DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/1085639
20 A CLOSER LOOK AT TRID By John V. Levonick and Scott McNulla Although it had been several years since the housing crises, in the third quarter of 2015, residential mortgage backed securitizations were still sailing into headwinds as the private label securitization market was still a fraction of its former self. Lenders were finally getting a firm footing after the Dodd-Frank based regulatory changes effective starting with loan applications received January 10, 2014, most significantly introducing the Ability to Repay testing and modifying the federal high cost testing under the Home Ownership and Equity Protection Act. Lenders were preparing for the TILA- RESPA Integrated Disclosure Rule (TRID), effective with loan applications as of October 3, 2015. e 1,888 pages of TRID meticulously rewrote the mortgage disclosure process with thoughtful detail, with the intention of making the mortgage origination process more transparent with easier to understand disclosures for consumers. e new disclosure requirements, also referred to as Know Before You Owe, were developed by the Consumer Financial Protection Bureau (CFPB) to help consumers understand the loan terms, loan features, and charges to facilitate shopping for loans they were considering. Two new disclosures, the Loan Estimate and Closing Disclosure, replaced the existing Good Faith Estimate, Initial TIL Disclosure, Final TIL Disclosure and Settlement Statement. Lenders were unaware of the severity of the storm coming over the horizon. Despite the entirety of the mortgage origination industry focusing its efforts on defining the origination requirements of TRID, the secondary market was left to focus on defining the liability surrounding these new disclosure obligations that was not abundantly clear, specifically attempting to quantify the risk that the investor may face in the event that investor purchased a loan that contained a violation of TRID. e uncertainty surrounding the potential liability was compounded by the extreme scrutiny being placed on the disclosure timing and content that resulted in the perfect storm of compliance exceptions being identified on loans evaluated for secondary market acquisition. e loans being reviewed were evaluated under a microscope with every misstep by the originating lender rendering an exception on the loan cited by the third-party review (TPR), firms as a material exception that required remediation, if remediation was available. It was more than a single rogue