TRID Caused Bulk Of QC Issues For Mortgage Lenders In 2016, Study Finds

Posted by Patrick Barnard on March 08, 2017 No Comments

A study conducted by mortgage process outsourcing firm MetaSource finds that 12 of the top 15 quality control (QC) issues mortgage lenders faced in 2016 were related to the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosures (TRID) rule.

In fact, the six most frequent findings were issues with TRID requirements, the firm says.

The top two findings were related to correspondence of information listed in the “calculating cash to close” table on page three of the closing disclosure (CD) to the information cited on the last disclosed loan estimate (LE) and receipt by the borrower of a CD at least three business days prior to consummation.

Other findings that routinely sent up red flags were related to the following:

  • 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 and providing it to the borrower within three business days of receiving information sufficient to establish a reason for re-disclosure; and
  • Providing the LE to the borrower not more than three business days after receipt of application.

It should be noted that 2016 was the first full year of the rule’s implementation. It should also be noted that the CFPB has revised and finalized its TRID rule and that those changes will be taking effect later this year and in 2018. Further revisions are possible.

“These findings demonstrate the impact TRID has had on us and the industry,” says Mary Kladde, senior vice president of mortgage services for MetaSource, in a release. “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 CD and LE, especially when they had the same date,” Kladde adds. “We’ve worked extensively with lenders to get the information we needed to validate accurate findings. We’ve also educated our clients on what they needed to do to prevent these findings in the future.”

With regard to the top two findings, Kladde points out that both are related to “difficulty in calculating the home buyer’s income.”

“[The] Federal Housing Administration [FHA] and Fannie Mae have often found these to be problems, as well,” Kladde says. The leading non-TRID issue – and 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 12th, providing verification of assets for review, an issue the FHA and Fannie Mae also encountered.

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