Correcting TRID Errors

Presented by

Brandy A. Hood

Buckley LLP

Evaluating Errors and Risk

1. Was there an error?

2. Does TRID provide a cure?

3. Can I do anything else to limit my liability?

4. What risk remains?

1. Was there an error?

• Not all errors are the same

• Hyper-technical rule with ambiguities

• Requires fact-specific analysis

1. Was there an error?

Per-diem interest increased

• Based on best information reasonably available?

• No post-consummation CD as long as only changes are related to per diem interest

1. Was there an error?

Recording costs decrease

• Based on best information reasonably available?

• Post-consummation CD within 30 days of receiving information

2. Does TRID provide a cure?

• “Clerical” errors

• Tolerance violations

2. What is a clerical error?• No violation if CD contained “non-numeric

clerical errors” as long as corrected CD sent no later than 60 days after consummation

• “Clerical” = does not affect a numerical disclosure and does not affect requirements imposed by § 1026.19(e) or (f).

2. What is a clerical error?

• CD discloses incorrect settlement service provider as recipient of a payment

2. What is a clerical error?

• CD discloses incorrect settlement service provider as recipient of a payment

• Curable under this provision

2. What is a clerical error?

• Wrong property address that affects delivery requirement imposed by §1026.19(e) or (f).

2. What is a clerical error?

• Wrong property address that affects delivery requirement imposed by §1026.19(e) or (f).

• Not curable under this provision

2. What is a clerical error?

• Wrong Box Checked on Servicing Disclosure

2. What is a clerical error?

• Wrong Box Checked on Servicing Disclosure

• Curable under this provision

2. What is a clerical error?

• Loan ID incorrect

2. What is a clerical error?

• Loan ID incorrect

• Not curable under this provision

2. What is a tolerance violation?

• “An estimated closing cost… is in good faith if the charge paid by or imposed on the consumer does not exceed the amount originally disclosed,… except as otherwise provided.”

2. What is a tolerance violation?

• Zero Tolerance - Disclosed amounts cannot increase

• 10 % Aggregate Tolerance - Aggregate disclosed amount for third-party services selected from List of Providers and recording fees cannot increase by more than 10%

• No Tolerance – unlimited tolerance if original estimate is based on “best information reasonably available”

2. How can a tolerance violation be cured?

• If consumer pays amount that exceeds tolerances, no violation if no later than 60 days after consummation:– Excess is refunded; and

– Corrected CD reflecting the refund sent

2. Is this a tolerance violation?

• Example 1:– Initial LE: $300 appraisal fee

– Final charge: $405 charged to borrower

2. Is this a tolerance violation?

• Example 1:– Initial LE: $300 appraisal fee

– Final charge: $405 charged to borrower

• Tolerance violation

2. Is this a tolerance violation?

• Example 2:– Initial LE: $500 appraisal fee

– Revised LE: $400 appraisal fee

– Final charge: $500 charged to borrower

2. Is this a tolerance violation?

• Example 2:– Initial LE: $500 appraisal fee

– Revised LE: $400 appraisal fee

– Final charge: $500 charged to borrower

• Not a tolerance violation

2. Is this a tolerance violation?

• Example 3:– Initial LE: $500 appraisal fee

– Final charge: $600, but $500 charged to borrower and $100 Paid by Others (because creditor provides $100 specific lender credit)

2. Is this a tolerance violation?

• Example 3:– Initial LE: $500 appraisal fee

– Final charge: $600, but $500 charged to borrower and $100 Paid by Others (because creditor provides $100 specific lender credit)

• Not a tolerance violation

2. Is this a tolerance violation?

• Example 4 (Purchase transaction):– Initial LE: $0 homeowner’s insurance

– Final charge: $1,200

2. Is this a tolerance violation?

• Example 4 (Purchase transaction):– Initial LE: $0 homeowner’s insurance

– Final charge: $1,200

• Tolerance violation

3. How can I limit my liability?

• 2015 Letter from Richard Cordray: – “while the [TRID] rule does integrate the TILA

disclosures with the disclosures required under [RESPA], it did not change the prior, fundamental principles of liability under either TILA or RESPA.”

3. How can I limit my liability?

• 2015 Letter from Richard Cordray: – “In addition to the cure provisions contained in

the rule, the Truth in Lending Act itself contains provisions for the correction of errors. These provisions continue to apply to the integrated disclosures.”

3. How can I limit my liability?• Each provision relies on TILA, RESPA, and

Dodd-Frank

– But only a private right of action for violations of TILA Part B

– Most TILA authority cited from Part A

3. How can I limit my liability?

• TILA § 130(b) – correction of errors

• TILA § 130(c) – bona fide errors

3. What is TILA § 130(b)?“A creditor or assignee has no liability… for any failure to comply with any requirement imposed under [Part B of TILA]” if:

(1) Consumer is notified of error within 60 days of discovery (and prior to a borrower lawsuit or written notice of error); and

(2) Creditor or assignee makes “whatever adjustments … are necessary to assure that the [consumer] will not be required to pay an amount in excess of the charge actually disclosed, or the dollar equivalent of the [APR] actually disclosed, whichever is lower”

3. Is TILA § 130(b) available? • Example 1: APR disclosed as 5% on final

Closing Disclosure, but actual APR is 6%

• Example 2: Total of Payments disclosed as $300,000 when actual TOP is $310,000

3. What is TILA § 130(c)?“A creditor or assignee “may not be held liable” in any action brought under 15 U.S.C. §§ 1640 or 1635 for a violation of TILA Part B if the creditor or assignee can show that “the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error”

3. What is TILA § 130(c)?Examples “include, but are not limited to, clerical, calculation, computer malfunction and programing, and printing errors, except that an error of legal judgment with respect to a person’s obligations under this subchapter is not a bona fide error”

4. What risk remains?

• If adopted under TILA Part B:– Private right of action

• Actual damages

• Attorney’s fees and costs

• Statutory penalties of up to $4,000 for certain errors

– Regulatory Enforcement

– Criminal liability if willful and knowing

4. What risk remains?

• TILA Part A or RESPA– No private right of action

– Regulatory Enforcement – civil money penalties of up to $5,000 per day per violation (increased to up to $25,000 per day for reckless violations and $1M per day for knowing violations)

– Criminal liability if willful and knowing

4. What risk remains?

• Assignees subject to TILA liability when:– violation “is apparent on the face of the

disclosure statement provided in connection with [the] transaction,” and

– the assignment to the assignee was voluntary

4. What risk remains?

• “Apparent on the face of the disclosure”:– “the disclosure can be determined to be incomplete or

inaccurate by a comparison among the disclosure statement, any itemization of the amount financed, the note, or any other disclosure of disbursement;” or

– “the disclosure statement does not use the terms or format required to be used by this subchapter.”

Additional Examples

Finance Charge Understated by $1,000– Adopted under TILA Part B and probably

apparent on face of disclosure

– TILA § 130(b) applies – avoid liability by notifying borrower of error and making sure borrower does not pay more than disclosed

Additional ExamplesLate Loan Estimate

– Adopted under TILA Part B, but probably not apparent on the face of the disclosures

– Argument that TILA § 130(b) applies, but not clear and may cause confusion

– Old HUD guidance on giving free loans not in TRID rule

Additional Examples

Waiting Period for Closing Disclosure Not Met

– Adopted under TILA Part B and probably apparent on face of disclosure

– Argument that TILA § 130(b) applies, but not clear and may cause confusion

Questions?

Brandy A. HoodCounsel(202) 461-2911 bhood@buckleyfirm.com