Congratulations, you have survived the TILA/RESPA Integrated Disclosure rule (TRID) effective date!
It might be tempting to sit back and rest from the chaos you survived. Getting ready was the attempt by the industry to implement the most significant mortgage rule changes, ever.
But you cannot afford to rest.
Now is the time to take a short inventory of your compliance controls to see where they can be enhanced before too many loans are closed under the new rules.
The following is a basic list of risk management-related procedures to check in your TRID process:
1. Automate or centralize as many processes as possible.
Lenders and brokers should not initiate disclosures or determine whether a valid change of circumstance exists, not on their own. These critical decisions and documents should be determined and overseen by a small group of TRID experts.
Change-of-circumstance decisions should be made in conjunction with a detailed policy or job aid. This will allow all staff that make these decisions to act in concert with one another. Otherwise, expect a lot of inconsistency and upcoming regulatory trouble.
Another process that is critical and should be automated is the ongoing calculation of the fee baseline (to determine if they change more than 10%). This should always be an automated process, not a manual one.
2. Issue new Settlement Service Provider Lists (SSPLs) whenever a new fee is added to a revised Loan Estimate.
Everyone knows that you need to issue an SPPL when the initial Loan Estimate is provided. However, the regulation is silent on whether you should issue a new list when a new provider comes into play due to a changed circumstance or a borrower-initiated change.
If you do not issue a new SSPL with the new provider listed, the assumption will be that the consumer could not shop for the newly added service—and it will fall into the no tolerance category.
3. Implement an ongoing post-closing quality control review.
It is surprising that some lenders do not have post-closing compliance reviews. TRID is so complicated, this process should be added if it is not already in place. Finding errors and correcting them immediately after the loan is closed may not stop restitution of incorrectly disclosed fees, but it will help the lending institution steer clear of enforcement actions and private litigation.
4. Conduct a full-scale TRID compliance review within 90 days.
The magnitude of the TRID changes was so great that the entire mortgage origination compliance program should be reviewed for TRID compliance within the first three months to correct anything that has gone off the rails or that was not set up correctly in the first place.
This review should be thorough—and findings and corrected actions should be documented.
5. Keep a clear and clean audit trail of all critical decisions, especially change of circumstances.
Mortgage origination systems should have a place for notes to be added to indicate the sequence of events, communications, and processing items that document a change to the loan mid-stream. This can include facts about the property or the borrower, notes from an appraisal, etc., that require a change of circumstances.
This documentation is necessary to prove compliance with the regulation. It is helpful if the system has a search methodology to allow you to bring up notes quickly. Documents that are relevant to these decisions should be added in the system as well.
Remember: The key to TRID is to take manual decisions out of the process where possible and review procedures often until the system checks out to be 100% compliant.