Let’s talk TRID 2.0 and the 10% tolerance bucket. TRID 2.0 brings some changes to how we look at tolerances relative to shopping, and the 10% bucket. The 10% bucket is made up of third-party services, required by the lender, where we simply give the applicant the opportunity to shop. The other thing that falls into the 10% bucket is going to be government recording charges. They are not as big as a concern to us today. We’re going to concentrate on that opportunity to shop.
The way TRID has gone along since day one is if you didn’t disclose a fee, or you didn’t comply with the shopping requirements (the list and so forth), those fees will become a general 0% tolerance. Not a good thing for bankers if you made a mistake.
However, TRID 2.0 is going to change the game, and somewhat in our favor, as bankers. Here’s how it works. Let’s talk about the shopping list. If you failed to provide a shopping list, or maybe you failed to list a service on the shopping list, or maybe it wasn’t specific, the original TRID rule would say 0% tolerance, generally speaking, for that service in connection with the transaction. However, TRID 2.0 says, “Maybe you made a mistake with this shopping list,” failed to provide it, didn’t list a provider, wasn’t specific to the transaction, that’s not going to automatically indicate that you have a 0% tolerance. In fact, as long as you can demonstrate that you gave the applicant the opportunity to shop for the provider, you’re going to be able to put that fee into your 10% bucket.
It does come with a consequence. You’re still going to be in violation for either not providing the list, not making it specific to the transaction, or not putting a provider on there in compliance with the shopping list elements. But you do get some grace, in that it’s not an automatic 0% tolerance. It’s going to fall into the 10% bucket. Again, that’s a win for the banking industry, in my opinion.
The other part of this is going to be the Loan Estimate side of it. Loan Estimate section C is going to be for the third-party services required by the lender where you give them the opportunity to shop. The idea is, you list it in this area here and you also provide them with a shopping list that gives somebody specific to the transaction. If you failed to list someone in section C, under the current rule, what would happen is it becomes a 0% tolerance. That’s not the case under TRID 2.0. What TRID 2.0 says is If you leave something off in section C, as long as you can give and demonstrate that the borrower was provided the opportunity to shop, that’s going to land into the 10% bucket. Now, it does also come with consequences.
First off, you’re going to be in violation for not completing the Loan Estimate section C correctly. Second, even though it falls into the 10% bucket, provided you can demonstrate that the borrower was given the opportunity to shop, (and you’ll have to document that somehow), you’re already going to be off by whatever the fee was that you failed to list. Let’s just say it’s $100 survey that you were going to put in section C and give them the opportunity to shop and you didn’t do that, but you were able to demonstrate that they were ultimately given the opportunity to shop through documentation, a loan file or whatnot. You’re going to be off that $100 survey right out of the gates. Keep that in mind. There are still consequences. There are going to be violations for not completing certain elements correctly, although your grace is going to be a little better as far as the tolerance goes. We get this 10% Tolerance.
This is just one of the many things that TRID 2.0 brings to the table. There are also other elements in TRID. If you’re looking for more information on this, or maybe something else TRID related (not necessarily TRID 2.0), we’re excited to bring you our three-part TRID A to Z webinar series. Each segment is going to be two hours long. It kicks off on November 1st of this year and it’ll be three consecutive weeks of TRID, where we’ll take it from A to Z.
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One of the most common areas of confusion and errors, as it relates to the deposit side of the bank, is the inconsistent use of fee and term language.
Truth in Savings has this thing that says you’ve got a Truth in Savings Act disclosure (TISA Disclosure) that describes your product, and your fees, and how things work. Then that language has to match up with the periodic statement. If you say overdraft on the TISA Disclosure you need to say overdraft on the Periodic Statement. Be consistent in the terminology, I know it’s a minor thing but it’s something that’s a very ticky-tacky thing that examiners very easily pick up on along the way.
What about other spaces, like a website, and marketing, and brochures, and things like that? Well, that space isn’t governed by Truth in Savings. It’s going to be governed more so by the Unfair Deceptive or Abusive Acts or Practices (UDAAP). That’s a very subjective area, so it comes down to how I perceive it versus how you perceived it if we’re talking about auditors and examiners. You win some and you lose some when it comes down to that.
We want to try to mitigate UDAAP Risks, so it’d be best if you just make sure that whatever we say on the TISA Disclosure matches up with whatever we say on the Periodic Statement. Those other spaces that have to do with marketing, and brochures, and the website, we do the same things there as well.
This is just one element of compliance in the deposit operations side of the bank. We’re going to be covering this in several other deposit operations, compliance requirements, as well as some of the hot-button issues currently affecting that area of the industry in our two-hour webinar special on August 28th.
We’ll be taking some questions that you can pre-submit. We’ll also be taking questions live during the presentation. All of the compliance is going to be provided back to you in a plain English format.
Are you looking for some great lending compliance training? A place where lending compliance is put into Plain English. We’re getting ready to kick off our Fall Lending Compliance Conference Tour in just a few short weeks.
If you’re looking for some great lending compliance training, we will delight you! If you’re looking for someone to translate lending compliance into Plain English, that’s just what you’ll get. From Fair Lending to HMDA to TRID, Beneficial Owners; we’re even having a special banker panel where we’re going to get some perspective from your peers on some of the latest compliance requirements that have been brought into our industry, so don’t miss out. Get registered today and save your seat. I can’t wait to see you there.