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CFPB left much work undone in TRID revisions

The Consumer Financial Protection Bureau (CFPB) finalized a major revision and cleanup of the TILA-RESPA Integrated Disclosure Rule, the 2015 rule better known as "TRID" or “Know Before You Owe,” which changed how the costs of home mortgages are reported to consumers. Michael Cremata, senior counsel and director of compliance at ClosingCorp, breaks down what the changes mean, and discusses the areas where CFPB made helpful revisions and also where the bureau missed an opportunity to improve the rule.

In your view, what were the most important changes in the TRID revisions?

cremataThere are a lot of significant changes made by the TRID revisions, and which are the most important probably depends on one’s perspective, and what their biggest pain points have been with respect to TRID 1.0. But some of the big headliners are: the introduction of a tolerance for the "total of payments" disclosure (which tells borrowers the total amount to paid over the life of the mortgage); clarification of requirements around the disclosure of construction and construction-permanent loans; expanding the exemption for certain housing-assistance loans; and clarifying and revising various calculations in the "Calculating Cash to Close" table (which estimates the amount of cash a borrower will need to close on a home). All of these changes are helpful, and should be welcomed by the industry.

Was there anything that the industry has been calling for, but the CFPB failed to address?

Yes. As expected, the bureau declined to make any changes to TRID’s treatment of simultaneous issue rates (a mandated calculation method for disclosing the title insurance rate), or to introduce additional cure mechanisms for defective disclosures, both of which have been significant pain points for many in the industry. Another area that probably won’t get as much press, but I think is also disappointing, is the final rule’s failure to add meaningful guidance regarding the extent to which settlement-service fees may be itemized on a Loan Estimate or written list of providers. The initial proposal included a helpful clarification that fees for certain packages of settlement services may be aggregated, but the bureau decided to drop this clarification from the final rule.

They also did not include any changes to resolve the so-called "black hole" issue (which causes potential problems when a borrower requests changes to the loan terms after the final disclosure statement is issued just prior to the loan closing). Although, it is the subject of a new proposal, released at the same time as the final rule, for which the bureau is currently seeking comments.

Will these revisions, in essence, clear up most of the ambiguities in the rule that were worrying industry participants?

For the most part, yes. Although, significant ambiguities remain within some of the areas the bureau declined to address, and, as is always the case when new content is added to a rule, some of the changes the bureau has made introduce new ambiguities into the regulations.

TRID has been around now for more than a year and half. Do you think the new disclosures are working well?

The jury is still out on that. On the surface, the disclosures seem to be easier to understand, average time-to-close figures are dropping back down to pre-TRID levels, and, personally, I’m noticing general improvement in the accuracy of most settlement fees disclosed on Loan Estimates. However, a survey ClosingCorp released earlier this year showed that a significant portion of homebuyers are still confused about closing costs, with an incredible 17 percent not knowing they were even required until they got to the closing table. Also, it’s not clear how much of the improvements in time-to-close and accuracy are actually attributable to TRID, as opposed to other factors such as improved processes, technology and data resources.

By and large, do you think the industry is now wired into these changes, and things have been running smoothly?

The industry has responded extremely well. TRID has certainly presented significant challenges, and in some ways has fundamentally changed the way mortgage lenders, and their vendors, do business. But, in the end, the industry has shown incredible resilience, and I would say, roughly two years on from when TRID first went into effect in 2015, things are mostly back to business as usual.

What do you think TRID’s fate will be once a new director takes over for Richard Cordray at the CFPB next year. Do you think there will be further changes to this rule?

That’s tough to say. I certainly don’t see TRID, as a whole, going away, such as through a repeal of Dodd-Frank. I do think a TRID 3.0 is possible, at least resolving some of the major pain points that Cordray’s bureau has refused to resolve in TRID 2.0. Although, with Republicans in Congress likely to find a way to cut the bureau’s funding, if not restructure it entirely, it’s possible Cordray’s replacement will face a shortage of resources that could hinder its ability to make any further changes to TRID. Personally, I wouldn’t be surprised if the bureau’s new leadership took a more indirect approach to reforming TRID, by using its broad discretion to simply shift enforcement resources, even publicly, away from some of those regulations that have been the most heavily criticized by Republicans and (the) industry.

This article is based on written responses provided by Cremata to questions submitted to him in advance by Scotsman Guide News.  


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