Jeremy Potter is general counsel and chief compliance
o;cer for Norcom Mortgage, where he is responsible for
legal and regulatory compliance. He also maintains all
licensing requirements and advises senior management on
operational and risk decisions. Potter serves on the board
of directors of the Massachusetts Mortgage Bankers Association and on the national Mortgage Bankers Association
regulatory compliance committee. He also is a frequent
speaker on federal mortgage regulations. Reach Potter at
TRID is a Game-Changer
New regulatory standards are propelling a major
shift in priorities for mortgage originators
By Jeremy Potter
In the run-up to the implementation of TRID, some mortgage-industry observers described the new consumer-disclosure regulations as a paradigm shift. Now that TRID has been in force since its
o;cial launch this past October, it’s fair to say those
experts were correct. TRID is a paradigm shift —
de;ned as a fundamental change in approach or underlying assumptions.
The underlying assumption that drove the mortgage industry for many years was that the purchase-and-sale contract serves as the foundation of the
homebuying transaction. The contract, and the closing
date established by the pact, set the expectations for
everyone involved in the transaction, including the
lender and its timeline and process.
TRID shifts the process from a contract transaction
to a ;nancing transaction in which the lender is in
charge — with all the potential liability that entails.
That change, it turns out, has lasting implications that
were not felt in full until TRID was put into practice
this past fall. The new timelines and demands for
certainty embodied in the TRID Loan Estimate and
the Closing Disclosure forms are forcing a big adjustment within the industry. In that context, it’s worth
noting that adjusting to new expectations is even
more di;cult than adjusting to new documents.
Those new expectations, however, also drive a
new approach. Following are several examples of the
changes that mortgage lenders will have to embrace
under TRID — the Truth in Lending Act (TILA) and Real
Estate Settlement Procedures Act (RESPA) Integrated
; First, the accuracy of initial disclosures, fee
estimates, loan information and changed circum-
stances will be judged by regulators in light of “the
best information reasonably available” and the “due
; Second, TRID encourages lenders to leverage
technology and lays the foundation for the mortgage industry to become even more dependent on
technology in the future.
; Third, the execution of TRID only intensi;es
vendor-management pressures for mortgage
It is unclear at this point how some of TRID’s new
standards will be applied in practice. What is known,
however, is that the “T” in TRID stands for the Truth In
Lending Act, a violation of which opens a lender to
signi;cant liability. As a result, the impact of the new
TRID standards on the industry appears to be equal
parts unknown and critically important.
TRID makes clear that the mortgage lender is
required to disclose all items to the homebuyer according to the “best information reasonably available.”
What’s deemed reasonable by regulators seems to be
a call that will be made based on the thoroughness of
the “due diligence” that is performed.
Over the last few years, the meaning of due diligence has become all too familiar to companies and to
mortgage lenders that sell loans and servicing rights.
Although industry norms will develop over time, mortgage lenders under TRID are committing more resources
(due diligence) to assuring accurate information is
issued to prospective homebuyers as early as possible
in the process. This has the simultaneous e;ect of
being good for consumers in terms of information
and transparency as well as a more costly practice —
with lenders taking on additional labor and risk.
Mortgage lenders that successfully navigated TRID’s
implementation and initial execution without incurring too much damage likely relied heavily on technology to do so. As the nuances and operational
challenges of TRID came into view leading up to its
Oct. 3, 2015, launch, lenders turned to technology
solutions for everything from estimating condo-association review fees to producing closing-disclosure information. And this is just the tip of the
iceberg. Loan-origination systems were forced to add
hundreds of data ;elds and functionality to perform
the thousands of calculations necessary as a loan
application moves through the pipeline.
Document-management systems have been invaluable for the correct placement, rounding and presentation of fees and ;gures. Service-provider vetting
and management systems are now employed by
mortgage lenders to assist in all areas of TRID — from
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