TILA-RESPA Integrated Disclosure (TRID) Rule a.k.a. Know Before You Owe

with New Haven Middlesex Association of REALTORS

July 16, 2015

Jeremy Potter, General Counsel and Chief Compliance Officer, Norcom Mortgage 1 What We’ll Cover:

• Basics: Why We’re Here • Final Rule • The New Forms • Evaluating the Rule • Challenges for banks and its attorneys • Questions

2

CFPB Authority in our Industry

• Alternative Mortgage • Home Ownership and Equity Transaction Parity Act Protection Act of 1994 • Consumer Leasing Act of 1976 • Real Estate Settlement • Electronic Fund Transfer Act* Procedures Act of 1974 • Equal Credit Opportunity Act • S.A.F.E. Mortgage Licensing • Act of 2008 • Fair Credit Reporting Act* • • Home Owners Protection Act • of 1998 • Omnibus Appropriations Act • Practices of 2009* Act • Federal Deposit Insurance • Interstate Land Sales Full Act* Disclosure Act • Gramm-Leach-Bliley Act* • Mortgage Reform and Anti- • Home Mortgage Disclosure Act* Act of 1975

*Indicates that portions of this Act transferred to the CFPB 4 while other portions did not. Basics:

• Applicable Loans o Final rule applies to most consumer mortgages, EXCEPT: • Home-equity lines of credit • Reverse mortgages • Mortgages secured by a mobile home or dwelling not attached to land • No-interest second mortgage made for down payment assistance, energy efficiency or foreclosure avoidance • Lenders who make 5 or fewer loans in a year • Consumer instead of Borrower • Creditor instead of Lender • Variances reference changes to fees • Tolerances reference the thresholds on fees

5 The New Forms:

• Loan Estimate • Closing Disclosure

o 3 pages long o 5 pages long • Combines early two-page TIL • Combines three-page HUD-1 and three-page GFE and final two-page TIL o Who provides? o Who provides? • Two options: lender or • Two options: lender or mortgage broker combination of lender and o When? settlement agent • Within three days of o When? application • Three days before closing o Still subject to tolerances • Exceptions

6 LOAN ESTIMATE

• The New Forms Must Be Used with Respect to Any Applications Received for a Covered Transaction on or after October 3, 2015

• No change for the following: o Cannot Impose Lender Fees (except for credit report) before consumer Receives LE and indicates Intent to Proceed o Cannot Require Submission of Verification Documents prior to issuing the LE

• You Cannot Use New Forms Before Effective Date

7 LOAN ESTIMATE – Timing

• Must Be Provided Within Three (3) Business Days (open for substantially all business) of Receiving an Application o Delivered o Or Placed in Mail • That Delivery Date (or Date Placed in Mail) Must Also Be no Later Than Seventh (7th) Business Date Before Consummation • Trigger Date is Date When “Application” Received o By Creditor o Or by Mortgage Broker

8 LOAN ESTIMATE -

• Loan Estimate Must be Completed in “Good Faith” o Based on Actual Information if Known • Must Use “Good Faith” and Exercise “Due Diligence” to Try to Obtain Information o Estimate Must be Based on “Best Information Reasonably Available” • Using Good Faith • Due Diligence • CFPB has not addressed the scope of due diligence o You Can Rely on Third Parties for Information • Including Consumer

9 10 11 12 Consumer Shopping

• A creditor permits a borrower to shop for third party settlement services when they: o Inform borrowers on Loan Estimate o Provide them with a written list of settlement service providers

• The creditor may still impose reasonable qualifications for providers. o Example: • Provider must be licensed – Impact on closed list • Creditor is not indemnifying “the list”

13 Summary of when new LE is possible

The exceptions include situations when: 1) The consumer asks for a change; 2) The consumer chooses a service provider that was not identified by the creditor; 3) Information provided at application was inaccurate or becomes inaccurate; or 4) The LE expires. When an exception applies, the creditor generally must provide an updated LE form within 3 business days.

14 Closing Disclosure (CD)

• Required form used by lenders • Three business days before closing • Provided by: o Lender o Lender may rely on Settlement Agent, but Lender remains responsible for accuracy • Contents covered by § 1026.38

15 Closing Disclosure Page 1 § 1026.38(a)-(d)

(a) General Information

(b) Loan Terms

(c) Projected Payments

(d) Costs at Closing

16 Closing Disclosure Page 5

§ 1026.38(o)-(q)

(o) Loan Calculations (p) Other Disclosures (q) Questions Notice 17 Closing Disclosure Page Five (cont.)

§ 1026.38(r)-(s)

(r) Contact Information (Sale) (r) Contact information (Refinance) Contact information for: Contact information for: 1. Lender 1. Lender 2. Mortgage Broker 2. Mortgage Broker 3. Real Estate Broker (B) 3. Settlement Agent 4. Real Estate Broker (S) 5. Settlement Agent

(s) Signature Statement 18 Sale – Closing Date

Delivery By Hand: SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY 1 2 3 4 5 6 7 Hand Disclosure Delivery = Day 1 Receipt

8 9 10 11 12 13 14

Sunday Disclosure Disclosure doesn't count Day 2 Day 3 - OK to close Delivery By Mail: SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY 1 2 3 4 5 6 7

Closing Mail Day 1 Mail Day 2 Mail Day 3 = Disclosure Disclosure Receipt Day 1 MAILED 8 9 10 11 12 13 14

Sunday Disclosure Disclosure doesn't count Day 2 Day 3 - OK to close 19