Month: July 2017

The New TRID Rules Cheat Sheet (Part 2)

Let’s continue with the TRID rules cheat sheet started last week. A lot of changes for construction loans, and a there’s a new tolerance rule to beware of.

Construction Loans

Construction loan rules got a lot of changes, and probably could have served as a blog on its own. But let’s break down the changes into its simplest form:

  1. Disclosing construction-permanent loans as 2 separate transactions: Clarifies how the 3 business rules work when disclosing construction-perm loans as two transactions. If receiving two separate applications, one for the construction phase and one for the permanent phase, then the 3 business day rule for delivering the LE applies following receipt of each separate application. If receiving one application for both phases (but still disclosing as two separate transactions) then both the construction LE and permanent LE must be delivered within 3 days of receiving the joint application.
  2. The new rules clarify how creditors must allocate construction versus permanent financing charges, fees, and points.
  3. The new rules clarify how construction inspection and handling charges are disclosed, as well as their applicability to the good faith standard.
  4. Clarifies how transactions without a seller should disclose the appraised value or estimated value of property on both the LE and CD, including when to use estimated values of improvements.
  5. Provides clarification on how the term of a construction-perm loan should be disclosed if the loan is being disclosed as part of a single transaction.
  6. Clarifies how to complete the Product disclosure, disclosure of interest-only features, and balloon payments disclosure for construction-only and construction-perm loans.
  7. Clarifies when the creditor must use the ARM disclosure for construction-permanent loans when the creditor may increase the consumer’s interest rate after converting to the permanent phase.
  8. Clarifies certain interest rate disclosures for construction-only and construction-perm loans.
  9. Clarifies disclosure of whether amounts can increase after closing for construction loans when the amounts and timing of advances are unknown.
  10. Clarifies aspects of the Projected Payments table.
  11. Clarifies disclosure of mortgage insurance and escrow payments in the Project Payments table when only the permanent phase requires payment, and the loan is disclosed as a single transaction.
  12. Clarifies how various construction costs should be disclosed on the LE and CD, and also address when creditors place a portion of the proceeds into a reserve account at closing.

Disclosing Simultaneous Subordinate Liens

The new rules modify and address the disclosures for bridge loans, and the disclosures provided to the sellers on the seller CD.

Tolerances for Total of Payments

The 2017 rules are adding a new tolerance to watch out for. Under the new rules, the “Total of Payments” disclosure on the CD will have the same tolerances as the “Finance Charge” disclosure; which is it’s considered accurate if the amount disclosed is 1) understated by $100 or less, or 2) is overstated.

Once again, just a quick-and-easy guide to give you an idea at a glance what the upcoming changes are about. More to come next week!

Bryan T. Noonan, Esq.
Regulatory Compliance Consultant
SPILLANE CONSULTING ASSOCIATES, INC.
501 John Mahar Highway, Suite 101
Braintree, MA  02184
781-356-2772
781-356-2837 (fax)
www.scapartnering.com

The New TRID Rules Cheat Sheet (Part 1)

The new TRID rules are out, though they don’t fully take effect until October 1, 2018. Starting in about 60 days, compliance with them are optional. Even though they are optional, it’s always smart to be ahead of the curve and prepared for when they are mandatory.

Still, not all the rules will all apply to everyone. So here’s a cheat sheet, a quick reference for what rules are changing. Use it to evaluate what will apply to your institution so you can start planning and prioritizing what you need to do to be compliant by October 2018.

Post-Consummation Notices

Currently, the TRID rules requires a creditor or servicer to provide certain disclosures after the loan is closed. The new rule applies to 2 disclosures: the notice when an escrow account is closed, and the partial payment policy of a new owner of loan. Those notices aren’t changing.

Under the old rules though, the notices only applied to mortgage applications received on or after October 3, 2015. The new rules say the notice requirements will apply now regardless of when the application was received.

Loan Secured by a Cooperative

Currently, whether certain disclosures need to be provided on loans secured by cooperatives depends on how state property law classifies the cooperative (that is, whether it’s treated as real property or personal property). The new rule takes away the state law requirement, and requires the disclosures to be made on all loans secured by cooperatives (closed-end consumer loans, of course).

Loans to Trusts

Commentary is being added to clarify that loans to certain trusts established for tax or estate planning purposes is treated as though they are extended to natural persons.

Exemptions for Housing Assistance Loans

TRID rules provide disclosure exemptions to certain housing assistance loans (the details are outside this post; it’s supposed to be a cheat sheet, remember?) The new rules say:

  1. Transfer taxes can now be payable by the consumer, and
  2. Recording feeds and transfer taxes are excluded from the 1-percent cap on total costs payable by the consumer.

It also changes the disclosures required.

I want this to be a quick reference, so I’m going to keep it relatively short. The next part of the new rule will get into some deeper and more pertinent subjects, such as significant construction loan rules, tolerances, and good faith and revised disclosures. I don’t want them to get buried here, so I’m going to leave this as it is.

Remember though, this is just scratching the surface. We’ll be learning a lot more about the new rules in the next few months.

Bryan T. Noonan, Esq.
Regulatory Compliance Consultant
SPILLANE CONSULTING ASSOCIATES, INC.
501 John Mahar Highway, Suite 101
Braintree, MA  02184
781-356-2772
781-356-2837 (fax)
www.scapartnering.com