Housing Finance: TRID

Determining compliance with CFPB’s “Know Before You Owe” rules helps maintain secondary market liquidity. SFA’s TRID Grid leads the way.

Briefing

“After the October 2015 effective date of TRID, the secondary market initially was left to focus on defining the liability surrounding new disclosure obligations that was not abundantly clear. Since June of 2016, the rating agencies, TPR firms, and the capital market investors have confidently followed the Structured Finance Association’s TRID Compliance Review Scope effectively placing the private label securitization marketplace back on a strong footing.” – Scott McNulla, AMC and John Levonick, Pepper Hamilton

The Structured Finance Association originally published its TRID Compliance Review Scope© documentation in 2016 to facilitate uniform testing standards resulting from a consistent interpretation of Truth-In-Lending Act liability. This interpretation was drafted by subject matter experts at SFA member firms, according to our understanding of prevailing legal precedent and informal written guidance and webinars offered by the CFPB as it applies to the Know Before You Owe / Truth In Lending Act  (TILA)– Real Estate Settlement Procedures Act Integrated Disclosure (RESPA) or TRID Rule (78 FR 79730, as amended) across third-party review (TPR) firms.

The third version of the Compliance Review Scope—formerly known as the SFIG RMBS 3.0 TRID Compliance Review Scope, now known as the SFA TRID Compliance Review Scope (“TRID Grid 3.0”)—was published on December 5, 2019. The foundation of the new scope’s primary consideration is the elimination or alteration of testing those areas that may carry assignee liability, but based on the specific area being addressed, the probability of actual losses is minimal. The secondary consideration is the elimination of testing origination compliance on aspects that do not carry assignee liability or impair the asset.

In addition to the changes to the TRID Compliance review scope, the SFA updates include a few alterations based on the secondary consideration that go beyond TRID to remove the testing/exceptions pertaining to four current categories not considered to carry assignee liability or impair the asset. Categories to be removed from scope of previous TRID Grid include: Fair and Accurate Credit Transactions Act (FACTA); The Equal Credit Opportunity Act (ECOA); Real Estate Settlement Procedures Act (RESPA) (HUD-1 in scope for points and fees testing); and State Late Charge Grace Periods/ Amounts (Retaining NM, NJ, and GA based on Assignee Liability).

This furthers the pursuit of a uniform scope required for TPR firms performing compliance reviews on loans that will be securitized, and reduces the testing performed during a compliance review on loans to be included in a rated securitization. Due to the fact that the logic driving the content of this document is based upon informal CFPB guidance, and legal precedent from several court decisions, there may be shifts in the requirements should there be future CFPB rulemakings or formal guidance, and as caselaw develops following the passage of the Know Before You Owe / TILA RESPA Integrated Disclosure Rule.

The TRID Compliance Review Scope will continue to be reviewed and updated by SFA and is subject to the same protocols as other SFA work streams and work products.

Click here to download the Structured Finance Association’s TRID Compliance Review Scope. If you have any questions about the most recent TRID Grid, or would like to participate in SFA’s TRID Working Group, please email [email protected].

Contact

Dallin Merrill

Senior Vice President, MBS Policy

Dallin.Merrill@structuredfinance.org