TheMReport

TH E M R EP O RT | 33 FEATURE Curing TRID Errors: Post Consummation Closing Disclosure and §130(b) U nder TRID, originators now have an affirmative obligation to re-disclose the CD under circumstances where 1) amounts paid by the consumer changed after consummation; 2) a tolerance violation error exists; and 3) there are non-numerical clerical errors. This does not change the legacy TILA cure provision within §130(b) that permits errors to be remediated within 60 days of identification of the error, but the new TRID redisclosure obligations effectively creates a duty for creditors to self-identify errors and correct them in a timely manner. Investors will be reviewing all attempts at remediating errors to verify that the use of the Post Consummation Closing Disclosure ("PC-CD")accurate, and adequately addressed the error that existed at consummation. Investors still have the ability to see that errors are corrected when they identify them in the ordinary course of due diligence, under §130(b)… it is now merely a determina - tion of whether the creditor can remediate the errors under the PC-CD process, or if the investor needs to rely upon §130(b), and when §130(b) is available to cure. TRID PC-CD vs. TILA §130(b) and §130(c) T he TRID rule contains several redisclo- sure scenarios where the creditor must undertake a corrective action to issue a PC- CD; since they are required, our firm does not label them as "cures." These are: • Changes that occur within the first 30 days of consummation that impact the amount that the borrower pays for a fee or fees. • Corrective Action: Redisclosure within 30 days of discovery of the change. • Corrections to errors present at consummation. There are two types: • Non-Numeric Clerical Errors • Tolerance Refunds • Corrective Action: Redisclosure, and in the case of Tolerances, refund the overage, within 60 days of consummation. While numeric errors are not correctible under the TRID PC-CD scenario, but may be able to be cured under the legacy TILA cure provisions of §130(b). As part of a loan-level due diligence review, the due diligence firm will review all disclosures in the loan file for accuracy, including any PC-CDs. It is impor- tant to note that the review shall report on the terms of the transaction with an associ- ated exception that reflects any errors that existed at consummation, even if there is a PC-CD in the loan file. Then, in the event that there is a PC-CD in the loan file, the PC-CD must be reviewed and determined if the PC-CD remediated all errors that existed at consummation. TILA §130(b) "Legacy Cure" T ILA is not perfectly clear in identifying when §130(b) can sufficiently cure an error that existed at consummation. For example, in the event of an underdisclosed APR, investors have historically accepted as a cure, evidence of a refund of the amounts underdisclosed as refunded to the consumer pursuant to a redisclosed material disclosure, evidence that a letter of explanation was tendered to the consumer, verification that the consumer received the amounts and redisclosure, and if relevant, verification that the new Right of Rescission was properly reissued. The timeline for this is still 60 days from discovery, and is in addition to the PC-CD redisclosure scenarios discussed above. In the event of an error remediation or cure, the path that the creditor relies upon as the justification for the cure must be clear, e.g. if the creditor is curing a non-numerical clerical error with a PC-CD or if an investor found a tolerance violation more than sixty (60) days from consummation and is relying upon §130(b) cure to make the consumer whole. While questions surrounding the use of the PC-CD and the separate, but still rel - evant, ability to rely on §130(b) to cure errors has seemed to iron itself out, other issues, such as those surrounding the determina - tion of materiality when it comes to the relationship between the new disclosure elements of TRID and legacy TILA enumer - ated disclosure requirements, will hopefully be addressed when the CFPB provides the industry with "greater certainty and clarity" on TRID in late July (which has not been announced at the time of this writing). One thing's for sure, there are certainly many more TRID articles to come… JOHN LEVONICK is Director of Regulatory Compliance at Clayton. He can be reached at jlevonick@clayton.com.

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