With the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosures (TRID), or “Know Before You Owe” rule now in effect for four months, it’s no secret that the sweeping change to the mortgage application process has impacted homebuying for all parties involved. Reports of compliance issues are quite common. In December, Moody’s Investors Services released a credit outlook report in which its analysts estimated that several third-party firms found TRID violations in more than 90 percent of the loans they audited. Now, the other shoe has dropped: With thousands of loans closed under the new regulatory regime now making their way to the secondary market, investors are refusing to buy them due to compliance problems and loan document errors. The reasons why investors are rejecting these so-called “defective” or “scratch-and-dent” loans may surprise you, as some of the infractions are minor and technical in nature, according to two of the...
- With thousands of loans closed under TRID making their way to the secondary market, investors are refusing to buy them due to compliance and documentation issues.
- The majority of infractions are minor and technical in nature, such as failing to include an agent or broker's contact information or inconsistencies among forms.
- The biggest sticking point on the real estate side of the transaction appears to be the use of third-party authorization forms to give agents access to a consumer’s Closing Disclosure.
- Anticipating delays and adding extra days to the transaction timeline is one way agents can hedge against roadblocks.