TRID Overview with Latitude Info
- 1. TILA-RESPA Integrated Disclosures Rule Overview Ryan L. Buckley Account Executive 562.241.1141
- 2. Overview Goal By the end of this overview, participants will have a well-rounded understanding of the process of closing loans within the complex of the new TRID regulations, from origination of the loan to the retention requirements for all related records and actions.
- 3. Linear Title Company Overview Company Profile Ownership Privately Owned Title Agency Inception 2005 Corporate Offices Newport, RI Employees 360 Underwriters Fidelity, First American, Old Republic, North American Title Insurance Company, Williston Financial Group (WFG) National Title and Westcor Land Title Fundings Per Month 4000 Capacity Per Month 10,000 funded transactions Property Reports Per Month 30,000 Security Virtual Private Network Security & Technology SSAE 16 SOC 1 Data Transmission MPLS Private Network Footprint All 50 States High Volume States CA,TX, PA, FL BBB Rating A+ Rating
- 4. History and Origin General Specs Loan Estimate Disclosures (LE) Closing Disclosures (CD) Other Disclosures Recordkeeping Latitude Loan Services Presentation Overview
- 5. Origin Dodd-Frank Act Directs CFPB to integrate TILA and RESPA disclosures Bureau finalized rule with new integrated disclosures Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (Regulation X) Truth in Lending Act (Regulation Z) Revisions are found in:
- 6. CFPB’s Goals Easier-to-use mortgage disclosure forms Improve customer Understanding Aid Comparison shopping Prevent Surprises at closing table
- 7. Scope of Rule Most closed-end consumer mortgage loans Establishes requirements for timeshares/construction loans/loans to trusts for estate/tax purposes/25 acre+ NOT APPLICALBLE TO: HELOCs Reverse Mortgages Non land-attached mobile homes Loans by creditors with < 5 loans / year Certain no interest mortgages
- 8. Effective Date October 3rd, 2015 Applications Received Before October 3rd GFE and initial TIL used HUD-1 and final TIL still used regardless of close date Applications Received On Or After October 3rd GFE and initial TIL combined into new Loan Estimate HUD-1/1A and final TIL combined into new Closing Disclosure Results in OVERLAP of forms Certain rules effected regardless of application reception. NO: 1) Imposed fees 2) Estimates without disclaimer 3) Required docs PRIOR TO LE DELIVERY
- 9. Liability TILA Private right of action (individual or class action) with attorney’s fees and costs Statutory penalties of up to $4,000 for failures to properly provide certain disclosures (including finance charge and APR) RESPA No private right of action for GFE and HUD-1 disclosures
- 10. Liability Dodd-Frank §1055 CFPB enforcement of consumer financial laws (TILA, RESPA included) $5,000/day per violation; $25,000/day for reckless; $1M/day for knowing 3 year Right of Rescission with errors on any of disclosures APR, Finance Charge, Payment Schedule, Section 32 of Loan Disclosure, Prepayment Penalties
- 11. General Overview Use of forms is mandatory for most transactions and Only limited modifications are permitted Facilitate comparison between loans during origination process Structure driven by testing Key terms on first page Interest rate and how it can change Monthly payment and how it can change Cash to close Additional detail/itemization on subsequent pages Other info on back
- 12. New Loan Estimate Form Initial TIL Disclosure + Good Faith Estimate New Loan Estimate Form Currently borrowers receive the GFE and the initial TIL disclosure. On October 3rd, 2015 the creditor will instead use a combined Loan Estimate form intended to replace the GFE and TIL. The new three-page Loan Estimate form must be provided to borrowers on a timetable similar to the current GFE.
- 13. Loan Estimate: General Good faith estimates of credit costs and transaction terms and must: Be made based on best info available Be in writing and contain info prescribed in S 1026.37 (Form H-24) Satisfy timing and method of delivery requirements Revisions only in certain circumstances Not technical errors, miscalculations or underestimations Be provided by either broker or lender
- 14. Loan Estimate Who Provides? Creditor or broker, but LENDER is legally RESPONSIBLE Broker provision: if broker receives a consumer’s application and provides LE, broker must comply with all relevant requirements CREDITOR must ensure that all requirements are met Broker provision satisfies creditor’s obligation
- 15. Loan Estimate When? Deliver and place in mail within three business days after creditor receives application and seven business days before consummation Application: 6 items: borrower name; income; SSN to obtain credit report; property address; estimate of property value; loan amount sought Business day: two meanings Providing Loan Estimate Disclosures AND Re-disclosures: 3 days on which creditors offices are open to public and performing most all of its business functions after application is received All Other Instances 7 calendar days except Sunday and legal holidays before consummation (unless financial emergency)
- 16. Loan Estimate When? Worksheets: any estimates of costs/terms cannot resemble LE and must state clearly: Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan. Fees & Verifications: retains limitation on fees and requiring documentation until borrower gives “notice of intent to proceed” in manner specified by creditor Must be documented Redisclosure: provide revised disclosure: Within three “open for business days” of receiving sufficient info On date rate is locked
- 17. Loan Estimate Fee Changes Tolerance Estimates are required to be made in good faith and are determined as such by comparing to closing disclosure Category 1: Zero Tolerance Disclosed amounts cannot increase Category 2: 10% Aggregate Tolerance Aggregate disclosed amount for 3rd party services selected from List of Providers and recording fees cannot increase by more than 10% Category 3: No Tolerance Disclosed amount must be based on best information reasonably available at the time using reasonable due diligence but no limitation on increases
- 18. Category 1 Fee Tolerance Zero Tolerance unless exception applies Creditor’s or broker’s charges for own services Charges for services provided by affiliate Charges for services for which consumer is not permitted to shop Transfer taxes
- 19. Category 2 Fee Tolerance 10% Aggregate Tolerance 3rd party services selected from List of Providers Recording Fees Example LE original amount Re-discloses a higher amount <10% Closes with higher amount <10% above redisclosed amount VIOLATION!
- 20. Category 3 Fee Tolerance No tolerance Prepaid interest Property insurance premium Amounts placed in escrow or impound Charges paid to consumer-selected, third-party service providers not on List of Providers Charges paid for third party services not required by creditor even if paid to affiliate
- 21. Loss of Tolerance in Category 2 A discovery is revealed that qualifies as a “Changed Circumstance” Results in cost increase <10% Creditor can re-disclose, but cost at closing cannot exceed 10% of original LE
- 22. Loan Estimate: Timing for Revisions Same timeline as original application New LE must be delivered or placed in mail by third day after receiving information requiring revision Must be received by consumer no later than 4 days before consummation Cannot be delivered after CD
- 23. Loan Estimate: Permitted Revisions Circumstances May issue revisions to LE due to changed circumstances that affect consumer eligibility: Extraordinary event Info specific to consumer or transaction was in accurate or changed New info May issue revisions to LE due to changed circumstances that affect settlement costs: Natural disaster Title insurer goes out of business New info related to property May NOT issue revisions to LE because of later discovered technical errors, miscalculations, or underestimations of charges OR if charges increase within tolerance level
- 24. Loan Estimate: Permitted Revisions Circumstances 1. Changed circumstance affecting eligibility or settlement charges 2. Consumer request causes increased charge 3. Interest rate dependent charges. If rate is not locked for original LE, new LE required when locked within 3 days 4. Expiration: consumer does not indicate intent to proceed within 10 “open for business” days after LE provided 5. New Construction: closing more than 60 days after initial LE; must be stated that it may revise *When exception applies, provide new LE by third day after new information is obtained and wait at least 4 business days after receipt before consummation
- 25. Written List of Providers If consumer is permitted to shop for settlement service, creditor must provide written list identifying at least one available provider for each service and stating that customer may choose different provider Must contain sufficient contact Provider must service consumer’s area Must include RESPA affiliated business disclosure if applicable May state non-endorsement May provide list separate from LE but subject to same time requirements
- 26. New Closing Disclosure Form Final TIL Disclosure + HUD1 Settlement New Closing Disclosure Form The Final Truth-In-Lending and HUD1 Settlement are combined into a single Closing Disclosure form. The New Closing Disclosure form is used not only to disclose many terms and provisions of the loan, but also the financial details of the closing.
- 27. Closing Disclosure: Basics Standard form for transactions covered by both RESPA and TILA Model form for transactions covered only by TILA Lender is responsible for the preparation of the Closing Disclosure Rule also allows lender to delegate the preparation to their settlement agent Creditor remains responsible to ensure CD complies Settlement agent responsible for providing CD to seller and creditor
- 28. Closing Disclosure: Multiple Versions Versions with borrower and seller and without seller For borrower seller versions, separation of borrower and seller information permitted for versions provided to respective parties
- 29. Closing Disclosure: Timing Borrower must receive CD at least 3 business days before consummation “business day” not “open for business day” Timeshare transactions: no later than consummation Certain changes require new disclosure AND waiting period APR becomes inaccurate, loan product changes or prepay penalty added All other changes require new disclosure but NOT waiting period Borrower may inspect CD based on info known to creditor one business day before consummation IF requested Seller must receive CD at or before consummation
- 30. Closing Disclosure Timing Delivery in person: receipt upon delivery Everything else, “mailing rule” applies Deemed receipt the third business day after sent out by any method, including electronic May rely on evidence of actual receipt, electronic or otherwise *may waive 3 day waiting period upon personal financial emergency
- 31. Closing Disclosure Timeline: Mailing Tuesday 2 Wednesday 3 Thursday 4 CD Considered Delivered Friday 5 Saturday 6 Monday 1 CD Sent Out for Delivery Sunday 7 The 3-Day borrower review period begins the day of Closing Disclosure “Receipt”. WITHOUT “hand delivery” or electronic confirmation of receipt the total delivery and review period results in six business days between the Closing Disclosure mailing to the actual settlement & loan signing. 1st Day Signing May Occur Monday 8 Closing Disclosure 3-Day DELIVERY (a.k.a. Mailing Rule) Closing Disclosure 3-Day REVIEW (Sunday Excluded)
- 32. Closing Disclosure Timeline: Electronic Tuesday 2 Wednesday 3 1st Day Signing May Occur Thursday Friday 5 Saturday 6 Monday Sunday 7 The 3-Day borrower review period begins the day of Closing Disclosure “Receipt”. WITH “hand delivery” or electronic confirmation of receipt the total delivery and review period results in 3 business days between the electronic Closing Disclosure receipt to the actual settlement & loan signing. Monday 8 Closing Disclosure 3-Day REVIEW 4 CD Considered Delivered
- 33. Closing Disclosure: Fee Disclosure Approach Fee lines dedicated to certain specific items Other fees go in applicable section alphabetically Fees specific to one service within section i.e. title list, “Title-” at beginning followed by fee
- 34. Closing Disclosures: Average Charges Average charges may be imposed under these conditions: Average charges are no more than average amount paid for service by all consumers/sellers in class of transaction Creditor/settlement service provider defines class of transaction based on appropriate period of time, geographic area and loan type Creditor/settlement service provider uses same average charge for every transaction within class Creditor does not use charges for Any insurance Charge based on loan amount/property value *Cannot be used to inflate costs in any way
- 35. Closing Disclosure: Changes LE may not be delivered after CD delivery Deadline for final LE revisions is 4 business days before consummation Necessary changes? Revised CD to be used to determine good faith tolerances 3 types Changes occurring before consummation requiring new review period Changes occurring before consummation NOT requiring new review period Changes post-consummation
- 36. Closing Disclosure Changes: Prior to consummation Changes Requiring New Review Period, New CD, New Terms Disclosed APR becomes inaccurate Loan product changes Prepayment Penalty Added Changes Requiring New CD, New Terms, No Waiting Period Any other revisions including consumer requested changes Consumer has right to inspect any new changes the business day before consummation Must be requested by consumer
- 37. Closing Disclosure Changes: Post-Consummation: Borrower Good Faith Standard Corrections: If borrower pays an amount that exceeds amount imposed under good faith standard, creditor must refund excess and provide corrected CD no later than 60 days after consummation Event Corrections: If event that occurs within 30 days after consummation causes CD to be inaccurate and results in change in amount borrower paid, creditor must provide corrected CD no later than 30 days after receiving sufficient information to corroborate event Clerical Corrections: For non-numeric clerical errors, creditor must provide borrower with corrected CD no later than 60 days after consummation.
- 38. Closing Disclosure Changes: Post-Consummation: Seller Event Corrections: If event occurs within 30 days after consummation causes CD to be inaccurate and results in change in amount paid by seller, SETTLEMENT AGENT must provide corrected CD no later than 30 days after receiving sufficient information to corroborate event
- 39. Special Information Booklet RESPA Settlement Costs Booklet Must be given to consumer of any real-property secured, first-lien mortgage loan Not refinances, subordinate liens, HELOCs, reverses Same time frame as LE Only one copy to all applicants Broker must provide Very limited allowance for changes to booklet
- 40. Post-Consummation Disclosures Escrow Closing Notice Mortgage Servicing Transfer Partial Payment Notices
- 41. Escrow Closing Notice Consumer Requested Closing: Consumer must receive at least 3 business days prior to cancelling account Any Other Reason for Closing: Consumer must receive at least 30 business days prior to cancelling account Necessary when canceling any escrow account that was established in connection with closed-end, first lien mortgages (excluding reverses) Exceptions: Escrows established in connection with delinquency or default on mortgage When mortgage is terminated: Repayment, refinancing, rescission, foreclosure
- 42. Escrow Closing Notice: Required Information Date closing Alternative names: impound or trust account Reason for closing State consumer must pay all property costs DIRECTLY, possibly in one or two large payments/year Table titled, “cost to you,” Any fee imposed on consumer in connection with closure of account labeled, “Escrow Closing Fee.” Include statement that fee is for closing account
- 43. Escrow Closing Notice: Required Information “In the future” section referencing: Consequences of delinquency Phone number for more info on the cancellation Option to keep open; with phone number Cut-off date to keep open
- 44. Escrow Closing Notice: Other Requirements Conspicuous header Clear and understandable language 10-point font minimum One-page document substantially similar to form H-29
- 45. Mortgage Transfer Notice: Partial Payment Policy Disclosure Required for all mortgages besides reverse mortgages Required information regarding partial payment: If payments less than full amount due are accepted, include a statement indicating the lender may apply the payments to the loan If payments less than full amount due are accepted but NOT applied until borrower pays remainder of amount due, include a statement indicating the lender may hold payments in separate account until remainder of payment is fulfilled, then applied to loan If payments less than full amount due are not accepted, include a statement indicating the lender does not accept them Include a statement that if the loan is sold, the new lender may have a different policy
- 46. Recordkeeping Regulation Z: General two year record retention period, however for mortgage loans specifically: General Requirement: 3 year record retention from date of consummation, date disclosures required to be made, or date action required to be taken, whichever is latest. Evidence of compliance with ALL required actions, not just copies of docs Applies to mortgage brokers to extent applicable Closing Disclosure: 5 year record retention period following consummation If creditor sells or transfers loan and will not service it, creditor must keep copy AND provide one to new owner or servicer who must also retain for remainder of period Post-Consummation Disclosures: Escrow Closing and Mortgage Transfer with Partial Payment Policy 2 year record retention
- 47. Summary Liability Creditor is ultimately responsible for broker and settlement agent Hefty penalties Loan Estimate Timing: no more than 3 days after application, at least 7 days before consummation Categories 1, Zero Tolerance; 2, 10% Tolerance; and 3, No Tolerance List of providers in consumer’s area Change of circumstance Closing Disclosure Timing: 3 day mailing period (or confirmed receipt,) 3 day mandatory review period Limited times for redisclosing post-consummation Recordkeeping 3 year retention for all actions and docs 5 year retention for latest CD
- 48. Latitude Loan Services Solution As a stand alone vendor management technology, Latitude Loan Services enables lenders to integrate multiple title & settlement companies into a single platform to manage all order processing, GFE fee quotes, communication, closing, title & settlement document storage. Latitude allows for multiple user access to facilitate the new October 3rd, 2015 CFPB Closing Disclosure form with an electronic confirmation of borrower receipt solution. Electronic delivery and confirmation of receipt potentially saves 3 Days off the new Closing Disclosure review period process.
- 49. Latitude Loan Services Solution Latitude shared access allows both the lender and the settlement agent access to the Closing Disclosure form in a secure, privacy protected environment. The Closing Disclosure form allows each user access only to their section of the CD form and tracks all changes with each CD form revision. Upon final approval the Closing Disclosure form is electronically distributed to your borrowers and all authorized parties. Lender Agent
- 50. Electronic Confirmation of Receipt Latitude’s “Consumer Portal” facilitates the October 3rd, 2015 CFPB requirement for the Borrower’s Closing Disclosure confirmation of receipt. Electronic confirmation of receipt for the Closing Disclosure form will drastically shorten or eliminate the 3-day “mailing rule” delivery period. The Consumer Portal is a highly visual, secured web portal for borrowers to access their title & settlement transaction status and documents 24/7. The Consumer Portal will be branded with the lender’s contact information to be accessed by your borrowers indefinitely. Access to status changes and important docs provides vital transparency to your borrowers.
- 51. Latitude Value Proposition The Latitude portal provides a single platform for vendor management of multiple title & settlement companies in a centralized platform: • Latitude provides guaranteed fee quoting technology for your current GFE disclosures and the new October 3rd, 2015 Loan Estimate form. • Latitude allows for multiple user access enabling lenders and title agents to create, revise, approve, and electronically distribute the new Closing Disclosure form to your Borrowers and all authorized parties. • The Consumer Portal provides your borrowers a safe and secure platform to access their loan documentation and check status of their loan file while providing a branding opportunity for your company. • Electronic receipt confirmation of the borrower’s Closing Disclosure form via Latitude’s Consumer Portal potentially saves lenders up to 3 days off the new Closing Disclosure delivery process. Saving up to 3 days off the Closing Disclosure delivery process provides substantial cost savings & operational efficiencies to Latitude lenders.
- 52. Latitude Value Proposition for Wholesaler Lenders Offers one transparent platform to manage all the files for which it is legally responsible by: Ensuring Compliance Side-by-side comparison of disclosures; instant updates to file; complete and final broker oversight Facilitating Communication Instantly send receive docs, notes and actions and updates between all users Maintaining Audit Trail Step-by-step history of actions Retaining Documents Automatic e-storage of all documents
- 53. References http://files.consumerfinance.gov/f/201409_cfpb_tila- respa-integrated-disclosure-guide-to-form.pdf PDF guide to LE/CD http://files.consumerfinance.gov/f/201409_cfpb_tila- respa-integrated-disclosure-guide-to-form.pdf Dodd-Frank Act http://portal.hud.gov/hudportal/HUD?src=/program_of fices/housing/ramh/res/respamor RESPA https://www.fdic.gov/regulations/laws/rules/6500- 200.html#fdic6500101#fdic6500101 TILA
- 54. For More Information Contact: Ryan Buckley rbuckley@lineartitle.com 562-241-1141