We hope this TRID guidance will help you better understand payoffs and payment tables. As you are probably well aware, the TRID rule give two separate versions for both the Loan Estimate and Closing Disclosure. One format, sometimes referred to as the “primary” version, is required to be used whenever a seller is involved in the transaction. It’s important to note, however, the regulation does allow this version to be used for any TRID (TILA RESPA Integrated Disclosure) transaction, regardless of whether a seller is involved. The other format, sometimes referred to as the “alternate” version, can be used in a transaction where a seller is not involved.
Remember, you can’t switch formats mid-transaction. In other words, if you issue a Loan Estimate on the “primary” (i.e., with a seller) form, you must use that same format for the Closing Disclosure. You cannot change and issue a Closing Disclosure on the “alternate” (i.e., no seller) form.
Keep in mind, your investor(s) may have additional rules on when you can or need to use the “primary” vs. “alternate” versions. You will, of course, need to play by those rules as well.
It seems that most institutions prefer using the alternate forms whenever possible. In doing so, when you get to the Closing Disclosure, the Payoffs and Payments table takes the place of the transaction summaries found on the primary version. This table is generally used to itemize payments made to third parties, either from the loan amount or other funds provided by the consumer (or on behalf of the consumer). Each entry in the table should include:
- The payee;
- A description for the purpose of the payment; and,
- The amount (in the separate column).
We commonly see instances where the payee or a description of the purpose is missing. For example, if you’re paying off a different loan, the institution may be listed, but there is no further description of the purpose, such as to pay off a loan. Similarly, information may be given for a loan being paid off, such as “Loan #12345” but no indication of where the funds are actually going (i.e., the payee).
Granted, this is a technical requirement and nothing to lose sleep over. However, it’s also something that is commonly overlooked but fairly easy to fix.
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Diane joined Banker’s Compliance Consulting with over 10 years of compliance experience and over 15 years of experience within the financial industry. Diane is a Certified Regulatory Compliance Manager (CRCM) and has a Bachelor’s Degree in Sociology with a concentration in Criminal Justice. She is a graduate of the Schools of Banking Compliance School and has participated in various other training opportunities throughout her career. Diane understands firsthand the struggles banks face in building and maintaining successful compliance programs. Her experience and common sense approach to consumer compliance is a great asset to our clients.
Diane and her husband have two kids who keep them busy. She enjoys running and other sports and is a big Bugs Bunny fan! She’s a bit crazy in that she does enjoy reading some of these regulations and she’s a “crazy cat lady!” Her cat tales are hilarious!