TILA-RESPA record retention: How to avoid an audit nightmare
Can you "replay" the transaction?
This article is part of HW PartnerDirect™. What is this?
CFPB RESPA/TILA Rule Reference: 2.3-2.5, Page 15, CFPB Detailed Summary of the Rule
The current TILA-RESPA ruling clearly states that certain records must be retained for a certain number of years. But the real concern is what isn’t covered: the information related to the process that produced those records.
This potentially means that, although you have neatly organized and retained all of the resulting documentation of your organization’s work, you probably have no record of what took place to produce them. First, let’s review the retention periods outlined in the ruling:
TILA-RESPA Records Retention
- Closing Disclosure Forms – 5 years after consummation
- Loan Estimate Forms – 3 years after consummation
- Escrow Cancellation Notice – 2 years from notice
- Partial Payment Policy – 2 years from notice
If the loan is sold
- Originator – same retention period applies
- Buyer – for the term remaining from origination
The ruling also states that electronic record keeping can be used but is not required. “Records can be maintained by any method that reproduces disclosures and other records accurately, including computer programs.”
However, there are still a variety of discussions around recording how you created these documents, so it’s clearly known what happened during the process to create or change them. This single issue creates a chasm of unknown circumstances that will arise when an audit takes place, requiring you to prove what happened, or to replay the circumstances of the process and interactions with the consumer.
So let’s ask ourselves — as an industry, are we currently capable of successfully complying with that detailed level of record-keeping? What tools will be needed in order to document that process? What should the new best practice be for record retention?
Obviously, the best practice in this case is to not only keep the forms, but to be able to "replay" the actions of all the stakeholders in the transaction, specifically the actions of the Consumer. Is that even possible today? Or worse yet, will that even be possible by the time the ruling is effective on August 1, 2015?
The answer to both of those questions is “YES.” With products available in the marketplace like MortgageDNA, Closing Forensics, and eVaulting, it’s possible to implement a technology solution today that will not only comply with the new regulations but also improve customer service by keeping the consumer engaged.
For more information on the impact to the industry and how technology solutions can help your business mitigate them, visit the TilaRespa Knowledge Center.
All information and views expressed or implied are provided without warranty and are only the opinion of Pavaso, Inc. Each participant should seek legal representation for legal interpretation of the ruling and the CFPB directly for final instruction and interpretation. The final rule can be found here.