At its core, TRID is about being clear and upfront with mortgage borrowers. It requires the lender to provide accurate information to the consumer in a way that they can clearly understand it. Love them or not, the CFPB’s TRID disclosures actually benefited the industry by not making lenders guess about what the regulator considered a clear disclosure.
But as we’ve learned over the past decade, even with the changes we’re seeing now with the slow but possibly steady rollback of Dodd-Frank and the new head of the CFPB, the risk of non-compliance must still be considered high. We have no reason to assume that the fines or settlements will be lower than we’ve seen in the past for missteps.
So, what are the biggest contributors to increased TRID risk? From our experience, they are timing and accuracy. Delivering a disclosure to the borrower outside of the statutory timelines throws the lender out of compliance. Likewise, getting the numbers wrong on the disclosures is also problematic.
Accuracy is less about non-compliance and more about additional expense to the lender and its partners. If the lender gets the numbers wrong on the Loan Estimate and chooses not to re-disclose and move the closing back, which will become much more difficult to do as we move deeper into a purchase money market and borrowers need to close on time, then any additional costs that would otherwise show up on the Closing Disclosure will have to be absorbed by the lender or its partners.
Some lenders are large enough to push these costs back to their partners, but that has long-term consequences for the partnership, especially if it happens often. Smaller lenders may not have the ability to force supplier to adjust costs and may either have to pay them out of pocket, increasing their cost to close, or be forced to delay the closing due to redisclosure.
So, what can cause the lender to get the numbers wrong? We’ll talk about that in our next few posts.