TRID Liability Will Be A Dominant Issue In 2016
Law360Brandy A. Hood, Benjamin K. Olson
Oct. 3, 2015, was a watershed moment for the mortgage origination industry and the Consumer Financial Protection Bureau. On that date, the CFPB’s long-awaited Know Before You Owe: TILA-RESPA Integrated Disclosure (TRID) rule finally became effective, marking the end — for most mortgages — of 30 years of separate, overlapping disclosures under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), and the beginning of TRID’s loan estimate and closing disclosure.
Measured against their predecessors, the new TRID forms are a marked improvement in terms of prioritizing and explaining the cost information that consumers care most about when selecting a mortgage. But the first round of loans closed under TRID is troubled. The quality control vendors that assess compliance are reporting extraordinary levels of errors, and private investors are rejecting loans at seemingly unprecedented rates, citing violations of the rule’s requirements.
Some of these errors are technical, some are not. These findings may suggest problems with the rule itself or with its implementation by the myriad lenders, vendors, mortgage brokers, appraisers, settlement agents and other players that must coordinate to produce a mortgage loan. Or the findings may suggest that the rule is being interpreted inconsistently or that the private investors who purchase loans are adopting a particularly conservative standard.
In our work advising lenders, investors and other market participants, we have seen evidence to support all of these theories. The root of the problem, however, is that it may not be possible to get TRID “right” at the level that many came to expect under the old TILA disclosures.
Originally published in Law360; reprinted with permission.