Monthly Archives: April 2015

NMLS Warns – Time is of the Essence

3189056213_9a7c11faed_zIn an earlier post, we mentioned the new TILA-RESPA (TRID) integrated disclosure rule will take effect on August 1, 2015, and that mortgage originators should consider compliance training. It appears we beat NMLS, who recently released a newsletter asking whether mortgage institutes were ready to teach the new TRID rule, to the punch line. Fortunately for those interested in mortgage compliance training, Ameritrain has the instructors, approved TRID workbooks and multiple learning platforms to facilitate it. For those still catching their breath, the Consumer Protection Financial Bureau (CFPB) created a readiness guide to help mortgage professionals navigate the seminal rule.

In the readiness guide, the CFPB provides a litany of questions, which form the framework for an implementation plan. The first set of questions determine whether the TRID rule applies to your institution. These questions include: “Do you offer mortgage loans to consumers?”; “Do you offer closed-end credit or home equity lines of credit secured by a dwelling?”; “Do you service mortgage loans or own servicing rights?”; etc. Other questions address which products or services from your portfolio are affected, whether you’ve already created an implementation plan and finally a critique of your policies and procedures.

The policies and procedures section examines each product/service category and offers supplementary questions to ensure compliance. For example, loans that aren’t qualified mortgages fall under the Ability-to-Repay heading and include provisions that ensure borrowers have sufficient assets/income to pay back the loan. The policies and procedures section also looks at mortgage servicing rules, with emphasis on periodic billing statements, interest-rate adjustable notices for ARMs, force-placed insurance, etc. Finally, the guide then exhausts a host of other products and services that your institution may offer.

CFPB’s readiness guide also devotes a section to training, in which they ask whether mortgage institutions have determined what training programs need development, who needs training, whether training has been conducted, the formats for training and also the responsibility for developing course content.

Point being: the TRID rule is highly complex and readiness guides, such as the one reviewed above, demonstrate the extent of preparation needed on behalf of course providers to ensure compliance.



Crash Course: The Loan Estimate Disclosure Form

calculator-385506_1280The Loan Estimate is a mandatory form that you, as a budding or even seasoned mortgage originator, will soon have to provide to consumers, and, rest assured, the disclosure form contains valuable information—not simply frivolous details.

Essentially, the Loan Estimate presents a good faith calculation of credit costs and transaction terms. The good faith qualification stems from the mortgage originator having to provide, after due diligence, the best available information. Should the information later be discovered as incorrect, revisions generally aren’t accepted, except in special circumstances. Therefore, it’s imperative mortgage originators competently fill out the Loan Estimate form, or they risk misleading consumers and damaging their credibility. If you’re feeling overwhelmed, don’t despair—Ameritrain offers TILA-RESPA compliance training.

That’s all well and good, but what information exactly goes on the form? In total, the Loan Estimate has three pages. Page 1 of the form has three sections covering general information, such as Loan Terms (including loan amount, interest rate, monthly principal, etc.); Projected Payments (including payment calculation, estimated total monthly payment, estimated taxes, insurance and assessments); Costs at Closing (including estimated closing costs, estimated cash to close). Also, when signing page 1, feel free to plug-in your company logo, because it’s permitted (and you can’t beat free advertising).

Page 2 details closing costs, which are deconstructed into four main categories. The costs related to mortgages fall in two general types—Loan Costs and Other Costs. Loan Costs entails costs paid by the consumer to the mortgage originator for servicing the loan. Pretty straightforward. Other Costs encompasses all taxes, governmental recording fees, and other fees incurred in the closing process. Mortgage originators will have to calculate several figures, and display them in tables, which reflect any variability in the figures, for this page. You will, therefore, likely spend the most time filling out this page of the form, so familiarize yourself with it accordingly.

Finally, page 3 captures additional information about the loan, including Contact information, Comparisons and Other Considerations. Further, this page stipulates any covenants that the creditor and consumer enter into. Page 3 contains crucial legal information and looks and feels like a contract.

Now that you know what goes on the form, let’s touch on when to deliver it. No later than three business days after receipt of a consumer’s application, mortgage originators must mail (in hard copy, despite this being the digital age) the Loan Estimate. Also, mailing the form doesn’t absolve you of ensuring compliance, you will still be held responsible for meeting requirements, so make sure you’re well trained.



Are You Ready for the TILA-RESPA Integrated Disclosure Rule?’s start with the basics: what is the TILA-RESPA Integrated Disclosure rule? Apart from being a mouthful—industry jargon abbreviates the rule to “TRID”—the rule integrates four disclosure forms (the Good Faith Estimate [GFE]; the initial Truth-in-Lending Disclosure [TIL]; the HUD-1; and the final TIL) lenders have historically been obligated to provide to consumers applying for a mortgage, and also before closing on a loan. Since the original forms were confusing for consumers and cumbersome for lenders.

Fast forward to August 1, 2015 and the Consumer Financial Bureau has unveiled two new, user- friendly mortgage loan disclosure forms, which mortgage professionals will have to adopt by this deadline. The Loan Estimate form, an offspring of the GFE and initial TIL, basically summarizes key pieces of information that consumers should know, such as the risk, cost and term of the loan applied for. This form must be provided within three business days after a consumer submits a loan application. The second form, the Closing Disclosure, combines the HUD-1 and final TIL and conveys similar information to the Loan Estimate but with a wider scope. The Closing Disclosure covers the costs of the transaction, not just the costs of the loan. Also, this form must be provided to consumers within three days after consummation of a loan.

Plain-language is the mantra of the TRID rule, and these new forms should clarify a once muddled process with their language.

But what does the TRID rule cover, exactly? The TRID rule covers most closed-end credit transactions secured by real property, which means any piece of land altered by immovable, man-made improvements. However, the TRID Rule doesn’t cover HELOCs, reverse mortgages or chattel-dwelling loans. Further, individuals who originate fewer than six mortgages a year are exempt as well.

Sounds like a big deal because it is. Mortgage loan originators may need compliance training in order to adhere to the new rule, because while the new disclosure forms aim to clarify the loan closing process, there are still many technical details and stipulations involved in filling them out (the final rule contains approximately 1,888 pages, so not exactly an easy read.)

As previously stated, this new rule will not take effect until August 1, 2015, which is just around the corner, so be sure to acquaint yourself with the new regulations and contact course providers should you need more information.