms of operational costs. In a recent statement, David Stevens, president and CEO of the Mortgage Bankers Association (MBA), applauded lenders’ ‘Herculean’ efforts ‘in preparing for, and executing, the new Know Before You Owe (TRID) disclosures in a manner that has insulated the vast majority of borrowers from any adverse impact.’

Stevens says now that the ‘costly system changes, staff training and business partner education’ stage has passed, lenders are deploying ‘massive amounts of human capital to address vendor issues, inconsistent investor interpretations and inadequate preparation by some settlement service providers’ in order to address the ‘unknown potential compliance risk.’

‘We recognize that the current situation is not sustainable, and that further clarity from the CFPB is essential to bring efficiency to the closing process,’ Stevens says in his letter to MBA members. ‘[The] MBA is actively engaged with lenders, investors, vendors and third party diligence companies to identify common TRID compliance problems arising from unclear rules, inconsistent interpretations of the rules, and unanticipated transactional issues.’

Stevens adds that the MBA has shared the preliminary results of its findings on TRID with the CFPB and that the association hopes to ‘obtain better guidance from the CFPB, expanded cure opportunities for minor TRID issues, and more consistent application of TRID by investors.’

‘Given the CFPB’s reluctance to provide such guidance to date, we are reaching out to our colleagues in the financial trades, real estate, title and settlement industries to work with us in an effort to bring resolution to these concerns as soon as possible,’ Stevens writes in his letter. ‘In the meantime, we will continue to provide members as much up-to-date information as possible by webinars and otherwise.’

Register here to receive our Latest Headlines email newsletter

Leave a Comment