TRID: The "Know Before You Owe" mortgage disclosure rule.
For additional information about TRID, the Consumer Protection Financial Bureau provides a variety of resources. Follow this link to access their website.
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July 29, 2016
Today, CFPB issued proposals to clarify the TRID (KBYO) Rule through additional rule language and commentary – predominantly the latter. Because the proposal is 293 pages of fairly small print, it is impossible to cover all of its contents in one summary.
This information focuses on highlights and key topics for settlement agents. A more detailed summary will follow shortly. Please note AEA will be submitting a written position paper on the proposals by the October 18, 2016 deadline.
The rule clarifies and addresses a variety of items including coverage of, and technical provisions relating to construction loans, as well as new coverage of cooperative housing units and loans coming from local housing assistance.
There are a variety of technical clarifications directed at lenders, but each must be well understood by AEA members as well. These include clarifications on property taxes, recording fees and per diem interest disclosures as well as credits—seller and lender.
The CFPB also included clarifications about disclosures for simultaneous first lien and subordinate loans including language on the Seller’s CD. They address the “black hole” issue that lenders spotted and use of sequential corrected closing disclosures when they are within the last four business days before consummation.
“Section 1026.19(e)(4)(ii) requires that a creditor ensures receipt of any revised Loan
Estimate no later than four business days before consummation and further prohibits the issuance of a revised Loan Estimate on or after the date on which the creditor provides the Closing Disclosure. Even when the creditor may not provide a revised Loan Estimate under
- 1026.19(e)(4)(ii), however, it can still use revised amounts for the purpose of determining good faith if the revised amounts are reflected in the Closing Disclosure, subject to the other requirements of § 1026.19(e)(4).
Although existing comment 19(e)(4)(ii)-1 expressly references only the initial Closing
Disclosure issued pursuant to § 1026.19(f)(1) in explaining this fact, the same logic applies to corrected Closing Disclosures issued pursuant to § 1026.19(f)(2). As explained in comment 19(f)(1)(i)-1, if a Closing Disclosure provided to comply with § 1026.19(f)(1)(i) later becomes inaccurate, a creditor can satisfy the requirements of § 1026.19(f)(1)(i) by providing corrected disclosures that contain the actual terms of the transaction, provided that the creditor meets the timing requirements of § 1026.19(f)(2). Thus, the provision of a corrected Closing Disclosure under § 1026.19(f)(2) is properly an extension of the ongoing requirements of § 1026.19(f)(1)(i).
As a result, the creditor’s issuance of a corrected Closing Disclosure, as with the issuance of an original Closing Disclosure, falls within comment 19(e)(4)(ii)-1’s ambit. Accordingly, a creditor may use a corrected Closing Disclosure to reset applicable good faith tolerances when there are fewer than four business days remaining before consummation or when the Closing Disclosure has already been issued, provided that the creditor also complies with the other requirements of § 1026.19(e)(4). The Bureau is proposing comment 19(e)(4)(ii)-2 to clarify this point.”
More to the point for settlement agents directly, one key item – with the language included herein below – concerns sharing of information subject to special protection under the Gramm Leach Bliley Act. While basically repeating existing federal law under Regulation P, the proposal provides three possible approaches to sharing the information. These are directed at the lender as they are responsible for the forms but the rule is applicable to you the Escrow (Settlement) Agent as well.
Note also that they are open to recommendations on effective date of the provisions including the possibility of retroactive.
“1. Permissible form modifications to separate consumer and seller information. The modifications to the form permitted by § 1026.38(t)(5)(v) may be made by the creditor in any one of the following ways:
- Leave the applicable disclosure blank concerning the seller or consumer on the form provided to the other party;
- Omit the table or label, as applicable, for the disclosure concerning the seller or consumer on the form provided to the other party; or
iii. Provide to the seller, or assist the settlement agent in providing to the seller, a modified version of the form under § 1026.38(t)(5)(vi), as illustrated by form H-25(I) of appendix H to this part.
- Provision of separate disclosure to consumer. If applicable State law prohibits sharing with the consumer the information disclosed under § 1026.38(k), a creditor may provide a separate form to the consumer. A creditor may also provide a separate form to the consumer in any other situation where the creditor in its discretion chooses to do so, such as based on the seller’s request. For the permissible form modifications to separate consumer and seller information, see comment 38(t)(5)(v)-1.
- Provision of separate disclosure to seller. To separate the information of the consumer and seller under § 1026.38(t)(5)(v), a creditor may provide (or assist the settlement agent in providing) a separate form to the seller where applicable State law prohibits sharing with the seller the information disclosed under § 1026.38(a)(2), (a)(4)(iii), (a)(5), (b) through (d), (f), or (g), with respect to closing costs paid by the consumer, or § 1026.38(i), (j), (l) through (p), or (r), with respect to closing costs paid by the creditor and mortgage broker. A creditor may also provide (or assist the settlement agent in providing) a separate form to the seller in any other situation where the creditor in its discretion chooses to do so, such as based on the consumer’s request. For the permissible form modifications to separate consumer and seller information, see comment 38(t)(5)(v)-1.”
Note that the new proposal would encourage collaboration between settlement agent and lender. Indeed collaboration is necessitated.
Special attention should be paid to language within the proposal as a general provision, that preemption of state law (if applicable) is made effective back to October 3, 2015. In this case, they are saying if state law prohibits… AEA members should seek an in-state opinion on whether this provision applies. Some states authorize sharing and in some states, it is not clear. It is critical that you know with whom it can be shared if authorized.
Further note, this provision does not seek to preempt tighter state law, in fact it accommodates state law. It’s recommended that you work with your state REALTOR® association and state Bar to get this right.
I don’t see any wording approving use of a standard settlement statement, (ALTA or otherwise, and which we had recommended) as a substitute for a seller CD. AEA will likely repeat our request for use of a standard settlement statement within our comments, AEA Board to decide.
Readers should understand that this proposal is the initial draft from CFPB. Written comments will be accepted through October 17, 2016. As a result of subsequent changes by the CFPB, the foregoing analysis may change and the necessary actions by closing agents may also change.
May 27, 2016: The CFPB Meets with Industry - A Report from Art Davis, AEA Washington D.C. Representative
AEA and a number of other industry trade groups met today with the CFPB to cover TRID implementation and issues needing additional agency guidance or resolution through written information from the CFPB.
Following are the CFPB staff in attendance and their primary role in the discussion.
- Introductions – Jennifer Stockett, Office of Financial Institutions.
- Setting Expectations – Patricia McClung, Mortgage Markets. Ms. McClung set the stage that today’s discussion is broader than just the immediate rule-making, as the proposed rule will not solve everything industry wants addressed and the Bureau wants to engage in meaningful discussion and ideas for successful implementation.
- Rulemaking Process – Diane Thompson, Regulations. Ms. Thompson provided a description of the upcoming process and the likely timing for the proposed KBYO rule-making.
- Implementation Progress – All Participants.
- Share views about issues the industry is still working to fix and those that the industry believes are still needed for complete and implementation.
AEA participated early and often in the discussion. I made the case for providing additional examples and more materials in both the website timeline materials and in the “small entity compliance guide” that address the various changed circumstances during the Closing Disclosure phase. CFPB staff showed keen interest in these and our other comments.
In addition there was good focus on the NPPI issues and sharing information with the broker. They seemed to believe that Regulation P already addressed these privacy concerns and companies could make their own judgment. However, a number of us made it clear that we believe direct coverage in their guidance would be very helpful. Staff was interested in how easy or difficult it is currently to obtain proper releases to share.
A lot of discussion occurred concerning lender liability from potential CFPB action and private rights of action. The point was made repeatedly that more complete and effective cure provisions would be very helpful.
I introduced a comment from an AEA member that the Seller CD requirement could be deemed met, if a proper Master Closing (for your state) or ALTA Settlement Statement is timely delivered and copied to the lender. CFPB staff showed keen interest and took copious notes on this idea. This solution would effectively eliminate the need to issue the seller a one-sided CD or the short form from the Appendix. Of course, it would not address the private personal information of the seller that may be conveyed to the borrower (called reverse privacy concerns) in the Rule provisions for the Borrower.
CFPB staff in attendance made it very clear that the upcoming expedited Rule process necessarily meant only a very limited number of key issues could be addressed in that Rule process. For example, it is possible that lender concerns such as the “black hole” and strengthened cure language will be covered. Nevertheless, it was made equally clear that for CFPB Staff, implementation means much more, including the issues I had already described-timeline examples, with specific costs addressed, and the small entity guide.
All in all, I am very optimistic about the many avenues for getting questions answered that the Bureau talked about today. I and AEA will follow up with written testimony for their attention very soon.
February 13, 2016: “CFFB clears up a gaffe in its explanation of TRID rules.”
A TRID tolerance issue were just cleared up by the CFPB. Before reading it (a quick one-pager) please keep in mind it does not change the Rule. It explains a typo (gaffe) in the explanatory materials that go with the Rule. Another similar item was not addressed and probably won’t be. In its explanation for requiring a line item for owners title costs in the loan estimate–and then calling it “optional”—- if bought it would be a major cost item and could escape tolerance analysis if not included on the LE. However they finally clarified that owners title costs are outside tolerance analysis unless required by the lender (e.g. not optional) to get the loan. But that was not a typo; it was an out-of-place argument for requiring a line item for it on the loan estimate.
The Supplementary Information to the TILA-RESPA Final Rule (2013 Supp. Information) contained a typographical error, which this notice corrects. Specifically, on page 79829 of Volume 78 of the Federal Register, in the first column, in the sentence containing “property insurance premiums, property taxes, homeowner’s association dues, condominium fees, and cooperative fees,” the phrase “are subject to tolerances” should read “are not subject to tolerances.”
Section 1026.19(e)(3)(iii) is titled “Variations permitted for certain charges” and lists certain charges—including property insurance premiums, “[a]mounts placed into an escrow, impound, reserve, or similar account,” and “[c]harges paid for third-party services not required by the creditor”—in the category of charges not subject to tolerance. Property taxes, homeowner’s association dues, condominium fees, and cooperative fees are all “[c]harges paid for third-party services not required by the creditor.” Additionally, the 2013 Supp. Information sentence being corrected here is inconsistent with the sentence that precedes it, because the preceding sentence states that “property insurance premiums are included in the category of settlement chargesnot subject to a tolerance, whether or not the insurance provider is a lender affiliate.”  Consequently, on page 79829 of the 2013 Supp. Information, regarding “property insurance premiums, property taxes, homeowner’s association dues, condominium fees, and cooperative fees,” the phrase “are subject to tolerances” should read “are not subject to tolerances.”
Accordingly, the Bureau makes the following correction to FR Doc.2013-28210 published on December 31, 2013 (78 FR 79730):
1. On page 79829, in the first column, in the 48th, 49th, and 50th lines, revise “are subject to tolerances whether or not they are placed into an escrow, impound, reserve, or similar account” to read “are not subject to tolerances whether or not they are placed into an escrow, impound, reserve, or similar account."