Ready for TRID? October presents ‘Catch 22’ for Lenders

New Procedures for Real Estate Agents and Lenders via TRID

The Consumer Financial Protection Bureau has implemented a case whether real estate and lending professionals are ready or not — there needs to be a better way to protect the consumer’s interest when buying a home. That’s the reason for the new 3 Day “Know Before You Owe” rule, which gives customers ample time to make a decision about the estimated cost of the home.

The Big Issue Feeding the TRID “Black Hole”

But the issue arises not from the mere implementation of the new forms (for those who are ready), but from the unforeseen customer changes. Any unexpected changes made to the forms result in a ‘catch 22’ in which lenders may find it difficult to comply with the new standards set forth by TRID, if and when the borrower requests changes be made to the closing date.

That’s because lenders are required to deliver the Loan Estimate to the borrower within 3 days of receipt of the loan application AND at least 7 days before consummation (when the loan documents are signed). The Community Home Lender’s Association (CHLA) brought this information to the attention of the CFPB:

“Specifically, when a borrower makes a request to delay the closing after the Closing Disclosure has been made, but more than seven business days before the new closing date, that there is no apparent legal way for the lender to disclose an increase in costs, for example in conjunction with a loan lock extension fee,” said the CHLA. “The timing of the requirements could create a Black Hole.”

The Community Gets Involved

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The Community Home Lender’s Association now warns the CFPB that these new forms and regulations on the duration of time needed to complete the Loan Estimate and Closing Disclosure may result in non-compliance or an unavoidable and costly demise for some. It’s the TRID “black hole”. This occurs if the borrower requests a modification in the loan estimate or extension on the closing.

“However, if the change in circumstances occurs more than seven business days before consummation, there are concerns that a lender cannot effectively comply with both the requirement to provide the revised Closing Disclosure (in lieu of a revised Loan Estimate) within 3 business days of the change AND provide it within 4 business days of consummation,” said the CHLA.

It appears up front that given the situation, a lender’s only option may be to absorb the revised Loan Estimate. This may actually cause lenders to eat the additional costs.

Since this issue has not yet been properly addressed by the CFPB, it’s likely it will stay this way — all the more reason to start working with a good title insurance company to get you through the rough patches for the rest of the year.

Are you concerned about compliance with TRID?

Join a title agency with a quick and easy process via a digital platform and esignatures. Bay National Title Company offers a team of real estate legal experts and mortgage professionals well-versed in each step for a better closing process.

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SOURCES:

Community Lenders Warn CFPB of TRID “Black Hole”

Compliance takes on new importance as TRID draws closer