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 compliance 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. Check out this TRID training page for more online banking resources regarding Tila-Respa Integrates Disclosures rule.
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Check out TRID 2.0 Good Faith Effect