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The Truth in Lending RESPA Integrated Disclosure Rule (TRID) took effect October 3, 2015, and placed the mortgage industry in unchartered waters. Our office has spent countless hours reviewing the rule, the commentary, the CFPB Guidelines, and listening to lenders’ concerns about the Rule. Here are our initial observations.
Initial Examinations: All of the relevant regulators have provided assurances to their supervised entities that examiners will “evaluate an institution’s compliance management system and overall efforts to come into compliance, recognizing the scope and scale of changes necessary for each supervised institution to achieve effective compliance.” So what does this mean? It means that examiners will likely be focused on the implementation of policies and procedures and due diligence testing of software in initial examinations. The good news is that most lenders began implementing policies and procedures regarding TRID well ahead of October 3rd; however, reports from the CFPB and lenders themselves indicate that the software roll out from vendors may not have been as smooth. Several lenders have indicated that software is still being updated making it difficult for them to do their due diligence in testing the software. The CFPB has indicated some awareness of the issue, acknowledging that the implementation process “was not as smooth as we would have hoped” and placing the blame largely at the feet of the software vendors. Our message for lenders, however, remains the same: make sure you are adequately testing the software and remember, TRID places liability for noncompliance squarely on the lender.
Private Rights of Action/Class Actions: Simply put, TRID provides more risk for litigation exposure to lenders. Under TRID, lenders are solely responsible for compliance with the rule. While RESPA did not provide a private right of action; the TRID Rule relies on the Truth in Lending Act for all disclosure, timing and content requirements. Truth in Lending does provide a private right of action and thus, it is a foregone conclusion that we will see more litigation under TRID. Additionally, class actions are likely to become more prevalent.
Loan Estimates: The timing requirements for Loan Estimates (3 business days from application) places immense pressure on underwriters to perform their analysis of credit worthiness in a very tight time frame. The ramifications of this are that lenders are going to make loan decisions without adequate time to fully vet credit worthiness. Additionally, we see the following pitfalls for Loan Estimates:
Closing Disclosures and Consummation:
Caren Enloe leads Smith Debnam’ s consumer financial services litigation and compliance group. In her practice, she defends consumer financial service providers and members of the collection industry in state and federal court, as well as in regulatory matters involving a variety of consumer protection laws. Caren also advises fintech companies, law firms, and collection agencies regarding an array of consumer finance issues. An active writer and speaker, Caren currently serves as chair of the Debt Collection Practices and Bankruptcy subcommittee for the American Bar Association’s Consumer Financial Services Committee. She is also a member of the Defense Bar for the National Creditors Bar Association, the North Carolina State Chair for ACA International’s Member Attorney Program and a member of the Bank Counsel Committee of the North Carolina Bankers Association. Most recently, she was elected to the Governing Committee for the Conference on Consumer Finance Law. In 2018, Caren was named one of the “20 Most Powerful Women in Collections” by Collection Advisor, a national trade publication. Caren oversees a blog titled: Consumer Financial Services Litigation and Compliance dedicated to consumer financial services and has been published in a number of publications including the Journal of Taxation and Regulation of Financial Institutions, California State Bar Business Law News, Banking and Financial Services Policy Report and Carolina Banker....LEARN MORE