Page 1 of 17

Review of the Top 20 TRID Implementation Issues

1. Pre-application Cost Estimates.

a. This topic references a “written estimate of costs or terms” or a “worksheet” often

provided by creditors to potential consumers regarding costs associated with a

particular loan transaction. The rule provides a place for these pre-application cost

estimate worksheets after TRID goes into effect; however, to reduce the consumer’s

potential confusion between a worksheet and an LE the rule requires (1) a conspicuous

disclosure at the top of these worksheets and (2) a type of formatting that does not

resemble the appearance of the Loan Estimate (LE). The required disclosure must be in a

font size that is no smaller than 12-point font and must state:

Your actual rate, payment, and costs could be higher. Get an official

Loan Estimate before choosing a loan.

b. The preamble to the rule (see, CFPB TRID Final Rule, pg. 313) states that creditors may

use the worksheets that they have already prepared for this purpose, the current

worksheets will just need to be updated and in use beginning August 1, 2015. If your

organization habitually uses these types of cost-estimate worksheets, then you should

be aware of the following:

i. Worksheet cannot be given after and LE has already been issued.

ii. The required disclosure cited above takes effect on August 1, 2015, regardless

of whether or not an application has been received by the borrower.

c. The above statement is NOT required when a document with estimated costs is based

solely on the following:

i. The written estimate is a preprinted list of closing costs common in the

consumer’s area, or

ii. The written estimate is a preprinted list of available rates for different loan

products, or

iii. Advertisements are also exempt from the requirement to state or include the

statement cited above.

Page 2 of 17

2. Revised definition of “application;” subtopics include: brokers and internet lead generators.

a. This hot topic relates to the six points of information, once obtained by the lender,

trigger a requirement to provide the applicant with a Loan Estimate within three

"general" business days. The six points of information include:

i. Consumer's name

ii. Consumer's income

iii. Consumer's SSN

iv. Property address

v. Property's estimated value; and

vi. Loan amount sought

b. A good way to remember these six items may be to think of the sought-after

information as the three things you want to know about every borrower and the three

things you want to know about every property.

c. The above items of information are similar to the current RESPA triggers to disclose the

GFE, with the exception that the RESPA rule included a seventh "catchall" trigger that

allowed lenders to hold off on disclosing the GFE until other items were gathered. For

the purposes of the Loan Estimate under the new rule, the "catchall" to delay disclosure

is gone.

d. The following advice comes from a member of the CFPB who spoke at the MBA's TRID

presentation in Dallas, TX, July 24, 2014, and will help lenders navigate some costly

errors that could be made when gathering consumer application information:

i. Do NOT gather all six items of information until after you've gathered the

additional information you need to know to generate an accurate loan estimate;

e.g., if your potential consumer is looking for a VA loan and you'd like to ask him

for information related to his veteran's status, hold off on asking for the SSN (or

some other Loan Estimate triggering piece of information) until after the

consumer has already provided that info.

ii. Do NOT ask the potential consumer for verifying documentation until after the

Loan Estimate has been given to the consumer and the consumer has

responded with an "intent to proceed" with the application.

iii. Do NOT ask the potential consumer for any type of payment (exception:

payment for pulling the consumers credit score) or payment info (e.g. check or

credit card #) until after the Loan Estimate has been given to the consumer and

the consumer has responded with an "intent to proceed" with the application.

See, 1026.19(e)(2) & comment 19(e)(2)(i)(A)-5.

3. Managing online application systems.

a. There has been some discussion throughout industry regarding management of Online

Application Systems. The discussion revolves around the stricter definition of application

and how companies will gather the information they need (or would really like to know)

Page 3 of 17

before triggering the requirement to provide a Loan Estimate. Just to recap, the stricter

definition of application brought on by the new rule drops a seventh “catch-all” option

that allowed lenders to define their own additional requirement beyond the remaining

six items* defined by the rule, which are as follows:

i. Consumer’s name

ii. Consumer’s income

iii. Consumer’s SSN

iv. Property address

v. Property’s estimated value; and

vi. Loan amount sought

b. The CFPB said in the rule (see, § 1026.2(a)(3), Official Interpretation 1(i) and (ii)) that

creditors may ask (but not require) other helpful items of information that will help to

provide an accurate Loan Estimate and the creditor may also sequence how it gathers

the six pieces of information. So, when it comes to managing online application systems,

the major concern seems to be finding a way to request information in the online

application without making it look like the information requested is required. Creditors

will have to carefully set this up. Creditors should sequence the questions so that

consumers are not asked (and probably do not even see) at least one of the six items of

an application until just before the consumer selects the online “Submit” button.

c. *For more about the six required points of an application, See topic, Revised definition

of “application;” subtopics include: brokers and internet lead generators.

4. Delivery rules; subtopics include: in-person vs. everything else.

a. TRID has new timing requirements surrounding the creation, delivery, and receipt of the

Loan Estimate (“LE”) and Closing Disclosure (“CD”), which are as follows:

i. LE – Requirement to deliver the LE within three business days of application.

See, § 1026.19(e)(1)(iii)(A).

ii. LE – Requirement to deliver the LE seven days or more prior to

consummation. See, § 1026.19(e)(1)(iii)(B).

iii. CD – Requirement to make sure the consumer receives the CD at least three

days prior to consummation. See, § 1026.19(f)(1)(ii)(A).

b. Creditors should evaluate which forms of delivery will ensure compliance with these

time lines. The rule allows creditors to provide the disclosures (1) by handing them in

person, (2) by sending them via postal mail, or (3) by using electronic delivery methods

(see, Official Interpretations to the above citations). Electronic delivery is subject to

compliance with the consumer consent and other applicable provisions of the E-Sign Act

(15 U.S.C. 7001 et seq.). See, § 1026.38(t)(3)(iii).

c. The consumer is considered to have received the disclosures according to the following

conditions:

Page 4 of 17

i. In-Person – the same day the forms are handed to the consumer.

ii. Postal mail – three “specific” days (federal holidays and Sundays are not

counted) after they’re sent, unless the creditor has “evidence” the consumer

received the disclosures earlier than three business days. Creditors may rely on

evidence of early delivery to consider the forms as received on that earlier date.

iii. Electronic delivery – before this method of delivery can be used, the consumer

must consent in accordance with the E-Sign Act to receiving the disclosures

electronically. With consumer consent in-hand, the creditor can consider the

disclosures received three “specific” days (federal holidays and Sundays are not

counted) after they’re sent, unless the creditor has “evidence” the consumer

received the disclosures earlier than three business days. Creditors may rely on

evidence of early delivery to consider the forms as received on that earlier date.

d. See, § 1026.19(e)(1)(iv) and its Official Commentary; § 1026.19(f)(1)(iii). See

also, paragraph entitled “E-Sign” from topic “Creation and Issuance of the Closing

Disclosure.”

5. Creation and issuance of the Loan Estimate.

a. Predisclosure cost estimates. TRID allows creditors to provide customers with an

estimate of costs prior to delivering an LE; however, the estimate worksheet cannot

look like the LE and it must print the following in a 12-point conspicuous font: “Your

actual rate, payment, and costs could be higher. Get an official Loan Estimate before

choosing a loan.” See, § 1026.19(e)(2)(ii). See also, topic “Pre-application Cost

Estimates.”

b. Predisclosure fees restrictions. Creditors shall not impose a fee on a consumer in

connection with the consumer’s application for a mortgage transaction covered by TRID

before the creditor has issued and the consumer received the LE; however, a creditor

may charge a fee for obtaining a consumer’s credit report. See, § 1026.19(e)(2)(i).

See also, topic “Revised definition of “application;” subtopics include: brokers and

internet lead generators.”

c. Stricter application requirements. Loans subject to Regulation X, specifically,1024.2(b),

prior to August 1, 2015, followed a definition of application that has mostly been

adopted by TRID, with the exception of the following phrase: “…and any other

information deemed necessary by the loan originator,” which has been cut out.

Removing this catch-all phrase means that as soon as the other six elements are met

that a time frame for which the creditor has to produce an LE has been triggered.

See, § 1026.19(e)(1)(iii). See also, topic “Revised definition of “application;” subtopics

include: brokers and internet lead generators.”

d. Brokers. TRID states that “if a mortgage broker receives a consumer’s application, either

the creditor or the mortgage broker shall provide a consumer with [an LE].” Allowing

either the creditor or the mortgage broker to provide the LE seems like standard

practice; however, the new rule also states that “the creditor shall ensure that such

Page 5 of 17

disclosures are provided in accordance with all of the requirements [of the rule for

producing an LE].” See, § 1026.19(e)(1)(ii). This last phrase has had many creditors in the

industry looking into how to manage current broker relationships while also ensuring

compliance.

e. Creditor Liability. Combine the fact that creditors are required to “ensure that [LEs] are

provided in accordance with [TRID]” with the CFPB’s discussion of liability in the

preamble to the rule, which states, paraphrasing, that TRID is written into Regulation Z,

which provides for a private right-of-action for consumers (unlike Regulation X, which

doesn’t for the purposes of the GFE) and you have a situation where creditors may be

liable to consumers where prior to August 1, 2015, creditors were not. The CFPB has

cited in each part of the rule under which authority the disclosures are being made and

just about every section sites a part of Regulation Z. For questions of whether or not a

particular authoritative section of Regulation Z gives a consumer a private right of

action, creditors should consult an attorney. See, TRID Final Rule, Liability, pg. 100. To

sum this all up, the explicit responsibility to ensure that the LE is issued properly along

with the not-so-clear discussion of potential consumer law suits has been enough to

cause some concern among creditors as to how to manage creation and issuance of the

LE.

6. Creating and delivering the Written List of Providers.

a. The Written List of Providers is an interesting piece of the TRID puzzle. It’s the one

separate document (§ 1026.19(e)(1)(vi)(C)) from the actual LE and CD mandated by the

rule that has the same look and feel, by design, as the LE and CD. As one presenter from

an MBA conference put it, paraphrasing, “if the CFPB went to the trouble of creating a

model form for the service provider list that looks like the LE and CD, then you had

better use it.”

b. The meat of § 1026.19(e)(1)(vi) states:

i. If the consumer is permitted to shop for a settlement service, the creditor shall

provide the consumer with a written list identifying available providers of that

settlement service and stating that the consumer may choose a different

provider for that service.

c. It’s important to note that the timing requirement for the Written List of Providers is the

same as that of the LE.

d. While providing a list of service providers is not new, what seems to make this issue a

hot topic associated with the new TRID rule is that the Written List of Providers has

been brought to the forefront and better defined by the new rule; as opposed to just

being a comment in the Appendix section to Regulation X.

e. Another potential issue lenders should look out for when implementing the Written List

of Providers will be identifying at least one available service provider for each

settlement service and then making sure that the lender’s vendors can input those

providers and properly populate the new model documents.

Page 6 of 17

7. Use of vendors.

a. Vendors can help manage many aspects of the TRID rule, including: data collection, data

and file transfer, document generation, fulfillment and eSign, data storage, timing

requirement audits, and more. In the loan origination process, there are many vendors

that may play a part in producing and completing the LE & CD, e.g., brokers, LOS

providers, document preparation providers, compliance review providers, settlement

service providers, advisors and others. Given the importance of vendors in assisting with

TRID, there is no doubt that creditors will rely on the expertise of vendors to do a

particular function; however, the rule gives creditors good reason to pay close attention

to their vendor management, especially in the case of brokers and settlement service

providers, as mentioned in the next two paragraphs:

i. § 1026.19(e)(1)(ii) provides that a mortgage broker may provide the LE on

behalf of the creditor; however, the rule states that “the creditor shall ensure

that such disclosures are provided in accordance with all requirements of [ the

rule for LE disclosure].” This verbiage squarely places responsibility for

compliance with requirements for the LE upon the shoulders of the creditor

even when a broker is providing it on the creditor’s behalf. The comment to this

section details this responsibility even further by stating “that the creditor must

ensure that [LE] disclosures provided by mortgage brokers comply with all

requirements of [LE disclosure], and that [LE] disclosures provided by mortgage

brokers that do comply with all such requirements satisfy the creditor’s

obligation [for LE disclosure]—the logical inference is that if the creditor does

NOT ensure that the disclosures provided by mortgage brokers do comply with

all such requirements then the creditor’s obligation is NOT satisfied and the

creditor is liable for any LE disclosure errors made by the broker.

ii. § 1026.19(f)(1)(v) provides that a settlement agent may provide the CD on

behalf of the creditor; however, the rule states that “the creditor shall ensure

that such [CD] disclosures are provided in accordance with all requirements of

[the rule for CD disclosure].” This verbiage squarely places responsibility for

compliance with the rule’s requirements for the CD upon the shoulders of the

creditor even when a settlement service agent is providing the CD on the

creditor’s behalf. The comment to this section further reads, “to ensure timely

and accurate compliance with the requirements of [the CD], the creditor and

settlement agent need to communicate effectively.”

8. Process for Intent to Proceed.

a. The TRID rule states, paraphrasing, that creditors and others are restricted from

imposing a fee on a consumer in connection with an application for a mortgage

transaction:

i. (a) unless the consumer has already received the Loan Estimates, and

ii. (b) the consumer has indicated an intent to proceed.

iii. See, § 1026.19(e)(2)(i)(A).

Page 7 of 17

b. The Official Interpretation to § 1026.19(e)(2)(i)(A) clarifies that no fees may be charged

to the consumer prior to (a) and (b) above, with the exception of a credit report fee.

Digging a little deeper into the Official Interpretation, if a “third-party,” presumably, a

broker, is shopping for a deal on behalf of the consumer and presents the application to

a lender who denies the transaction, (or, by the same token, the consumer withdraws

from the transaction with the lender to whom the broker originally presented the

consumer’s application) and then the broker presents the consumer’s application to

another lender, neither the broker nor the new lender can charge another credit report

fee.

c. The Official Interpretation to § 1026.19(e)(2)(i)(A) also points out with regards to an

“intent to proceed” that a lender cannot accept silence as an indication that the

consumer would like to proceed with that lender and then automatically start charging

the consumer for other fees after a certain period of time has elapsed.

d. The rule allows for an oral indication of an “intent to proceed” by the consumer;

however, the rule also requires that the lender document the consumer’s indication of

an “intent to proceed,” even if that indication was done orally. The rule also allows for

written communication via email or having the consumer sign a pre-printed form, so

long as all these types of indication by a consumer of an intent to proceed are done

some time after the consumer has already received the Loan Estimate. IDS Compliance

believes that this makes it important for Lenders to carefully keep track of the date the

consumer receives the Loan Estimate and the date when an indication by a consumer of

an “intent to proceed” occurs.

e. The rule allows lenders to set up an internal procedure that requires consumers indicate

an “intent to proceed” in a particular manner. IDS Compliance believes that having the

consumer sign a document would be the best way for the lender to keep track of a

consumer’s “intent to proceed.”

9. Up-front fee restriction.

a. The TRID rule imposes some up-front fee restrictions on Creditors.

See, § 1026.19(e)(2)(i)(A), (B). Here’s the CFPB’s discussion, directly from the preamble

to the TRID rule, as to why it chose to impose a restriction on charging consumers fees

until after a creditor receives some kind of affirmative action from the consumer:

i. Section 128(b)(2)(E) of TILA provides that the “consumer shall receive the

disclosures required under [TILA section 128(b)] before paying any fee to the

creditor or other person in connection with the consumer’s application for an

extension of credit that is secured by the dwelling of a consumer.” 15 U.S.C.

1638(b)(2)(E). This provision is implemented in § 1026.19(a)(1)(ii). Although

RESPA does not contain a similar provision, Regulation X does. See,

§ 1024.7(a)(4). However, unlike Regulation Z, Regulation X prohibits a consumer

from paying a fee until the consumer indicates an intent to proceed with the

transaction after receiving the disclosures. Id. As discussed below, both

Regulation Z and Regulation X provide an exception only for the cost of

Page 8 of 17

obtaining a credit history or credit report, respectively. Thus, Regulation X [and

TRID] require[s] consumers to take an additional affirmative step before new

fees may be charged. (Emphasis added.)

ii. See, TRID Final Rule, pg. 298; 19(e)(2)(i)(A) Fee Restriction.

10. Managing tighter tolerances (variances or “variations” in the rule).

a. Good faith. The Loan Estimate (LE), like the current GFE, requires that certain closing

costs be disclosed in “good faith.” The TRID rule states that an “estimated closing

cost…is in good faith if the charge imposed on the consumer does not exceed the

amount originally disclosed” on the LE. The TRID rule refers to “tolerances” as

“variations,” and many in the industry are referring to them as “variances;” although,

technically, “variances” is not a word that appears in the rule. See, § 1026.19(e)(3) and

§ 1026.19(e)(3)(iii).

b. Buckets. Under the current rule, there are some “tolerances” that categorize closing

costs as (1) fees that cannot increase, (2) fees that may increase by 10% in aggregate,

and (3) fees that may increase by any amount. The new disclosures continue to

categorize the amounts disclosed into these three categories; however, some fees have

shifted categories, which may mean that a particular fee now fits into a tighter tolerance

category.

c. Tighter tolerances. Some closing costs that currently fit into a less stringent “variation”

category but have been moved to a stricter category are (a) fees paid to an affiliate of

the creditor or mortgage broker and (b) fees paid to an unaffiliated third party if the

creditor did not permit the consumer to shop for a third party service provider for a

settlement service, which were moved from the ‘fees that cannot increase by 10%’

category to the ‘fees that cannot increase’ category. See, § 1026.19(e)(3)(i), and its

official interpretation.

d. Revised estimates. Further, the rule says that “a creditor may use a revised estimate of

a charge instead of the estimate of the charge originally disclosed…if the revision is due

to” one of the reasons outlined in § 1026.19(e)(3)(iv) the rule. The term “changed

circumstance” in relation to the 10% tolerance bucket is defined in 19(e)(3)(iv)(A) & (B),

which are the (A) “changed circumstances affecting settlement charges” and

(B) “changed circumstances affecting eligibility” sections. Most of the time, the creditor

is not allowed to update the baseline amount for the “fees that may increase by 10% in

aggregate” tolerance threshold unless a valid changed circumstance results in an

increase to the fees in this category by more than 10% of the original amount disclosed.

See, § 1026.19(e)(3)(iv). Here’s an example: The total aggregate of fees disclosed on the

original LE equals $1000, resulting in a tolerance threshold of $1,100. Subsequent to

disclosing the original LE, a valid changed circumstance increases the aggregate of fees

in this category to $1,099. This amount does not breach the original $1,100 threshold,

therefore, the tolerance level cannot be updated. Supposing then, that a non-valid

changed circumstance then increases the aggregate of fees in this category to $1,200,

the creditor would not be allowed to update the threshold and would be obligated to

Page 9 of 17

pay the consumer $100 to cure a good faith violation. On the other hand, supposing that

the second changed circumstance above were another valid changed circumstance

raising the aggregate of fees to $1,200, then the revised LE could re-baseline to reflect

$1,200 as the disclosed amount and $1,320 would be the new 10% threshold.

11. The “good faith” and “best information reasonably available” standards.

a. Even though the “Understanding which charges can change after settlement” section of

the Good Faith Estimate has been removed from the LE to the benefit of consumer

understanding of the disclosures, the rule still requires that creditors do a good faith

analysis.

b. 1026.19(e)(3) is the section of the new rule that references the “good faith

determination for estimates of closing costs” input on the Loan Estimate. Some aspects

of what is known today as “good faith” will change August 1, 2015, to a stricter

standard—the general rule becomes “an estimated closing cost disclosed pursuant to

[the LE] is in good faith if the charge paid by or imposed on the consumer does not

exceed the amount originally disclosed” unless there is an exception provided by the

rule.

c. In the section of the TRID rule titled “Limited increases permitted for certain charges,”

3rd party service or recording fee charges are in good faith as long as they do not

increase by more than 10%.

d. In the section of the TRID rule titled “Variations permitted for certain charges,” the rule

defines a list of items that remain in good faith, even if the charged amounts change, so

long as the creditor can show that it relied on “the best information reasonably

available to the creditor at the time it is disclosed;” this list includes: (1) prepaid

interest, (2) property insurance premiums, (3) amounts placed into an escrow, impound,

reserve, or similar account, (4) charges paid to third-party service providers selected by

the consumer consistent with [the rule] that are not on the list provided pursuant to

[the rule], and (5) charges paid for third-party services not required by the creditor.

e. The rule further defines “changed circumstances” that would allow creditors to rely on a

revised estimate for determining good faith. The changed circumstances are quite

detailed, see topic Managing tighter tolerances (variances or “variations” in the rule).

f. 1026.19(f)(1)(i)-2 defines the “reasonably available” standard as when “the creditor,

acting in good faith, exercise[s] due diligence in obtaining the information.” (See,

1026.19(f)(i)-2 for examples).

g. 1026.19(f)(2)(v), the section related to closing documents, addresses required refunds

to borrowers for breaches of good faith from LE to CD. This section states that “if

amounts paid at closing exceed the amounts specified [on the LE], the creditor does not

violate [the "good faith" requirements of the LE] if the creditor refunds the excess to the

consumer no later than 60 days after consummation, and the creditor does not violate

[the CD requirements] if the creditor delivers or places in the mail disclosures corrected

to reflect the refund of such excess no later than 60 days after consummation.

Page 10 of 17

12. Fees with Limited Dedicated Lines on the Loan Estimate and Closing Disclosures.

a. § 1026.37 is the section of the TRID rule dedicated to preparing the Loan Estimate (LE).

37(f)(1) and (2) of the TRID rule refer to the subsections on the second page of the LE

titled "A. Origination Charges" and "B. Services You Cannot Shop For," respectively. Per

the second romanette in each of these sections, the total number of lines dedicated will

be a maximum of thirteen. § 1026.37(f)(6), entitled "Use of Addenda," limits itemization

for these sections to just the number of lines available, which means that no addenda

will be allowed even if a creditor has more than 13 items to list. For these two sections,

the itemization will be truncated at 12 lines, the 13th line will be labeled "Additional

Charges," and the 13th line will have an aggregate of all additional charges that could

not be listed due to space restrictions. The whole second column of page two of the LE

works the same way. Cf., 1026.37(g)(8).

b. § 1026.38 is the section of the TRID rule dedicated to preparing the Closing Disclosure

(CD). Official Interpretation to 38(j), comment 2 regarding addenda refers to the

sections of page 3 of the CD titled "Borrowers Transaction" and "Sellers Transaction."

This comment states that "additional pages may be attached to the Closing Disclosure to

add lines, as necessary, to accommodate the complete listing of all items required to be

shown [for these sections of] the Closing Disclosure."

c. In addition to the above cited locations that could potentially require the use of

addenda, if it is impossible to disclose all the borrower or sellers to the transaction in

the space allotted for such on each disclosure, then the commentary to 37(a)(5) and

38(a)(4) allow the use of an additional page to disclose these additional parties.

13. Expanded record keeping requirements.

a. Most lenders already recognize the importance of managing record retention policies;

however, little things like, ensuring that IT has the infrastructure to manage longer

retention periods, will be an important part of the TRID implementation process.

b. § 1026.25(c) states regarding records related to certain requirements for mortgage

loans:

i. A creditor shall retain evidence of compliance with the requirements of [the LE

and CD] for three years after the later of the date of consummation, the date

disclosures are required to be made, or the date the action is required to be

taken.

c. For Closing Disclosures when the loan consummates, the requirements are further

outlined, as follows:

i. A creditor shall retain each completed disclosure required [for the CD] and all

documents related to such disclosures, for five years after consummation,

notwithstanding [selling, transferring, or otherwise disposing of its interest in

the loan].

Page 11 of 17

d. The 3-year retention requirement, which is "evidence of compliance" with all aspects of

the TRID rule related to generating the LE and CD is invoked "the date the disclosures

are required to be made."

e. The 5-year retention requirement, which is "all documents related to [the CD]" is

invoked at consummation. This "all documents related to [the CD]" verbiage means that

it is likely that a copy of the LE will need to be retained with the CD for 5 years from the

moment of consummation.

14. Managing the 3-business-days before consummation waiting period requirement in which the

consumer must have received the Closing Disclosures.

a. TRID requires that the consumer receive the Closing Disclosure (CD) 3 business days

prior to consummation. The Official Interpretation to the rule states:

i. [The CD] must be received by the consumer no later than three business days

before consummation. For example, if consummation is scheduled for Thursday,

the creditor satisfies this requirement by hand delivering the disclosures on

Monday, assuming each weekday is a business day. For purposes of [this

section], the term “business day” means all calendar days except Sundays and

legal public holidays. See, 1026.19(f)(1)(ii).

b. This small piece of the TRID rule is charged with consequences. Creditors will likely make

a fundamental shift from what is standard practice with the HUD-1, today, completing

and delivering the CD to the consumer. For example, if a creditor would like to close on

Thursday in the example given from the Official Interpretation cited above, the creditor

will have to have the CD completely prepared for issuance to the borrower at least 7

calendar days in advance. Here's why, if a creditor relies on postal or electronic mail,

where there isn't any confirmation of receipt of the CD, then the "mailbox rule" states

that a creditor can "consider" the CD to be received by the borrower (for purposes of

compliance with this part of the rule) three specific "business days" after the CD is

mailed. In the example above, that would mean (accounting for Sunday as a Federal

holiday) that the CD would have to be mailed on the Thursday that is one week prior to

close. Now take into account the additional time that creditors, who have opted to

collaborate with settlement service providers, will be required to invest in preparing the

CD prior to issuance. Due to liability issues, many creditors have decided to prepare and

issue the CD themselves. See, 1026.19(e)(1)(ii), 1026.19(f)(1)(v), and their related

Official Interpretations.

15. Potential for revised Closing Disclosures that will require a new 3-business-day waiting period.

a. Overview. Revised Closing Disclosures are allowed to be given to consumers; however,

there are changes before consummation requiring a new waiting period and changes

before consummation NOT requiring a new waiting period. Whether a new waiting

period is required or not, the rule states that “the creditor shall provide corrected

disclosures reflecting any changed terms to the consumer so that the consumer receives

the corrected disclosures at or before consummation.” See, 1026.19(f)(2)(i).

Page 12 of 17

b. Three additional waiting period triggers. There are three situations that will require an

additional three day waiting period before consummation can take place, they are when

(1) the APR becomes inaccurate, (2) the loan product changes, and (3) a prepayment

penalty is added.

c. Inaccurate APR. A note of caution regarding the APR: a changed APR does not always

mean that the APR is “inaccurate” and requires redisclosure. The commentary to the

rule provides situations and definitions of what is a change to the APR that would

render it “inaccurate” for the purposes of this rule, and thus require a new 3-day waiting

period. The CFPB has also come out with additional guidance in a single page fact sheet

for consumers. See, Closing factsheet.

d. Product changes. The examples for loan product changes are quite specific in the rule.

Here’s a more general example: if a CD is disclosed with “Fixed Rate” as the product

type, but then prior to consummation a product change is made that adds a two year

negative amortization period, these circumstances would require a redisclosure of the

CD with the product now labeled “2 Year Negative Amortization, Fixed Rate” and a new

three day waiting period.

e. Prepayment penalties. If, after giving the CD, a prepayment penalty is added to the loan

between receipt of the CD and consummation, new disclosures and a new 3-day waiting

period are invoked. If, however, a pre-payment penalty is taken off the loan during the

same timeframe, redisclosure, but NOT a new 3-day waiting period, is required.

16. Ability of consumers to waive or modify waiting periods.

a. § 1026.19(e)(1)(iii)(B) requires the lender to deliver (or mail) the Loan Estimate at least

seven specific* business days prior to closing, written into the rule as a “waiting period.”

A separate rule, § 1026.19(f)(1)(ii)(A), states that the consumer must also receive the

Closing Disclosures for a specific* three-business-days prior to closing, also written into

the rule as a “waiting period.”

b. Separately, § 1026.19(e)(1)(v) and § 1026.19(f)(1)(iv), provide an option for a consumer

driven waiver of the waiting period required for each type of disclosure. However, the

following specifics about the similar waiver requirements should be highlighted:

i. The waiver cannot be received before the consumer has received the

corresponding disclosure.

ii. The consumer must have a bona fide personal financial emergency that

necessitates an earlier consummation.

iii. The consumer must provide the creditor with a dated written statement that

describes the emergency and requests waiver of the waiting period(s).

iv. The signature of all parties primarily liable on the legal obligation must sign the

waiver.

v. The waiver cannot be on printed forms created for this purpose.

c. Official Interpretation § 1026.19(e)(1)(v)-2 clarifies that if the Loan Estimate is

personally delivered on a Monday, and the consumer provides a waiver that same day,

Page 13 of 17

then the Closing Disclosure could be provided on Tuesday, then the transaction could

close either three days later or according to the requirements for another waiver.

d. The commentary uses as an example for a bona fide personal financial emergency

requiring a waiver the “imminent sale of the consumer’s home at foreclosure, where the

foreclosure sale will proceed unless loan proceeds are made available to the consumer

during the waiting period.” This sounds like a very exceptional circumstance: akin to a

consumer who needs to fund prior to a previously scheduled life-or-death surgery to

take place during the required waiting periods. The biggest take-away regarding the

waiver is that the CFPB has gone out of its way to make sure that it isn’t frequently used

by borrowers, or imposed upon them by creditors. Perhaps the biggest issue, which has

been stated many times by industry insiders, is that even if a consumer has a

legitimate waiver of a waiting period, it is likely that no investor will buy a loan where a

waiver has been used.

i. *Definitions:

1. Specific Business Day—all calendar days except Sundays and legal public

holidays referred to in § 1026.2(a)(6).

2. General Business Day—creditor’s offices are open to the public for

carrying out substantially all of its business functions, which, in general,

may or may not include Saturdays.

17. Creation and issuance of the Closing Disclosure.

a. Creation and issuance of the Closing Disclosure (“CD”) is probably the piece of the TRID

puzzle effecting the greatest change to industry. The following are some challenges

Creditors should keep on their radar:

i. 3-day Waiting Period. TRID requires that the consumer receive the CD three

specific business days prior to consummation. This small timing requirement

could affect everything in the loan generation process from (a) real estate

contract dates to (b) internal work-flow and quality assurance processes to

(c) coordination efforts with settlement service providers. See, 1026.19(f)(1)(ii).

ii. Revised disclosures. It is the current understanding of IDS Compliance that it

was the regulatory intent of the CFPB to make the LE and CD similar in their

appearance yet different in their defined roles. This role delineation stands out

when looking at the rules surrounding “receipt of revised disclosures” and the

official interpretation in the rule related to it. See, 1026.19(e)(4)(i)-

(ii). Paraphrasing, this section states that no more revised LEs shall be given

once a CD has been issued. That said, if there are changes to the information

disclosed on the CD (e.g., a last minute walk-through changes a disclosed cost;

see, 1026.19(f)(2)(i)-1(i)), the creditor shall redisclose the CD to reflect those

changes up to and including the date of consummation. See, 1026.19(f)(2)(i).

Note well, however, that there are three changes that if made after the CD has

already been issued will require redisclosure of the CD and a reset of the 3-day

Page 14 of 17

waiting period prior to consummation; the three “CD waiting period reset”

changes are (1) changing the product type, (2) adding a prepayment penalty,

and (3) changing the APR enough that it is “inaccurate” by regulatory definition.

See, 1026.19(f)(2)(ii).

iii. Creditor Liability. The LE and CD were written into Regulation Z (12 CFR § 1026),

which may provide consumers with a private right of action that Regulation X

(12 CFR § 1024) did not. Further, although certain third parties (e.g., brokers and

settlement service agents) are allowed to prepare or help prepare the new

documents, the rule places responsibility for accuracy of the forms on the

creditors. See, 1026.19(e)(1)(ii), 1026.19(f)(1)(v), and their related Official

Interpretations. Combine the possibility of a private right-of-action with the

rule-driven responsibility for disclosure accuracy placed on creditors and the

situation is that several creditors are opting to prepare and generate the LE and

CD while continuing to rely heavily on third parties for information necessary to

complete the forms.

iv. Settlement Service Providers. Title agents and others (e.g., closing attorneys)

who provide settlement services are an important part of the closing process.

Without having any statistical or empirical evidence to rely on, it’s probably not

a stretch to say that the industry standard prior to August 1, 2015, has been to

have the settlement service provider prepare the HUD-1 and any final

redisclosed TIL. For the reasons mentioned in “3. Creditor Liability” above,

several creditors may begin preparing all or part of the CD. The rule provides

just enough flexibility to complicate this piece of the workflow, stating “to

ensure timely and accurate compliance with the requirements of

1026.19(f)(1)(v), the creditor and settlement agent need to communicate

effectively.” Industry has been talking for several months now about the use of

technology to facilitate data exchange between creditors and settlement service

providers while preparing the CD; however, coming up with a technology

solution that will work all the time for everybody will probably take more time

than is remaining prior to the 1 August 2015 implementation date (although,

there are several technology providers working on it). This is a piece of the

puzzle where there may not be one perfect solution beginning August 1, 2015,

but creditors can have internal policies and procedures in place and in practice

that will facilitate the process—saving creditors who have a game plan: time,

money, and unnecessary hassles.

v. E-Sign. It’s interesting to note that the five page CD is the only industry

disclosure required by the rule to be received by the consumer 3 specific

business days prior to consummation. Besides in-person delivery (instant

receipt) and postal mail (presumptive 3-day receipt, unless evidence of receipt

proves that delivery took place sooner), the rule allows the CD to be delivered

by electronic means if its delivery meets the requirements of the E-Sign Act.

See, 1026.19(f)(1)(iii)-2. Using the E-Sign process in conjunction with the CD has

the potential to reduce the time to close by up to 3 specific business days. The

Page 15 of 17

rule treats E-Sign similarly to postal mail. In practice, the differences E-Sign and

postal mail relate mostly to reliable tracking and speed. For tracking, E-Sign

systems that follow the strict validation process of the E-Sign Act can provide

creditors with proof and peace-of-mind that the intended consumer receives

the disclosures. For speed, an E-Sign system should also keep time stamped

information of (1) when the consumer consents to receive disclosures

electronically and (2) when the disclosures are viewed/received by the

consumer. Also for speed, E-Sign systems can provide notices to the creditor via

email as soon as disclosures are received by the consumer. IDS will use its extant

E-Sign system to give clients the option of using E-Sign to manage the CD

delivery process.

18. Varying Time Periods for Correcting CDs and Refunding Money Post-Closing.

a. “30-30, 60, 60″—these numbers represent the mnemonic that IDS Compliance came up

with to help remember the timing requirements for LE/CD-related fixes required post

consummation. Tip: if you say “30-30, 60, 60″ fast enough in a discussion with

colleagues surrounding the topic Varying Time Periods for Correcting CDs and Refunding

Money Post-Closing, you’ll always sound precocious. Here’s a breakdown of “30-30, 60,

60.”

b. 30-30 represents the “Events” rule, which states that when the following criteria are

true within the first 30 days after consummation:

i. event in connection with the settlement of the transaction occurs, and

ii. causes the CD to become inaccurate, and

iii. the inaccuracy changes the amount actually paid by consumer comparative to

the CD,

then the creditor must deliver corrected disclosures within 30 days of receiving

information sufficient to establish that such event has occurred. For examples, read

the official interpretation to 19(f)(2)(iii).

c. 60 represents the “Clerical Error” rule, which states that when the following criteria are

true, then the creditor must deliver corrected disclosures within 60 days of

consummation:

i. CD provided at consummation had an error, but it is one that does NOT affect a

numerical disclosure, and

ii. CD provided at consummation had an error, but it is one that does NOT affect

requirements imposed by the LE or CD.

In other words, clerical errors represent lesser offenses (so a numerical error or an error

affecting the requirements of the LE or CD are major offenses). Clerical-type errors

simply require a corrected disclosure be delivered to the consumer within 60 days of

consummation. For examples, read the Official Interpretation to 19(f)(2)(iv).

Page 16 of 17

d. 60 also represents the “Good Faith Refund” rule, which states that when the following

criteria are true, then the creditor must deliver a refund & corrected disclosures

within 60 days of consummation:

i. Actual amount paid by consumer at consummation exceeded the limitations

permitted by the “good faith determination” located in § 1026.19(e)(3)(i)&(ii).

e. The 30-30 “Events” rule also applies to the Seller’s Transaction version of the CD

provided by settlement agents. See, § 1026.19(f)(4)(ii).

f. Tip: the CFPB published a great TRID Timeline Example that reviews some of the above

scenarios using a calendar where you can actually eyeball these varying post-closing

time periods.

19. Transitional period when HUD-1 and Closing Disclosures will both be in use.

a. The TILA-RESPA Integrated Disclosure (TRID) rule is very firm about its implementation

date of August 1, 2015. As a part of the implementation date, the rule specifies that

lenders are neither allowed to begin using the disclosures early nor allowed to use the

new disclosures on loans where the creditor received an application before August 1,

2015. The preamble to the TRID Final Rule states:

i. Not only shall the current early disclosures (i.e., the early TILA disclosure and

the RESPA GFE) be provided for the transaction, but the current final disclosures

(i.e., the final TILA disclosure and the RESPA settlement disclosure) shall also be

provided for that transaction, even when consummation of the transaction will

occur, and thus the final disclosures will be provided, after August 1, 2015. For

example, if a creditor receives an application for a mortgage loan subject [to

TRID] on July 31, 2015, the current rules will apply for that transaction from

application through consummation and thereafter. Accordingly, the creditor

would provide the current early disclosures within the timeframes required

under the current rules. In addition, even if settlement occurred 60 days later,

after August 1, 2015, the current final disclosures would be provided to the

consumer. Further, the creditor and other parties, as applicable, would also

have to comply with any other rules that apply under the current regulatory

regime with respect to the transaction… .

b. Due to the nature of this part of the rule, there will be a period (a sometimes lengthy

period, depending on how long the loan origination process is on particular loans)

where both types of disclosures will need to be originated for the same types of loans.

This will be the case until those loans with an application date before August 1, 2015,

have all been processed. See, TRID Final Rule, VI. Effective Date, (C) The Effective Date,

pg. 1243.

Page 17 of 17

c. To manage the dual production of pre- and post-TRID disclosures for the same types of

loans, lenders should consider some of the following things:

i. Do you have a set of policies and procedures in place for how your loan

processors will handle juggling multiple disclosure requirements for the same

types of loans with a variation based only on application date?

ii. Have you consulted with your LOS and Doc Prep Provider to find out what

technological tools they plan on implementing to help manage this situation?

iii. Does your current process include a team that manages the initial disclosures

and a separate team that manages the closing disclosures; if so, how will they

communicate with each other regarding which disclosures have already been

applied?

iv. Does your current process include generating your initial documents with one

LOS or Doc Prep Provider and then generating your closing disclosures with a

separate LOS or Doc Prep Provider and how will you manage communication of

which type of disclosure needs to be originated?

d. A separate, but related, issue is that some types of mortgages will be exempt from the

new TRID disclosures, e.g., HELOCs and Reverse Mortgages—these types of mortgages

will continue to require the disclosures currently provided. The idsDoc System will have

dual capacity, so for any loans that require the old GFE/HUD-1 or TIL disclosures, it will

be as easy to generate them as clicking a checkbox.

20. Ongoing need for GFE/HUD-1 for certain types of transactions.

a. After TRID takes effect, August 1, 2015, will the GFE and HUD-1 Become Obsolete? The

short answer is “No.” Here’s why: RESPA itself does not go away just because certain

transactions are now covered by the TILA-RESPA Integrated Disclosures (TRID). As for

the GFE and HUD-1, there are certain transactions, like reverse mortgages, that are NOT

covered by TRID but are still covered by RESPA. To illustrate, if a creditor would like to

originate a reverse mortgage, then the creditor would need to provide a GFE and a

HUD-1, even if the creditor chooses to furnish an LE and CD to the consumer for that

transaction. Page 20 of the CFPB’s Small Entity Compliance Guide provides the following

further clarification:

i. Creditors are not prohibited from using the Integrated Disclosure forms on loans

that are not covered by TILA or RESPA (e.g., mortgages associated with housing

assistance loan programs for low- and moderate-income consumers). (See

§ 1026.3(h) and § 1024.5(d)(2)). However, a creditor cannot use the new

Integrated Disclosure forms instead of the GFE, HUD-1, and Truth-in-Lending

forms for transactions that are covered by TILA or RESPA that require those

disclosures (e.g., reverse mortgages).