A TRID Guideline to Documenting Changes
During our September Monthly Connection, we revisited the documentation requirements that come into play when changes occur on a TRID-covered application. While documentation is a key component of compliance in general, it is actually something that’s written into the TRID (TILA RESPA Integrated Disclosure) rule.
Diane explains more in the video.
Well, we thought we would revisit the documentation requirements that are required for a TRID covered application in the event that something changes. And I know we talk a lot about document and compliance, but the TRID rule is a little different, in that it actually has these documentation requirements written in as part of the rule. So anytime you issue a revised disclosure to reset tolerances, you need to be able to document the initial estimate, why it changed, and how that change impacted the costs and the new estimate and that you re-disclosed within three business days.
Now of those items, I think probably the most challenging is the reason for the change and how it impacted the cost, and I really think specifically, how the change impacted the cost. One many of you may be seeing now is a rushed appraisal and where maybe there is an extra cost involved if you learn that, “Hey, we need this appraisal done by a certain timeframe.” Is that a changed circumstance? Well, maybe because if we have something, if the timing of closing the loan impacts how much that appraisal is going to cost, and we need to issue the loan estimate based on the best information we get, that sounds like some information that we should at least attempt to gather before we send out a loan estimate.
Now, we obviously have to get that loan estimate out the door. So if we make an assumption and it’s wrong, or maybe something changes along the way, absolutely, it’s a valid changed circumstance, which takes us back to our documentation requirements. How did that change impact the cost? And so maybe you say, “Well, the applicant said they wanted to close by October 1st.” That still doesn’t necessarily tell us the whole story. Maybe it’s the fact that I would expect to see something like, “The appraiser’s going to charge us an extra $100 to get this done by the end of September.”
So it all really comes back to, what did you know and when did you know it? And especially in light of the pandemic, people working here some days, there some days, here all the time, there all the time, and combined with a heavy volume that you’ve all likely faced, it’s really inevitable that documentation is going to suffer. And from a compliance perspective, if you’re looking at a file and you have to go back to a loan officer and ask questions, as far as, “Why did we do this, and what happened here?” It’s likely a good indication that your documentation isn’t where it needs to be. And I would just recommend trying to reign that in now. And if you haven’t done so already, especially if you have an exam on the horizon, I think this will likely become even more important as we move to more offsite exams.
Technology is great, but it inevitably adds an extra step to the process. You have an examiner working here. They can’t find something. They need to go to you. It’s no longer as easy as handing the piece of paper across the table. We need to get it uploaded, likely to a secure system. And all that is assuming everything is working at the time we need it to work and it just adds to extra frustration. We’re all human. And we don’t want frustrated examiners looking at our stuff. So anything you can do now to move this in a better direction is going to work out in the end, better for you.
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!