The housing market over the last five years have been marked by a shortage of homes for sale and ever-rising prices. This dynamic has been especially prevalent in coastal markets like New York, San Francisco, and Los Angeles, which tend to be expensive anyway.

Expectations were that this was going to continue, but in 2018, the market started to cool. This past summer—usually a busy season for homebuying—was suppose to be “the most competitive housing market in recorded history,” according to one realtor, with prospective buyers engaging in bidding wars over the few houses that were for sale.

That didn’t pan out, suggesting that home prices have finally risen beyond what people can actually pay; wages have risen at a much slower clip than home prices. The housing market follows the old economic principle of price being a function of supply and demand, and demand is strong with the economy doing well and older millennials finally entering stages of life that lead to buying a home.

Coming out of the summer on the West Coast, homes that were expected to spark bidding wars instead lingered on the market, leading to huge spikes in inventory for sale. San Francisco, San Jose, and Denver—some of the hottest markets over the last five years—were among the cities that saw the biggest inventory jumps.

This fall, those same markets saw median listings prices drop considerably. It’s important to distinguish the difference between a listings price and a sale price, because listings prices can still be bid up, but usually listings prices are leading indicator as to where home prices are headed.

If that holds true, 2019 could see West Coast home prices drop, which other than a few exceptions like 2008 rarely happens.

Speaking of the 2008 housing collapse, one might naturally be alarmed by the prospect of a housing slowdown, given the financial calamity that occurred as a result of the last housing slowdown. But conditions today are almost the complete inverse of conditions in 2008.

For example, most of the ills of the housing market leading up to 2008 were marked by lending practices that ranged from irresponsible to downright reckless. Ill-advised mortgages were spread through the entire global financial system via complex financial instruments, and when defaults started to rise, the system collapsed. But lending today is incredibly strict, so strict in fact that some in the industry believe the lessons of 2008 were over-learned.

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There was also a housing surplus in the years prior to 2008. Regional home building companies had recently consolidated to form large national builders, which pumped out houses at dizzying pace. When the housing bust happened, the surplus of housing made price drops worse. But as mentioned, today there’s a housing shortage, even with the recent jumps in homes for sale. This means any type of slowdown would have a hard floor as far as home prices go.

It’s also possible that instead of home prices dropping, the pace at which they go up merely slows down or even flat lines. The overall strength of the economy remains strong, despite the recent stock market selloff. Unemployment remains remarkably low, and the U.S. is still gaining jobs. Wages continue to rise. The general conditions for the housing market to do well remain, even if a few high-priced markets went up a little too fast. Stay tuned.

Source: https://www.curbed.com/2018/12/21/18148570/housing-market-predictions-2019

Servicers can’t slack on compliance as states step up oversight: S&P
While the foreclosure crisis is over and federal regulators are being less assertive on enforcement actions, mortgage servicers can’t let their guard down about compliance, according to Standard & Poor’s.

That’s because lax federal oversight is being supplanted by state regulators and attorneys general stepping up enforcement activities.

Some of the recent positive news for the “beleaguered industry” included: acting Consumer Financial Protection Bureau Director Mick Mulvaney’s statements at the Mortgage Bankers Association annual convention, the Senate Banking Committee’s approval of Kathy Kraninger for the permanent job, the dropping of Real Estate Settlement Procedures Act cases against PHH and Zillow, and Brett Kavanaugh’s elevation to the U.S. Supreme Court.

“While we believe the regulatory landscape has changed and that these actions offer some promising developments for servicers, this overture could still prelude some hurdles,” said the report, written by Steven Frie and Mark Shannon. “Additionally, since servicers have invested considerable capital — both financial and human — we expect them to continue to follow industry best practices despite the possibility of loosening regulations.”

But as the CFPB backs off from the level of enforcement under former director Richard Cordray, some state regulators are looking to fill the void. New Jersey hired Paul Rodriguez to be director of the Division of Consumer Affairs and turn it into a state-level CFPB. Pennsylvania Attorney General Josh Shapiro created a Bureau of Consumer Protection.

Other state attorneys general have also said they will step up their enforcement. Plus the Multistate Mortgage Committee remains active, pointing to a 2017 settlement with PHH on legacy servicing issues.

“We believe that the regulatory environment will remain uncertain as the CFPB establishes its regulatory routines and enforcement protocols with servicers,” the report said. “State governments and the MMC remain challenges for servicers as new state-level consumer protection units take form and as states continue to work together to investigate and bring about enforcement actions. Therefore, servicers will likely still be diligent in identifying possible regulatory issues at the federal, state, or municipal levels.”

Servicers also need to be concerned about reputational risk if some companies backslide into prior practices.

“If anything, a continuing trend of even minor violations of the law will have an unfavorable effect on a servicer’s reputation and could invite scrutiny by federal or state regulators, regardless of loosening regulations,” the report said.

There is $10.2 trillion of mortgage debt outstanding as of the second quarter, up from $9.4 trillion on March 31, 2016, according to the MBA.

Source:https://www.nationalmortgagenews.com/news/mortgage-servicers-need-to-keep-best-practices-in-place-s-p

The Calm After the Storm: Regulatory Relief in the Wake of HMDA

It’s no secret that mortgage regulations impact smaller lenders to a greater degree than they do larger ones. The time and expense of collecting, analyzing and submitting Home Mortgage Disclosure Act (HMDA) data for fewer than 500 loans can negatively impact a smaller lender’s profitability and efficiency.

In recognition of the specific needs of smaller lenders, Congress passed the Economic Growth, Regulatory Relief and Consumer Protection Act, which was signed into law in May. Section 104(a) of the law addresses HMDA compliance, granting institutions originating fewer than 500 closed-end mortgage loans in each of the two preceding calendar years with a partial exemption to reduce the regulatory burden.

Understanding the HMDA Exemptions

At the time mandatory HMDA compliance took effect in January, the number of required data fields more than doubled from 44 to 110.

For smaller banks and credit unions, efficiently managing these requirements can be very tedious, often requiring additional staff and higher compliance technology expenses. The partial exemption reduces the required data fields to be reported by smaller financial institutions, which, in turn, means that freed-up resources can be reallocated to customers.

In all, 26 data points are currently covered by partial exemptions. Because of that, The Bureau of Consumer Financial Protection in August released an interpretive and procedural rule to help affected institutions gain authoritative clarification and guidance regarding how to comply with these changes to HMDA, made by section 104(a) of the act. This rule should allow institutions that have these allowances to decide how to proceed with data collection and reporting.

These allowances should help partially exempt banks and credit unions alleviate the stress that comes with compliance changes, in turn, allowing loan officers to put their members and customers first and eliminate potential delays in the loan process. Note that for non-depository lenders of any size, this bill will not provide any additional relief.

Most Lenders Should Still Track Exempted HMDA Data
Most small credit union and bank lenders will still need to collect the new HMDA data, even if it is not required for the annual submission. One primary reason is that preparations for expanded data collection have already been done. Every major loan origination system has already rewritten their systems to include the new data fields, and vendors won’t create specific versions that exclude those fields.
Smaller banks and credit unions must also realize that while the exempted fields are not required for submission, fair lending reviews may still request all 110 data fields required under the new HMDA rules. Lenders that didn’t collect all the data may find it more time-consuming to verify that information in the heat of an exam than it would have been to collect the data upfront.

Also, if lenders anticipated being under the threshold for the year but end up exceeding 500 loans, they may find it difficult to retroactively obtain the required data fields for reporting.

Another consideration is the possibility of selling loans down the road. Financial institutions are required to report all 110 data fields for all purchased loans, even if the institution closes less than the 500-loan threshold. Therefore, if an institution sells one or more loans to another financial institution, the loan will no longer fall under that exemption rule, and the data that was at one point unnecessary then becomes a requirement for the completion of a HMDA submission.

It may be in the best interest of all parties to continue to collect all 110 data fields even though they may not all be required for the institution originating the loan.

Ultimately, the HMDA exemptions for credit unions and banks that close fewer than 500 loans per year can be beneficial. The submissions will be simpler with fewer data fields to scrub, and institutions can focus their resources on the loan business pipeline.
However, most lenders should still collect the expanded data to assist in fair lending reviews and simplify the sale of loans on the secondary market to investors that will need the additional data for their own compliance.

Source:https://mortgageorb.com/the-calm-after-the-storm-regulatory-relief-in-the-wake-of-hmda

Don’t Lose Your Cool When You Get Audited
There are ways to survive and thrive a gut-wrenching process
By Phil Mastin, assistant vice president and director of regulatory affairs, United Wholesale Mortgage; and Jeff Midbo, senior vice president and chief compliance officer/deputy general counsel, United Wholesale Mortgage | bio
You’re going to be audited. Those five words will make the hair on the back of any mortgage originator’s neck stand up.

Originators know they can be audited at any time and have come to expect it as part of their profession. Given current market trends and the climate of the Consumer Financial Protection Bureau right now, originators need to be more vigilant when it comes to examinations, both at the national and local levels.

For the first time in a long time, the industry is functioning as a true purchase market, with purchases making up over 70 percent of mortgage originations. That has cranked up the competition for business in a big way, which means intensified monitoring by national and state regulators to ensure that borrowers are protected.

Now, more than ever, it’s especially important for originators to be well-prepared and proactive in their compliance efforts. Following is an overview of what mortgage originators can do to make sure they remain compliant in today’s purchase-heavy market.
Key Points
Surviving your next audit
Build a relationship with the auditor.
Prepare ahead of time for the exam.
Be organized and diligent.
Show proper exam etiquette.
Determine the best person to answer key questions.
Ask lenders for an assist.

Prepare and organize
Mortgage originators know that relationships matter, both with their borrowers and real estate partners. They should take a similar approach with their regulators.

Regulators are not the “bad guys.” They are there to help professionals in the industry be successful the right way. Their rules are in place to protect the reputation and legal standing of businesses just as they are protecting consumers’ best interests.

Don’t be afraid to communicate with them. Regulators want originators to reach out if they have questions so they can get them the information they need. Regulators aren’t going to give you legal advice, but they will frequently provide feedback as to how they approach the various rules.

Set yourself up for success. Every originator is going to be subjected to an examination at some point, so be prepared. The 11th hour is not the ideal time to start focusing on compliance.

Originators need to prioritize compliance from the moment they are licensed to avoid being in scramble mode while preparing for an examination. Don’t hope for the best when it comes to exams. Being prepared is half the battle.

Make sure that you are organized. During an exam, there is always a back and forth between originators and examiners. Be diligent about what documentation you’re providing and what’s requested of you.

This ensures that you’re not missing things and you’re fulfilling all of your obligations to the regulator. Make sure you know where your loan files are, make sure they’re organized, and make sure you can provide a clean set of documentation to the regulator. If you give them everything in a timely, organized fashion, and it’s compliant because you’ve been doing due diligence all along, it’s going to make everyone’s life easier, especially yours.
Seek the right answers
When an exam is in progress and regulators are at your office, things can be a little awkward. But they don’t have to be. Being pro-active in communicating with your examiners will go a long way toward ensuring things go smoothly.

When the regulators are communicating with you, respond in a timely and accurate fashion. If they ask for something, and you don’t have it at your fingertips, let them know you’re working on it.

By showing a sense of urgency, you show the regulators that you’re taking the exam seriously. If you don’t, how do the regulators know that you’re giving compliance in general the attention it deserves when they’re not in your office?

When it comes to compliance, don’t try be a hero if you don’t have the cape. Meaning, if you’re not the best person at your company to handle compliance, then find somebody who is. It can be another originator, an office manager and so on.

You don’t need to be an attorney to be aware of how the business is being conducted, but it is important that someone is identified who can stay on top of it. Originators need to understand their strengths and weaknesses when it comes to compliance and act accordingly, so they’re set up for success when examinations occur.

If you have questions about any of the topics covered in this article, your lender may be able to point you in the right direction. Keep in mind, lenders cannot provide actual legal advice when it comes to compliance. As a trusted business partner who typically has more resources at their disposal, however, your lender can be a good source of information. Think of it this way: A lender can provide originators with the “why” behind the way things are done. They just can’t tell you how to handle those things.

Source:https://www.scotsmanguide.com/Residential/Articles/2018/11/Don-t-Lose-Your-Cool-When-You-Get-Audited/?utm_source=Residential-TopArticles1118&utm_medium=email&utm_campaign=Newsletters&utm_source=&utm_medium=email&utm_campaign=1524

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The Many Ways to Be Relieved of Your Timeshare Obligations While it is true that a timeshare contract is a binding legal document, it is often mistakenly thought that such a contract cannot only be cancelled. In fact, most timeshare companies maintain that their contracts are non – cancellable. This misconception is perpetuated by timeshare companies and user groups that are funded, maintained and controlled by the timeshare industry.

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Citigroup may face sanctions after it failed to offer mortgage discounts to minority customers despite offering the discounts to many other borrowers, a possible breach of fair-lending standards, according to a report by Reuters.

Three people familiar with the regulatory examination told Reuters that the Office of the Comptroller of the Currency (OCC) is mulling a penalty against the company. In case of a finding of wrongdoing, the OCC may impose a fine or place the company under tighter oversight, among other sanctions.

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According to the sources, Citigroup self-reported the “relationship pricing” issues to the OCC after it was uncovered in the company’s review of its compliance with fair-lending standards. Citigroup’s program allows a half-percentage point off the interest rates for customers with $1 million in deposits or investments. Some minority borrowers were not offered those discounts.

Citigroup told the regulator that the pricing discrepancies were inadvertent and that it had acted to resolve the problem, according to Reuters’ sources.

Drew Benson, a spokesman for the company, acknowledged the pricing issues. However, he said Citigroup believes it did not engage in discrimination or violate fair-lending laws.

“In 2014, Citi self-identified errors implementing its relationship pricing program which affected a small percentage of our mortgage customers,” Benson said in a statement provided to Reuters. “We conducted a comprehensive review, reimbursed affected customers, and have strengthened our processes and controls to help ensure correct implementation going forward.”

Source:https://www.mpamag.com/news/regulator-weighs-fairlending-sanctions-against-citigroup-over-mortgage-discounts–sources-113720.aspx

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The Many Ways to Be Relieved of Your Timeshare Obligations While it is true that a timeshare contract is a binding legal document, it is often mistakenly thought that such a contract cannot only be cancelled. In fact, most timeshare companies maintain that their contracts are non – cancellable. This misconception is perpetuated by timeshare companies and user groups that are funded, maintained and controlled by the timeshare industry.

Straight Up with Jocelyn Predovich: The Truth about FHA 203k Loans The FHA 203k loan program provides home buyers the opportunity to buy and fix up a property, without exhausting their personal savings.

Trade associations and cooperatives in the mortgage industry have called on the Consumer Financial Protection Bureau to update its Loan Originator Compensation rule, saying changes to the rule should be prioritized to help consumers and reduce regulatory burden.

The rule seeks to protect consumers from harms associated with “steering,” such as when borrowers agree to a loan they do not understand and cannot repay. However, trade groups say steering is now less likely given regulations since the passage of the Dodd-Frank Act. The groups cited the Qualified Mortgage rule and, more recently, the bureau’s TILA-RESPA Integrated Disclosure rule.

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“While these regulatory developments have reduced the risk of steering, the LO Comp rule places strict limits on certain practices that actually would result in lower consumer costs or greater product availability. After more than five years under the rule, a rebalancing is needed,” the groups said in a letter to CFPB Acting Director Mick Mulvaney.

To address problems related to the rule, the groups proposed the following changes:

The bureau should allow loan originators to voluntarily lower their compensation in response to demonstrable competition in order to pass along the savings to the consumer.

he bureau should allow lenders to reduce a loan originator’s compensation when the originator makes an error.

Lenders should be allowed to alter loan compensation in order to offer loans made under state and local housing finance agency (HFA) programs.

The groups further called on the bureau to explore ways to generally simplify the rule.

“The bureau should add clarity to the regulation, including specifying a clear ‘bright line’ list of impermissible compensation factors rather than the current approach of providing a short list of permissible factors and a vague and complicated ‘proxy for a term’ analysis that serves to discourage everything else,” the group said.

The letter was signed by American Bankers Association, America’s Mortgage Cooperative, Capital Markets Cooperative, Community Home Lenders Association, Community Mortgage Lenders of America, Consumer Mortgage Coalition, Independent Community Bankers of America, Mortgage Bankers Association, The Mortgage Collaborative, National Association of Federally Insured Credit Unions, The Realty Alliance, and Real Estate Service Providers Council.

Source: https://www.mpamag.com/news/trade-groups-call-on-cfpb-to-update-loan-originator-compensation-rule-112855.aspx

If there’s one issue that can slip you up, it’s loan pricing discretion unmanaged, which naturally increases fair lending risk. In 2011, the Truth in Lending Act was amended with the MLO compensation rule, which prohibits financial institutions from providing financial incentives to an MLO based on the terms and conditions of a loan.

In July 2018, the Federal Reserve issued a new publication, Consumer Compliance Supervision Bulletin. In this publication, the issue of mortgage target pricing was briefly discussed. While the publication acknowledges that the MLO compensation rule has reduced fair lending risk, it has done so only at the mortgage loan originator level, and that risk still exists for mortgage pricing.

According to the publication, some financial institutions “that originate mortgage loans for the secondary market now set a “target price” for each mortgage loan originator. This means that the bank sets a specific profit margin target for the mortgage loan originator. This target price can be achieved with any combination of a higher interest rate and/or discretionary fees charged to the borrower. These target prices are based solely on discretion and not on the risk-related credit characteristics of the borrower. This arrangement may comply with Regulation Z as long as the bank does not vary the loan originator’s compensation based on different prices for borrowers. That is, the bank still complies with Regulation Z if it sets one compensation arrangement with one target price for each loan originator.”

Where the fair lending risk increases is when a financial institution’s MLOs have different target prices and the MLOs that have higher target prices serve minority areas. The publication mentions two such cases which were referred to the Department of Justice; one resulted in an enforcement action.

So, even though your financial institution may have a loan pricing policy, now might be a good time to review fair lending risks. The publication provides key steps in managing risk:

Check for compliance with Regulation Z with respect to financial incentives

Implement policies and procedures to control the risk that discretion could lead to a fair lending violation

Evaluate and managing the risk when the mortgage loan originators with the higher target prices tend to serve minority neighborhoods

Monitor pricing by race/ethnicity across mortgage loan originators, including the APR, interest rate, fees, and overages, using statistical analysis if there is sufficient volume

Consider mapping loans by target price

In addition, keep in mind that prudential regulators also provide clues as to how they will assess and measure fair lending and its risks. For instance, the FDIC in its Compliance Manual, covers pricing. Here are some of the questions asked:

Does the bank have a written loan policy that addresses pricing?

Does a review of the bank’s policies raise any overt or other potential fair lending concerns with respect to pricing?

Does the bank provide loan officers with a rate sheet, matrix, or written guidance for pricing loans?

Does the bank allow discretion in the setting of loan terms and conditions (including interest rates or fees) for residential real estate lending?

Does the bank track and monitor loan and pricing exceptions?

Are loan officers compensated based on pricing of loans?

Are controls in place to ensure consistency in pricing practices?

Do credit pricing systems or processes vary by product or lending channel?

Does the bank’s pricing vary by region, office, or branch?

Has the pricing process for any loan product changed since the previous compliance examination?

Or, if the FDIC is not your prudential regulator, do you know where to look online for examination procedures or guidance regarding pricing discretion? Take the time to review your financial institution’s policies and procedures, monitoring, documentation, range of discretion, and board of director/senior management oversight.

Mortgage Compliance Magazine wants to hear from you! Bring the talent in our industry to the forefront by submitting a nominee from your organization. From your submissions, we will select and showcase one Mortgage Compliance Professional of the Month from nominees in regulatory compliance from banks, credit unions, or mortgage companies. Get started here!

Like Mortgage Compliance Magazine and the weekly “NewsLINES”? Tell your friends and colleagues about us! Send them this link for their free subscription.

Around the Industry:

Effective Now

The Office of National Drug Control Policy announced the designation of ten new areas across Kentucky, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, and West Virginia as High Intensity Drug Trafficking Areas (HIDTAs). This designation enables the 10 areas to receive Federal resources to further the coordination and development of drug control efforts among Federal, State, local, and tribal law enforcement officers, and allows local agencies to benefit from ongoing HIDTA initiatives that are working to reduce drug trafficking across the U.S.

MCM Q&A

Wanting to learn more about utilizing blockchain effectively and maintain compliance? Check out this article from the March issue.

Source:http://www.mortgagecompliancemagazine.com/weekly-newsline/loan-pricing-discretion-assess-your-compliance/

California

Military Families Financial Relief Act – The state of California amended its provisions relating to deferment of financial obligations for reservists by removing the requirement under the Military Families Financial Relief Act to provide a signed letter, under penalty of perjury, and instead require a written request. These provisions are effective on January 1, 2019 (AB 2521).

Connecticut

Consumer Credit Licenses – Connecticut has modified provisions under its Banking Law concerning consumer credit licenses. The new provisions expand the authority granted to the Banking Commissioner in various circumstances. The effective dates for these provisions range from July 1, 2018 to July 1, 2019 (HB 5490).

Indiana

Consumer Credit Fees – The Indiana Department of Financial Institutions published its annual consumer credit fees schedule. These fees are effective from July 1, 2018 through June 30, 2019 (schedule).

Georgia

Anti-Money Laundering – Effective July 17, 2018 the Georgia Department of Banking and Finance adopted multiple provisions relating to mortgage lenders, brokers and servicers that include lenders and brokers that satisfy the definition of “loan or finance company” under the Bank Secrecy Act must have an anti-money laundering program; and various updates to its mortgage servicing standards (80-11-6).

Michigan

Notary Provisions – The state of Michigan amended its provisions relating to notaries that include performance of notarial acts; remote electronic notarization; and signature of notary public. These provisions are effective immediately and this act takes effect on September 30, 2018 (HB 5811).

Pennsylvania

Foreclosure Provisions – Effective December 17, 2018, Pennsylvania has enacted provisions regarding the foreclosure of vacant and abandoned properties (PA HB 653).

Rhode Island

Mediation Conference – The state of Rhode Island modified its provisions relating to mediation conference prior to mortgage foreclosure by extending certain sunset provisions as well as limiting the amounts a HUD-approved agency may receive for a mediation and filing fee. These provisions are effective immediately (HB 7385).

Electronic Recording Act – Effective July 1, 2019, the state of Rhode Island enacted provisions relating to its Uniform Real Property Electronic Recording Act (HB 7080).

Source: http://www.mortgagecompliancemagazine.com/regulatory/state-regulatory-updates/monthly-state-regulatory-update-august-2018/

Introduction to TRID 2.0

An explanation of what to expect with our video series, the purpose of TRID 2.0, and a quick overview of major clarifications of TRID 2.0 as well as how to test them inside DocMagic.

Rounding and Truncation on LE & CD

Friday, September 7th, 2018
In episode 2 we review the original TRID rule for disclosing precentages, DocMagic’s rule for disclosing decimal places, and we address rounding and truncating trailing zeroes.

Seller Credits

Tuesday, September 11th, 2018
In episode 3 of TRID Talks we will be going over seller credits: how to send in XML & enter into DocMagic Online as well as the impact and changes on forms when Seller Credit.

Trusts and Non-borrowers

Thursday, September 13th, 2018
TRID Talks episode 4 will be about Trusts. Topics covered in this episode include: rescindable transactions – borrower title owner no longer to appear on pg. 1, and borrowers as ‘individuals’.

Closing Costs Expiration Date

Tuesday, September 18th, 2018
TRID Talks episode 5 will cover Closing Costs Expiration Date (CCED) over ten days – how to get plan feature set and CCED on redisclosed LE when ‘Intent to Proceed Date’ is present.

Simultaneous, Subordinate Lien Loans

Thursday, September 20th, 2018
TRID Talks episode 6 addresses simultaneous, subordinate lien loans. We will explain the new flag and the consequence of the flag which equals true.

Construction/CTP Changes

Tuesday, September 25th, 2018
In episode 7 we’ll discuss after consummation contruction inspection and fees including: the integration update and the impact on LE & CD as well as all other construction/CTP changes.

Principal Reduction

Thursday, September 27th, 2018
In our final episode of TRID Talks we’ll discuss how to indicate principal reduction is specifically for a tolerance cure. Also, the impact on display of items on the LE & CD.

Source: https://www.docmagic.com/trid-talks?utm_campaign=TRID%20Talks&utm_source=hs_email&utm_medium=email&utm_content=65734978&_hsenc=p2ANqtz-8xa1B8fjYfZsguFKeMqn_sRNm9YT0oblZO62mmgsMLll6-CCYSmaliplDJFLyqhTqpygzlGyr45fgvc0rnLh0Tv9o8yg&_hsmi=65734978

As I have discussed in previous articles, the October 1^st mandatory compliance date for the 2017 TRID Rule is quickly approaching. I hope you have taken some time to review these requirements during this “Optional Compliance Period.” If not, you still have approximately three months to ensure your policies and procedures are up to standard with the new requirements before they become the new law of the land.

With this new wave of requirements comes a slew of technical revisions and clarifications that I like to describe as a “reboot” of the existing TRID Rule. Since the implementation of the original rule in October 2015, the industry has faced certain challenges with the disclosures for certain types of transactions such as construction loans and simultaneous subordinate lien loan closings in connection with a first lien purchase loan.

These simultaneous subordinate lien loans are commonly referred to as “piggyback” loans, as they are typically originated in order to assist with the down payment of the 1^st lien purchase loan. Per the clarifications by the new 2017 Rule, in a purchase transaction that involves a subordinate lien loan, if the Closing Disclosure for the first lien loan has all of the required disclosures related to the seller, then the settlement agent, or the financial institution acting as settlement agent, may provide the seller with only the first lien CD instead of both the 1^st and subordinate lien CDs. As such, the Seller’s Summaries of Transactions table does not have to be included, or can be left blank, for the subordinate lien loan disclosure.

You are also permitted to use the alternative disclosures for the subordinate lien transaction since the seller’s information is not necessary to be included on the subordinate lien disclosures. Keep in mind, if you use the alternative disclosure on the Loan Estimate, then you must also use the alternative disclosure tables for the Closing Disclosure. Prior to this clarification in the Final Rule, the alternative disclosures were optional only when a seller wasn’t involved. In this case, a seller is involved, but not specifically in connection with the subordinate lien transaction. This means you may also omit the seller’s name and address for the subordinate lien disclosures as it will already be reflected on the 1^st lien purchase disclosures.

However, there are some additional things to note as clarified by the 2017 Rule –

The disbursement date on the Closing Disclosure for a simultaneous subordinate lien transaction is the date that some or all of the loan amount is expected to be paid to the consumer or a third party other than the settlement agent

The simultaneous subordinate lien will also be disclosed as a purchase purpose even though you are not required to reflect seller information on the subordinate lien disclosures as previously mentioned

Funds from the subordinate lien transaction are included in the Adjustments and Other Credits Section of the Loan estimate for the 1^st lien disclosure, and are then disclosed under the Borrower’s Summaries of Transactions Table on page three of the 1^st lien Closing Disclosure

Additionally, if you’re using the standard disclosure, the sales price is not disclosed under the Borrower’s Summaries of Transactions table on the CD for simultaneous subordinate lien loan. Therefore, the sales price is also not included in the Calculating Cash to Close calculations on the Loan Estimate or Closing Disclosure for the simultaneous subordinate lien loan transaction.

As a result of the many technical clarifications and amended provisions imposed by the 2017 TRID Rule, it will be important for you to perform a review of your loan operating system to ensure your software is up-to-date with these revisions. As the creditor, you are ultimately responsible for the accuracy and timeliness of the disclosures. It will be you, and not your third party software vendor, that will be held responsible for compliance with the new rules. So, take these last couple of months of the “Optional Compliance Period” to test your system and ensure it is compliant.
Source:https://www.temenos.com/en/blog/2018/july/trid-2-0-the-reboot/