Before the TILA-RESPA Integrated Disclosure (TRID) rule was implemented Oct. 3, 2015, there were many concerns that lack of familiarity with the new rules and forms, as well as the lack of formal adjustment period to the rules, would lead to delayed closings and, understandably, peeved customers. As the first mortgage loans featuring the new Loan Estimate and Closing Disclosure forms are being closed, though, how much of that actually has come true?

Understanding the rule and avoiding closing delays

One of the major concerns coming into the Oct. 3 implementation date was that a lack of understanding of the rules would lead to mistakes, potential enforcement and closing delays. However, many lenders are reporting that the few loans that they have closed so far have luckily not had this issue.

“From an origination perspective, we’ve been pleasantly surprised by the acceptance of the Realtors and real estate agencies of the TRID changes coming in,” said Doug Baker, vice president, strategic business development at CrossCountry Mortgage Inc. in Brecksville, Ohio. “We know a lot of them are sensitive to potentially needing more time in the process, but basically, the agents are understanding that it’s going to be very difficult to do back-to-back closings on the same day. And most real estate companies are doing a great job of preparing their agents to anticipate potential delays.”

CrossCountry Mortgage has closed only about 20 purchase orders thus far, and reports having a “tremendously smooth rollout” which they relate to their preparation process.

“We approached TRID understanding it’s an issue and a challenge,” said Darrel Bilbrey, CEO of CrossCountry. “We proactively created planning, development and deployment, and we’ve had extensive training. In September everyone had four hours of learning the systems and training, as well as daily FAQs and other training.”

However, getting used to the new rules has not been smooth sailing for all involved.

“A change is always difficult, and I would say that we invest in training. We have five individuals who do nothing but constantly train. It’s a lot of work,” Bilbrey said.

John Haring, the director of compliance enablement of Ellie Mae, said that they have “not heard from any lenders that they’ve had issues with closings.” However, he said that there is some confusion over some of the details of the rule that have not been cleared up by the CFPB.

“There are areas where I think people are still struggling a little bit to understand the forms themselves, asking how come the numbers in the Closing Disclosure don’t match the Loan Estimate and why the Loan Estimate does not match the details of transaction on the uniform loan application, but part of it is the way the Loan Estimate and Closing Disclosure were designed,” Haring said.

According to Richard Horn, principal at Richard Horn Legal, PLLC, who led the final TRID rule when he was a senior counsel and special advisor at the CFPB, many of the problems being faced could have been prevented by proper training.

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“I think a lot of folks are being trained by people who don’t understand the rule as well as they should,” Horn said. “There are a lot of trainers saying they understand the rule, but they are giving out misinformation. Poor training can lead to compliance violations. You also have to manage your consumers’ expectations. You want to make sure your staff can explain the disclosures the right way. For example, consumers will want their loan officers and settlement agents to explain where the lender and seller credits went to on the CD, the Projected Payments table, the TIP, and the Calculating Cash to Close table, especially for more unique loans. If you can’t explain something to a consumer, they lose trust, which can lead to complaints and the bureau knocking on your door.”

However, training has not been as big of an issue for his clients.

“ I’ve educated my clients about the rule, and they know to call me when something doesn’t look right. I’m on call 24/7 at this point. I make sure to tell them call me, and they are, before they send the disclosures out,” Horn said. “I worry about the lenders and title companies that don’t have that kind of resource, that just put their faith in their software vendor. They may not have the time, staff, or capability to spot the errors I’m seeing. They’re likely sending out some disclosures that have violations on them, such as tables completed incorrectly.”

Issues with failures in TRID technology

Before the rule was effective, many wondered whether the technology would be ready for the new forms, particularly the need to run two separate systems since some loans would still be using the old forms, and others (for applications received on or after Oct. 1) would use the new forms.

“There is a broader issue about readiness, but the technology still is going to be most important thing that lenders will have to deal with when trying to comply with TRID. If the technology doesn’t work they don’t work,” Horn said.

Already, there have been rumors of technology failures. So many so that they were specifically mentioned by CFPB Director Richard Cordray at the most recent Mortgage Bankers Association conference in San Diego.

Cordray’s statements hinted that the bureau might up the ante in scrutiny for LOS systems that apparently failed after the rule was implemented.

“Quite frankly, I have been disturbed by reports I have been hearing about the vendors on whom so many of you rely,” Cordray said. “Some vendors performed poorly in getting their work done in a timely manner, and they unfairly put many of you on the spot with changes at the last minute or even past the due date. It may well be that all of the financial regulators, including the Consumer Bureau, need to devote greater attention to the unsatisfactory performance of these vendors and how they are affecting the financial marketplace.”

Mistakes that lenders may have made, however, will be treated with a softer hand, Cordray indicated, based on the recognition “that the mortgage industry has already dedicated substantial resources to understand the rules, adapt systems and train personnel.”

Based on these remarks, there has been speculation that the CFPB may begin to investigate whether certain software vendors are qualified to provide certain servicers and could be preparing to use its supervisory and enforcement authority to take a closer look at vendors. Under the Dodd-Frank Act, the bureau would be within its authority to examine the “service providers” of supervised entities.

Horn said that, despite reassurances to lenders that the CFPB was not blaming them for technology failures, lenders still need to be on guard to work to amend any issues that arise.

“We’re in the early days of the rule, and lenders who are providing inaccurate disclosures that are caused by software vendors, I think they can argue they attempted to comply in good faith. The fact that the software vendor caused the issue, I don’t think it will be overlooked by the CFPB, however. They’ll still cite it in an exam, and the lender will be expected to take action to address the issue. But I don’t think it will cause a civil money penalty or an informal enforcement action in the first examination,” Horn said.

“But one thing to keep in mind is that the bureau, under their service provider bulletin, said you need to have a plan in place to monitor and take action if a software vendor is causing compliance problems,” he continued. “The lender has to take steps to address the situation, either having a backup vendor or canceling the contract with the vendor. Lenders may want to start investigating before an exam which vendors are fully compliant. The bureau is going to expect some kind of action.”

However, some software vendors, such as RamQuest, report that so far they’ve had no major issues with their technology; and as TRID closings are now underway encouraged consideration of the context of Cordray’s foreboding statements made during the MBA’s annual conference.

“I think that the remarks made (by CFPB Director Richard Cordray) last Monday were intended to be at a group of software providers, not all providers. I’m fortunate to work alongside a group of providers who acted in not only good faith, but great faith. There is, of course, emphasis on ensuring technology’s ability to appropriately and accurately support its customers through these changes,” said Mary Schuster, executive vice president of regulatory affairs and chief product officer at RamQuest.

Although perhaps not applying to all software providers, Horn says that Cordray’s statements did touch on a legitimate problem with some software vendors’ products.

“There are some software vendors that have put in the time and resources and have gotten it right. But there are technology problems,” Horn said. “I’ve seen disclosures that have errors that were caused by technology; either the data didn’t make it to the right place in the system or there was a misinterpretation by the LOS on how the disclosures work. There are some tricky parts of the disclosure that seemed to have tripped up some of the LOS systems. I’ve seen rounding errors, misinterpretations of the Projected Payments table and the Calculating Cash to Close table. There definitely are problems with some technology vendors.”

Schuster agreed with Horn and also pointed out some potential problems with rounding errors and the Calculating Cash to Close table.

“Some lenders who took the concept that some dollar amounts on the Loan Estimate need to be rounded to the nearest dollar continue that logic to the Closing Disclosure, which may or may not be software limitations on their side. It could be a different interpretation, and that produces different outcomes based on the set of things involved,” Schuster said. “We’ve also seen several circumstances where the LOS’s calculations of the Cash to Close table don’t synch up to the rule and the clarification the bureau disseminated about these items (which is available here).”

Ellie Mae Vice President of Product Compliance Angela Cheek agreed that comparisons between the Loan Estimate and Closing Disclosure have caused some confusion.

“Even the Closing Disclosure’s calculating cash to close table, comparing the displayed final column unrounded value to the Loan Estimate column value that’s rounded, for actual comparison behind the scene, you compare the actual unrounded numbers for purposes of variance but and show the rounded values in the Loan Estimate column, it ends up in an interesting place. The amounts in the Loan Estimate and final columns could appear to vary by $1 to $5, but the table won’t say there’s actually a change because the actual unrounded numbers used for comparison didn’t change,” Cheek said. “There are some complexities to these disclosures that when a consumer is looking at it may make them scratch their head a little.”

Haring said the alternate forms could have issues, as well.

“There’s a lot of concerns around the use of the alternate Closing Disclosure and alternate Loan Estimate, particularly because lenders want to document ways they did principal reductions, refunds of mortgage insurance premiums affecting cash to close, and other ancillary credits, and then not having an official place on the alternate version to do that,” he said.

Despite the potential for complications, Ellie Mae Director of Corporate Communications Erica Harvill said that the support team at Ellie Mae has been able to clear up most of the confusion that arises.

“I chatted with our support team earlier and more than 70 percent of the calls they’re getting results in a first call resolution, something that’s a question that can be answered very quickly,” she said. “That’s showing a level of support, that they’re one-offs and not ongoing problems.”

For more on TRID

The little TRID bill that could: How a grace period becomes a law

Agency announces TRID grace period

It’s alive! TRID finally upon us, but what is still missing?

Industry expects growing pains while adjusting to TRID

Cordray comes out swinging in NAR speech, says TRID ‘misinformation’ being spread

For resources, special reports and more, visit the Road through Oct 3

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