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TILA-RESPA Integrated DisclosuresTRID - Frequently Asked Questions***New Info: On July 21, 2015, CFPB released a final rule postponing the effective date of the TRID rule until October 3, 2015. What Change is Happening? The new Truth in Lending Act - Real Estate Settlement Procedures Act Integrated Disclosure rule (commonly referred to as “TRID”), required by the Dodd Frank Act, is effective October 3, 2015. (The TRID rule was originally scheduled to become effective on August 1, 2015.)The?TRID regulations?are issued by the Consumer Financial Protection Bureau (CFPB) and require new pre-closing and closing disclosures: (1)The Loan Estimate (LE), which will replace the Good Faith Estimate (GFE) and initial Truth in Lending Disclosure (TIL); and (2) the Closing Disclosure (CD), which will replace any final TILs and the HUD-1 Settlement Statement.? The LE incorporates the current Servicing disclosure. Affiliates will still be required to provide the other RESPA initial disclosures (List of Homeownership Counseling Organizations, Affiliated Business Arrangements, Home Loan Toolkit [currently called the Settlement Cost Booklet]). Failure to use the proper disclosure forms with respect to loan applications received (i.e., completed, in accordance with RESPA) after the effective date (now October 3, 2015) could result in an enforcement action with penalties from the CFPB, as well as possible private claims by affected homebuyers.?When is a Loan Application Completed, in Accordance with RESPA?A loan application is completed, in accordance with RESPA, once the lender has received the following 6 pieces of information from the applicant (borrower):Borrower’s name;Borrower’s monthly income;Borrower’s SSN;Property Address;Estimate of value of property; andLoan amountCurrently, RESPA allows lenders to include a 7th item to determine when an application is complete. This is a catch-all for any other item(s) the lender requires to make a decision on the applicant. Some affiliates may include elements such as completion of sweat equity or debt satisfaction in this category. Under the TRID rule, however, this flexibility is no longer allowed. Lenders must issue the Loan Estimate (“LE”) disclosure form when those 6 items are present, within the timeframe required by the TRID rule. Note, even though elements such as completion of sweat equity or debt satisfaction or down payment/closing cost savings can no longer be included as elements of a “completed RESPA application,” affiliates should still include these factors as conditions to closing.What are the Timing Requirements for the TRID Disclosures?The LE disclosure form must be provided within 3 business days after receiving a completed RESPA loan application (elements 1 – 6 above) and at least 7 business days prior to loan closing (meaning, you can close at the earliest on the 8th day after providing the LE). The CD disclosure form must be provided at least 3 business days prior to loan closing. The disclosures may be mailed or hand-delivered, but must be dated the day of delivery or placement in the mail.How Does this Apply to Habitat Affiliates?TRID applies to Habitat affiliates that originate more than five mortgage loans or 25 total loans (including secured and unsecured loans) in a calendar year.? Accordingly, Habitat affiliates subject to TRID must use the CFPB forms exactly as published by the CFPB.? All Habitat affiliates are subject to RESPA. TRID is one of many federal rules that apply to affiliate mortgage loan programs. If your affiliate does not originate more than five mortgage loans or 25 total loans in a calendar year, then your affiliate is not subject to TRID, but is still subject to RESPA requirements for early disclosures, which means that you must continue to provide the GFE and HUD-1 Settlement Statement in accordance with RESPA and Reg X, and should continue to provide the TIL form in accordance with TILA and Reg Z, along with the other required early disclosures. See MPAR U for more information.In addition, regardless of whether the TRID rule applies to an affiliate loan, every affiliate must ensure that they comply with all other provisions of RESPA and TILA, as applicable, with respect to the origination and servicing of their loans to Habitat families, whether for the purchase of the home or for owner-occupied repairs. RESPA applies to all affiliates and many provisions of TILA apply to affiliates, regardless of the number of loans they originate. See MPAR U for more information.Does a “soft second” mortgage count toward the threshold (5 mortgages or 25 total loans)?Most Habitat soft seconds will not count toward the threshold for determining if the TRID rule applies. A soft second mortgage would count for this purpose only if either (1) any finance charge is imposed in connection with the soft second mortgage, or (2) the soft second mortgage provides for payments in more than four installments. So, for example, if the soft second mortgage has no scheduled payments, is forgivable and there is no origination fee or other finance charge imposed, that mortgage would not count in determining whether an affiliate makes more than five mortgage loans or 25 total loans in a calendar year. Note, we were still researching this issue at the time of the June 23 conference call, so our guidance during that call was to take a more conservative approach than we now think is necessary.Does the TRID rule apply to Habitat “soft second” mortgages?The TRID rule contains a partial exemption for most Habitat soft second mortgages, so long as they are zero-interest and payments are either forgivable or deferred at least 20 years or until the property is sold or is no longer the principal residence of the beneficiary of the initial Habitat homebuyer; however, affiliates must take appropriate steps to ensure that homebuyers understand the terms of any soft second mortgage (e.g., what triggers payment, how will the principal be forgiven), and the exemption expressly requires creditors to provide the current disclosures under TILA for many soft second mortgages. Failure to clearly disclose these terms may also implicate state and federal regulations governing unfair and deceptive practices.May the TRID Forms be Completed by Hand? The TRID rule allows for manual completion of the forms; however, without specialized software, it is very difficult to prepare them accurately and completely, and in compliance with the very technical requirements in the TRID rule. Specialized software is available, and may be required to provide the disclosures to the homebuyer in full compliance with the TRID rule. If a software solution is not available for your affiliate, please refer to the sample TRID forms published by the CFPB and available on my.habitat.What is HFHI Doing to Help My Affiliate Prepare? HFHI is providing support to you and your affiliate on this in several ways. For the past several months, we have been engaged in a dialogue with Richard Cordray, Director of the CFPB, and his staff about the challenges and possible compliance concerns with completing the forms manually. This dialogue includes requests for a grace period and leniency on strict compliance with the rule so long as adequate disclosures are provided to ensure Habitat homebuyers are given every opportunity to understand the terms of their Habitat mortgages. On June 3, 2015, the CFPB announced that its enforcement of the TRID rule immediately after the effective date will take into consideration good faith efforts by lenders to comply with the TRID rule. The CFPB directly confirmed that Habitat affiliates will be given the same leniency so long as we also undertake good faith efforts to comply. Our dialogue with the CFPB is continuing, but at this time, all affiliates should be using their best efforts to prepare to implement the rule as it applies to all mortgage lenders.Separately, we are providing support by identifying vendors that can provide a technological software solution to produce quality and compliant TRID mortgage disclosures (see below); however, given the differing needs among affiliates, each affiliate will need to determine whether any particular product or vendor is suitable for its needs. In addition, a conference call was recorded on June 23, 2015 to provide an overview of the TRID rule and forms. What Can My Affiliate Do Right Now? Affiliates are encouraged to take the following actions in order to be prepared to issue the new mortgage disclosures in compliance with the TRID rule:?First, familiarize yourself with the?new forms at the link provided via the CFPB website, including the Loan Estimate (“LE”) that replaces the GFE and initial TIL, and the Closing Disclosure (“CD”) that replaces both the final TIL and HUD-1.? More information is available in CFPB’s collection of implementation materials. Also, speak with your settlement agent or neighboring affiliates that have loan origination software. In some cases, they may be able to produce the proper forms on your behalf. If your affiliate is looking for a software provider, MRG Document Technologies and Calyx Software offer document preparation software that can produce compliant TRID disclosures. Please be aware that HFHI has not done any due diligence on these vendors or any other companies. Both vendors charge a onetime set-up fee and then the disclosures are pay-per-use for each loan package (Loan Estimate & Closing Disclosure). Even if you currently have software that will be upgraded to prepare the new TRID forms, make sure you confirm with the vendor that it will work with your customary loan terms (e.g., some software is not written to accept a 0% interest product).Lastly, please look out for further news and guidance from HFHI, and we will provide you with any information we receive from the CFPB as soon as possible.?What Should My Affiliate Do If We Are Not Ready by the Effective Date (now October 3, 2015)? If you are not confident that your affiliate can fully comply with the TRID rule with respect to applications received (that is, all 6 items required under RESPA, as described above) on or after October 3, 2015, then you might consider delaying closings until you feel better prepared to meet the new requirements. Another practical consideration: If, prior to October 3rd, your affiliate has received items 1 – 6 of the RESPA loan application (but is only waiting for the additional affiliate-identified items), then your affiliate may consider issuing a GFE prior to October 3rd. If a GFE is issued prior to October 3rd, then the loan closes with the HUD-1 and Final TIL rather than the new TRID Closing Disclosure. Where Should I Go if I Have More Questions? Please contact the Affiliate Support Center at ussupportcenter@ or 1-877-434-4435. ................
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