Even though the mortgage industry is still adapting to the process of implementing TRID, there are other systemic and broader risks that cannot be overlooked either. Without paying attention to some of these indirect pitfalls, lenders could experience disruptions in their operations. One of the most common pitfalls has to do with the way that a lender views the accuracy of the initial cost closing estimates provided to potential borrowers, as it relates to the truth in lending act and the real estate settlement procedures act integrated to disclosures.
There are serious costs associated with noncompliance with TRID. For example, according to a former Consumer Financial Protection Bureau Senior Counsel, Richard Horn, it’s all too easy to make mistakes such as forgetting to put a charge on the initial form. When charges are input manually this could lead to a disclosure within an inaccurate estimate. But if the Consumer Financial Protection Bureau sees a practice or pattern of these mistakes, that’s when violations begin mounting.
General noncompliance with TRID costs a lender $5000 per day for classifications of a reckless violation or $25,000 a day, and a knowing violation will cost a lender $1,000,000 per day. The process of implementing TRID goes far beyond the initial implementation date therefore lenders should pay particular attention to how they train employees about how to remain compliant with the government regulations. Lenders need to pay particular attention to TRID estimate deviations. Even though these sound simple to begin with, they do assume that a lender has the funds necessary to reimburse a borrower. If a creditor however ends up lowballing an estimate outside the specified tolerances of the equation, the lender is responsible for making up the difference. But this leaves out the potential for highball estimates.
Creditors are responsible for making up the difference if they underestimate outside TRID tolerances. So some mortgage loan originators have contemplated overestimating their fees in order to build in some wriggle room. There are downsides to this strategy however. This could include being out priced by competitors. So it is a tricky game for mortgage lenders to determine the right course of action to take in order to remain competitive and stay in compliance with TRID.
Creditors who are found to be over or under estimating as a regular practice could also find themselves in violation with several other government acts such as the Dodd-Frank Act, The Unfair Deceptive or Abusive Acts, and other regulations. TRID forbids the practice of over or underestimating on a regular basis but violations of a rule like this could also be seen as breaking other laws or being noncompliant with other government regulations specified under different acts. Mortgage lenders and creditors should plan to stay in the loop with TRID over the course of the next several years in order to incorporate necessary changes within their own systems and day to day business practices. Being clear about the practices you carry out in your own business is the best way to avoid allegations of noncompliance or hefty fines.
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