Violations to the TILA-RESPA Integrated Disclosure rule will not substantially increase the losses in prime jumbo residential mortgage-backed securities, according to Moody’s Investors Service, which provides credit ratings and research covering debt instruments and securities.
Moody's gave two reasons why these violations won’t affect RMBS. The first, that third-party reviews will identify loans in violation to the rule. Also, the lenders and aggregators will be able to cure many of the violations before issuers place the mortgage loans in RMBS.
TRID took effect in October 2015, and since then, exceptions varied from formatting errors that were not material and curable to tolerance-fee violations that could expose the trust only to minimal statutory damages.
However, Moody's found that these lenders corrected exceptions.
Violations in prime jumbo RMBS will be corrected through third-party reviews, which further reduces the likelihood of TRID violations before issuers place the mortgage loans in RMBS.
In general, TRID violations can be addressed by notifying the borrower of any errors, resending disclosure forms and issuing a refund where applicable.
In addition, uncured TRID violations, such as ones that have statutory damages, have defined costs of up to $4,000 per loan, therefore helping quantify potential losses to RMBS transactions.
However, damages to the borrower due to TRID violations do not have a defined cost, but are less of a risk to lenders since borrowers would need to prove that their reliance on the erroneous information caused them harm, which is historically near impossible.
In a report on the impact on TRID on residential mortgage-backed securities, Moody’s analysts write that several third-party firms have reviewed a number of recent mortgage loans for TRID compliance and found violations in more than 90% of the loans.
Because of this, many companies began developing software that will catch TRID violations as they happen. DocMagic, provider of compliant loan document preparation compliance, eSign and eDelivery solutions, announced its new solution that will eliminate TRID audits and violations concerns.
Nationwide Title Clearing recently announced that they enjoy a 99.9% compliancy rate, an increase from their previous 99.8% rate, with a 25% increase in volume from last year.
Their secret? Training. They offer their staff comprehensive training through their more than 150 different training courses, seminars and apprenticeships, NTC CEO John Hillman told HousingWire.