Post-TRID loan-document violations involve mostly technical errors so far, Moody’s report shows

Some 90 percent of home loans in the first wave of mortgages finalized after the new consumer-disclosure rules under TRID went effective in October could have potential violations, Moody’s has reported.

Third-party reviewers discovered problems in a sampling of roughly 300 loans originated by more than a dozen lenders, the agency said in a bulletin last week.

Although the violations were technical in nature, Moody’s said that could indicate the lenders may be having problems complying with the TILA-RESPA Integrated Disclosure Rule known as TRID.

The agency also said TRID violations could delay issuance of new securitizations.

Moody’s indicated that it didn’t actually review the loans. Its report also cited only two clerical errors as examples, which involved spelling mistakes and a missed dash. Moody’s also said it believes the violations will diminish.

Some media outlets seized on the findings, however, noting that Consumer Financial Protection Bureau (CFPB) Director Richard Cordray has downplayed the impact of TRID. In a speech, Cordray recently likened fears over the TRID start date to the Y2K scare of the late 1990s.

Mortgage industry lobbyists have continued to press for a formal grace period from enforcement. The CFPB has indicated that it is taking a soft approach to enforcing TRID for an unspecified period.

Industry professionals told Scotsman Guide News that they don’t believe TRID has caused widespread problems in the mortgage industry to date.

“My sense is that people are handling [TRID] fairly well,” said Marc Israel, president of national title company MiT National Land Services. “I wouldn’t go so far as saying that it is a little bit of a Y2K. My recollection of Y2K was there was a tremendous amount of buildup and really nothing happened, whereas with TRID, there is bumps and bruises, and there is a learning curve, but I would say that most people say it is going fairly smoothly and it is not impacting people so dramatically.”

Israel said there have been some timing issues over the new rule that requires a three-day waiting period to close on a loan after the final rate disclosure.

“I’ve seen or heard some people  struggling a little bit with how to fill out the [TRID] form, and what information goes in any particular line,” Israel said. “Both fall under [what would] be expected [as part of a] learning curve.”

Tim Anderson, director of eServices at the vender firm DocMagic, said the Moody’s report didn’t appear to reveal systematic problems.

“To me, the majority of this is training, not issues with the actual systems out there,” Anderson said. Anderson said the impact of TRID, however, won’t be known until the CFPB begins to audit companies for violations.

“The CFPB is pretty vague on how they will implement and audit those files for compliance,” Anderson said. “That is the biggest concern.”

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