In the nearly three months since the implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures rule in October, a trend has begun to emerge for some smaller lenders – investors and aggregators rejecting loan purchases because the loans are not 100% certifiably compliant with TRID.
And with a recent report from Moody’s Investors Service showing that TRID compliance violations are potentially widespread throughout the mortgage industry, smaller lenders could soon be left scrambling when it comes to finding someone to buy their loans.
One mortgage company that plans to be there for its fellow lenders is Mid America Mortgage, which declared Tuesday that its interested in buying “Scratch & Dent” loans with TRID compliance violations, even if another investor rejected the loan for purchase.
"With TRID now in effect for two months, loans with the new disclosures have begun making their way to investors and been rejected for purchase due to minor TRID infractions to more significant errors,” Mid America Owner and CEO Jeff Bode said.
“It is to be expected, with a change this voluminous, to have errors during the first months of loans," Bode added.
"While the industry has diligently striven to have systems in place, training delivered, and testing fully vetted, errors cannot be completely avoided,” Bode said. "Mid America feels confident in its ability to cure these defects while providing lenders with an outlet for investor-rejected TRID loans.”
The Moody’s report showed that several third-party firms reviewed a number of recent mortgage loans for TRID compliance and found violations in more than 90% of the loans.
The loan audits revealed that many of the TRID compliance violations were “only technical” in nature, but the Moody’s analysts noted that the violations, no matter how small, indicate that some lenders are having difficulty complying with the TRID rules.
And with investors potentially balking at buying loans for even the smallest errors, Mid America feels that it can fill a void.
Mid America identified a number of potential TRID compliance violations that it feels it can cure, including:
- Disclosure timing outside of required timelines
- Missing NMLS information
- Missing real estate broker information
- Extraneous logos on the Loan Estimate or Closing Disclosure
- Title fees missing and/or not including "Title" before the fee name
- CD showing property address as borrower current address on a purchase