TRID Regs Even Trickier for Wholesalers, Brokers

Wholesale lenders and their brokers are finding preparing for the new mortgage disclosures that take effect in August especially tricky.

That's because third-party originators who work with multiple lenders contend the new deadlines and accuracy thresholds associated with the disclosures will make it complicated for them to help consumers shop for the best loan deals.

"This is where the challenge comes for the broker: Once the broker gives the Loan Estimate, whoever they register that loan with, whatever lender, is bound by that Loan Estimate," said Mike Vitali, senior vice president and chief compliance officer at LoanLogics, a quality control and risk management technology vendor in Trevose, Pa.

So far, wholesale lenders have been mixed in how they plan to approach this challenge. Plaza Home Mortgage, in San Diego, plans to let brokers generate the Loan Estimate document, which will replace the current Good Faith Estimate and upfront Truth-in-Lending disclosures. Meanwhile, Real Estate Mortgage Network, based in Iselin, N.J., and Carrington Mortgage Services in Santa Ana, Calif., may generate it themselves, executives from the three firms said at the recent New York Association of Mortgage Brokers wholesale conference in Tarrytown, N.Y.

But the wholesalers also said they're still working out the specifics of their respective plans. "It is still a little too early to know where to fall into line," said Tina Lewandowski, regional sales manager at REMN, told attendees.

Brian Gillespie, eastern regional sales manager in Carrington Mortgage Services wholesale division, also said when it comes to some aspects of the requirements, it's "too early to tell" exactly how they will be handled.

The question is a key one for brokers when it comes to the TILA-RESPA integrated disclosures, regulators' second post-crisis attempt to reform the Truth in Lending and Real Estate Settlement Procedures acts and improve consumers' ability to understand and shop for mortgages.

Regulators have been keen on implementing better controls around the prices lenders quote for third-party settlement services on consumer disclosures. Under the TRID requirements, there is virtually no room for error in the prices quoted on the upfront Loan Estimate and the final costs outlined in the new Closing Disclosure that's replacing the current HUD-1 settlement statement and final TIL disclosure. Any amounts above the originally quoted prices are the lender's responsibility, but some wholesalers may try to pass those costs on to brokers, said Vitali.

The new regulations also stipulate that once a borrower provides six pieces of application information, the lender has three days to deliver the Loan Estimate. But that may prove difficult if a broker is still shopping around a borrower to multiple lenders.

"Brokers may have three or four different lenders," said Vitali. "So at the time of giving the loan disclosure, if they don't know which one they are going to get, brokers have to leave the lender's name or the creditor's name blank, and they have to leave the lender or the loan ID number blank, because the loan ID number has to be uniform through the entire process."

CFPB guidelines address the role of mortgage brokers in providing the new disclosures. While brokers may deliver the Loan Estimate to borrowers, "the creditor is legally responsible for any errors or defects," the guidelines state. However, brokers still must "comply with the three year record retention requirements," that lenders adhere to, it adds.

Regardless of whether the wholesaler or broker generates and delivers the Loan Estimate, the three-day clock starts as soon as a broker receives the six pieces of information that constitute an application, said CFPB spokesman Sam Gilford. What's more, a broker that obtains an additional Loan Estimate from a different wholesaler after the three-day window would be out of compliance with the new regulations.

"Sending a new (e.g. second) Loan Estimate after the three day period would not be timely under the rules, but a revised LE can be provided if circumstances change," Gilford said via email.

Consumers can consider multiple loan offers, but they generally have to decide whether they want to proceed within 10 days of receiving a Loan Estimate, Gilford said. Otherwise, lenders may elect to redisclose the Loan Estimate.

Brokers may retain some advantages under the new disclosure regime, largely due to their relatively closer contact with borrowers, said Bonnie Nachamie, an industry attorney and treasurer of the NYAMB.

"You are still going to be the ones telling the customers what the heck it means," she told attendees at the broker group's meeting.

But that may also depend on how brokers market themselves in relation to the rule, Vitali said. "They bring more products to the market from various sources. They're not stuck to one particular program or set of programs."

And the question remains how much TRID will constrain brokers from doing just that.

While lenders and lawmakers continue to push for a phased-in approach to enforcement — if not an outright delay — of the new regulations, the CFPB has so far only shown tepid interest in such requests.

Only "nuances" of the rules may change before the deadline, Nachamie said, and warned those who procrastinate too long could find themselves behind the curve when the time comes to be compliant.