Are You Ready for TRID? Dodd Frank the CFPB & You Featuring TRID

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1 WELCOME! Are You Ready for TRID? Dodd Frank the CFPB & You Featuring TRID 1

2 TRID TILA-RESPA INTEGRATED DISCLOSURE Ready For It New Jargon Lender Borrower Closing GFE & TIL HUD 1 & TIL Creditor Consumer Consummation Loan Estimate Closing Disclosure First of All It s Not About You! It s About Them! 2

3 The 4 Pro s What s it going to do for you? 1. Profitable 2. Productive 3. Professional 4. Protected Significance of Error After the Administrative Error TRID Goes Live in days 10/03/15 RESPA and TILA Combined TRID=TILA RESPA Integrated Disclosure Dodd Frank direct the CFPB to Integrate 1. GFE and TIL 2. HUD 1 and Final TIL 3

4 CFPB Goals! Improved Consumer Understanding Simpler Monthly Payments Cash to Close! Better Comparison Shopping Competing Loan Offers and Shopping for Closing Costs CFPB Goals! Avoiding Costly Surprises at the Closing Table Easier Comparisons of the Estimated and Final Loan Terms More Time to Consider Choices Limits on Closing Cost Increases TRID Changes the customer experience on 10/3/15 TRID s new disclosures MUST be used exclusively for loans originated on or after 10/3/15 Applications taken before 10/3/15 will close on old forms 4

5 TRID Is required under TILA-RESPA rules for closed end credit transactions secured by real property Does Not Apply To Home Equity Lines of Credit Reverse Mortgages Commercial Loans Does Not Apply To Mortgages Secured by Mobile Home or Dwelling not Attached to Land Loans Made by a Creditor Who Makes Five or Fewer Mortgages in a Year 5

6 Ready to Embrace Change? Richard Cordray We (the CFPB) recognize that change on this scale is not easy New Terms to Know LE-Loan Estimate Replaces the Good Faith Estimate and the initial Truth in Lending Must be delivered by the 3rd day after application (delivered or mailed) 6

7 Old Good Faith Estimate Issues No Monthly Payment To Total Cash to Close No Signature Area for Borrower(s) New Loan Estimate (LE) Clear Terms-Page 1 Clear Total Payments-Page 1 Clear Cash to Close-Page 1 Clear Projected Payments/Comparisons Clear Signature Area 7

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9 Comparisons: WHY?? In 5 Years What you have paid Principal you have paid off New Terminology TIP-Total Interest Percentage Amount of interest you pay over loan term Dana Ward Real Estate Closing Solutions 9

10 Closing Disclosure (CD) Closing Disclosure (CD) The Closing Disclosure will replace the HUD-1 Closing Statement and the Final Truth in Lending Disclosure CFPB Three Day Rule The Closing Disclosure must be received by the consumer three business days* prior to closing with proof of delivery Changes after disclosure trigger additional three day waiting period 10

11 Closing Disclosure New Form Five Pages Combines three page HUD-1 and final two page TIL Who Provides? Closing Disclosure Who Provides? Two options: lender or combination of lender and settlement agent Lender Liable Settlement agent must work with individual lender to determine how the CD will be prepared Closing Disclosure BUT MORE IMPORTANTLY. How will the consumer receive? Settlement agent required to provide copy to seller 11

12 Closing Disclosure When? Consumer must RECEIVE three business days before closing (with proof of deliver) Closing Disclosure When? Specific Business Day-every day but Sunday and Federal Holidays Seller must receive no later than day of closing and before consummation New Math Does 3 days prior really = 10? 12

13 Let s Count the Days Business Days 1-Get ALL figures to title company & lender 3- Let s add a little to make sure! (most national lenders) 3-Mail the Closing Disclosure (CD) Let s Count the Days Business Days 3-Three Days Prior Consumer Requirement 10-Closing or Consummation/Signing Date Impact of 10 Day Rule Example: 12/31/15 Closing Sunday Monday Tuesday Wednesday Thursday Friday Saturday Ten Days Prior to Lender! Deadline to mail CD Day Disclosure Due! Federal Holiday 4 31 Smith Closing 1 13

14 BIG Change from the HUD-1 Closing Disclosure Requirements Line number changes Line terminology changes Alphabetizing of fees Fee Name and Ordering Consistent terminology and order between LE and CD Title Fees and fees to conduct closing always begin with Title- Alphabetical order in each subheading What Does This All Mean? In different transactions, many items will not likely appear in the same lines Lenders may name similar items differently-example, pest inspection vs. termite inspection Settlement agent will need a copy of LE to validate fees and fee names on the CD 14

15 CD-Five Pages Page 1-general information, loan terms, projected payments and costs at closing Page 2-loan costs and other costs Page 3-calculating cash to close CD-Five Pages Page 4-additional information about the loan Page 5-loan calculations, other disclosures and contact information Page 1 15

16 Page 1 Page 1 Page 2 16

21 Page 5 Page 5 REALTOR Takeaways The new rule dynamically transforms both the mortgage and settlement process We all have to get to closing to get paid-embrace the change and have a plan Communication and collaboration between all parties will be critical through out the entire contract-to-closing process 21

22 REALTOR Takeaways Much more engaged with Buyer and their agent on financing timelines and meeting critical dates Proactive in clearing conditions that could cause delays and not meet the ten days prior deadline.. Appraisal-timing and ordering Title and municipal searches Loan application process and where the borrower is in the queue REALTOR Takeaways Encourage Buyers to aggressively shop lenders EARLY in the process and be ready to commit to their preferred lenders at time of contract! Appreciation even small changes can have huge impact on closing without careful coordination with all service providers Ensure ALL parties are clear as to the DAY when all information is needed to meet the 3 Day Minimum CDF disclosure rule REALTOR Takeaways Have a plan for inspection, repairs and walk-thru exceptions and potential impacts of new BuyerSeller agreements, pricing adjustments and the impact on the loan process and timely disclosure and closing 22

23 REALTOR Takeaways Buyer s and Buyer s Agent-don t expect to make any changes at closing Seller s and Seller s Agent-don t do anything that would require changes at closing Last minute changes and delays mean you will NOT close! Nishad Khan P.L. Outline Enforcement & Fines Marketing Service Agreements 23

24 CFPB Private Right of Action & Individual Liability Two Main Powers: Investigatory & Enforcement Bureau has authority over any person, company or affiliate offering a consumer financial product or service CFPB supervises banks, credit unions and other financial companies regardless of size and industry CFPB Private Right of Action & Individual Liability Two Main Powers: Investigatory & Enforcement Also has authority to supervise any non-bank that it determines is posing a risk to consumers. People not normally regulated by CFPB may still be subject to its enforcement powers Investigatory Powers CFPB has authority to conduct investigations which includes sending subpoenas and civil investigative demands (CID s). CID is a demand for testimony, documents, responses, inspections, etc. An open book investigation 24

25 Investigatory Powers Once CID is received the recipient is required to attend a meet and confer conference within 10 days to discuss any issues regarding compliance During the conference, parties can negotiate the scope of demands and approve terms of satisfactory compliance with the CID Investigatory Powers If the recipient wants to set aside the petition, they must do so within 20 days of receiving the demand Trying to quash the CID will make it public, along with the subsequent investigation CFPB director decides whether or not to set aside the CID Enforcement Powers The bureau has the ability to commence its own civil actions and can bring its own cases in court or administratively in their own name with their own attorneys Other agencies like HUD have to present their cases to the DOJ which then reviews and brings suit CFPB does not and can bring its own cases-this is a UNIQUE and SIGNIFCANT power 25

26 Enforcement Powers The bureau can file in court but also has an Office of Administrative Adjudication, which is an independent judicial office within the bureau where the ALJ s hold hearings and decide on actions This Process is appealing for CFPB because the ALJ deciding the case is an employee of the bureau, and simply makes a recommendation to the bureau s director Enforcement of Powers This means the person who s enforcement division is filing a claim against you is also deciding your case A party can appeal the decision to federal court, but judges will usually give the fact finder a significant amount of deference Enforcement of Powers If the Bureau determines a law has been violated it can impose significant sanctions. The penalties include: Rescission Refund Restitution Disgorgement or Compensation for Unjust Enrichment Payment of Damages Public Notification Regarding the Violation Civil Money Penalties 26

27 Penalties Civil Money Penalties are Three Tiers: Tier 1-For ANY violation of a law, rule or order imposed by the CFPB, a civil penalty of $5,000 per day Tier 2-For any reckless violation of a law, rule or order $25,000 per day Penalties Civil Money Penalties are Three Tiers: Tier 3-For any violation of rule, order or law knowingly, $1,000,000 per day penalty This means if you had no idea you were violating federal consumer financial law you can still be subject to a $5,000 per day penalty Statute of Limitation No Statute of Limitation Since these actions can be brought through civil course and administratively, there is not statute of limitation You can receive a letter ten years from now for something you did today They can also issue cease and desist orders during the action 27

28 Marketing Service Agreements MSA: Providing general marketing services in exchange for periodic fixed fees that are not directly based on the volume of business HUD Interpretive Rule under Section 8(c)(2) of RESPA; In Re. Lighthouse Title, Inc., File No CFPB-0015 In Re Lighthouse Title: What did they do wrong? Lighthouse entered MSA with understanding they would get business in return; Did not determine a fair market value for the services received; Set fees based on number of referrals received and revenues generated; In Re Lighthouse Title: What did they do wrong? Set fees based on amount paid by other title companies for the same service; Did not monitor the Advertisers to ensure it received the services 28

29 In Re Lighthouse Title: What could they have done? Services must be legitimate marketing/advertising services The compensation paid by the SSP to the Advertiser must not be connected with the volume or value of business Fixed monthly fee instead of fix fee per unit of business In Re Lighthouse Title: What could they have done? Obtain expert valuation on the services provided and retain in records The SSP should diligently monitor the Advertiser to make sure services are provided Nishad Khan, Esq. Nishad Kahn P.L. 907 Outer Road Suite B Orlando, FL

30 Thank You for Attending! 30