Article by: Ben Giumarra, Spillane Consulting Associates, Inc.
Last week we proposed a quiz to use related to the 560-page July TRID Rule update. How did you and your team do? Do you agree with all of my answers here?
Okay, let’s see how you (and I) did!
TRID Quiz: July 2017 Updates
Remember the instructions:
Using the heading/topic below only, explain in a sentence or two the applicable part of the July 2017 Rule (which you can read here – and if 560 pages is too much for you, the 12-page executive summary should be perfect for you.)
*I completed a couple of these last week as examples
- Calculating cash to close table
There are probably more than a dozen changes related to the calculating cash to close table. Maybe that should be next week’s newsletter. What? That’s not enough to prove that I’m reasonably knowledgeable of the new TRID Rule. Okay boss.
How about that there is a new optional alternative calculating cash to close table, which we can use for showing construction costs. Also, the CFPB finally clarifies (officially) that figures from the most recent Loan Estimate are used for comparison purposes on the Closing Disclosure.
- Construction loans
More major changes here. Some of which include the CFPB reversing course on letting us use Section H for construction costs. This means that construction costs are disclosed in the Summaries of Transactions table and factored into the Funds for Borrower table on the Closing Disclosure. We also have a new addendum to use for fees to be paid post-closing, such as for inspections. It confirms that the “Loan Term” includes both the construction and permanent portion (at least when it’s a single-close transaction)- so the Loan Term is disclosed as 31 years when a 30-year permanent loan follows a 12-month interest-only period.
- Decimal places and rounding
You really need a chart to see all the clarifications/amendments here. But here are a few highlights: per-diem interest is not rounded on the Loan Estimate. Percentage amounts required in the Loan Terms table, for TIP, and for Points in Section A are rounded to three decimal places. Also, continue to truncate zeroes, e.g. disclose 1%, not 1.00%.
- Escrow account disclosures
The Rule allows us to disclose that a portion of taxes and/or insurance will be paid with escrow funds, if that’s actually true. It gives us an ability to use an addendum to help when escrow disclosures don’t fit well. It also clarifies that, with some escrow disclosures on the LE/CD, that we’ll start the initial 12-month period as of the date of the initial payment, not closing date.
- Escrow cancellation notices
Most of this July 2017 TRID Rule apply for applications taken on or after October 1, 2018. But the escrow cancellation notice requirement kicks in on October 1, 2018, no matter when the loan application was taken.
6. Informational updates to the Loan Estimate*
The Rule confirms that lenders can provide revised Loan Estimates voluntarily for so-called “informational purposes,” but noted that in doing so lenders would be held to the standard of best information reasonably available.
- Expiration dates for the closing costs disclosed on the Loan Estimate
We know (a) that after 10 days, the Loan Estimate expires and we’re no longer bound to it (works well if you made a mistake!) We also know (b) we are allowed to extend the 10-day extension as long as we want – so if a borrower wants to provide intent to proceed on day 11, it’s not like you have to draft a whole new set of initial disclosures. But the 2017 TRID Rule adds on: if a lender voluntarily extends the Loan Estimate expiration date, either orally or in writing, the lender is bound to that Loan Estimate.
In another clarification on this point, the Rule requires the expiration date/time to be left blank on any revised Loan Estimate. But watch out – this is only if you’ve received intent to proceed. If you’re issuing a revised Loan Estimate before receiving intent to proceed, you’ll have to disclose the 10-day period.
- Gift funds*
The Rule clarifies that we only disclose gift funds to be received at closing. We do not disclose gift funds received prior to closing.
- Lender and seller credits
Here’s a change that will make the Loan Estimate easier for a borrower to understand. The Rule permits specific seller credits to be disclosed as part of the fee estimates on the Loan Estimate. For example, if the seller agrees to pay $250 towards the appraisal, and the appraisal in this case costs $500, we can disclose that as $250 on the Loan Estimate. If the seller credit reduces the fee to $0, it is not disclosed at all. Note: The same does not apply to lender credits, where both specific and generic lender credits must be disclosed lumped together as “Lender Credits” on the Loan Estimate, before being divided out on the Closing Disclosure.
Hey – since I probably last 90% of people on number 7- how about we pick up the second half of the TRID quiz next week?
In even MORE TRID-related news, the CFPB made a surprising announcement last week and increased the threshold for having to report HELOCs to 500 per year. This is a welcome surprise to many community banks and credit unions.
It started with a comment made by Director Cordray to the NCUA, promising the increase, which had us buzzing in Braintree. Then sure enough, within the week it was official (see linked announcement above).
In Other News
- Trying to structure your mortgage department to survive the January blues and make it up in the June rush? With an industry where volume can fluctuate drastically and unpredictably, this is an age-old problem. Embrace Home Loans’ president Kurt Noyce calls this the “January to June Conundrum.”Read this intriguing article where Mr. Noyce provides insight into this problem and identifies the three potential solutions.
- Local Bank M&A news with East Boston Savings Bank joining forces with Meetinghouse Bank. Meetinghouse is known to be unstoppable in residential mortgages, where East Boston is known more for its commercial expertise (although the residential team is certainly not sleepy).
On My Mind …
What are your options when dealing with a talented but unreliable person? Maybe you’ve seen your carpenter/designer do amazing things, but aren’t sure if they’re going to show up tomorrow. Maybe your barber has given you the best, and also the worst, haircut of your life? Maybe you know your teammate has the ability to save your project, but there’s a 20% chance she’ll torpedo it.
Can you manage your carpenter/designer differently?
Do you go to another barber?
Do you bring that teammate onto an important project or not?
Seriously … I’m asking. What do you do? I have no idea. The lines are open for any advice!
“Slap some bacon on a biscuit and let’s go! We’re burnin’ daylight!” – John Wayne, in “The Cowboys”
(Also John in the morning when we have a big report to finish by the end of the day.)
Thank you to Ben Giumarra, Spillane Consulting Associates, Inc., a member of our Education Committee, who with the support of other experts at SCA have put together this newsletter.