By now everyone is aware of the TRID rule and is coping with compliance and how it is affecting their day to day business. Of particular interest is how this regulation is impacting Mortgage Brokers and their operations. I have heard the wailing and gnashing of teeth, but an apparent solution, provided by wholesale lenders for the Mortgage Broker, is worth both consideration and concern.
Rather than waiting on Mortgage Brokers to generate a required Loan Estimate the wholesale lenders are now offering Mortgage Brokers the ability, via their wholesale website, to allow the wholesale lender to handle the entire process from the Loan Estimate, with any following change of circumstances, to the final Closing Disclosure
While this sounds great, what concerns me most is how this is being sold to the Mortgage Broker. I have witnessed a wholesale lender – a very large wholesale lender – tell the Mortgage Broker this will remove all liability for them and all the Mortgage Broker has to do is complete the origination paperwork, sit back and wait for their check. Full compliance is now the responsibility of the wholesale lender and the broker is off the hook.
Some conversation with state regulators would seem to suggest otherwise. Their audits will be looking for full compliance and, if the Mortgage Broker has brokered this responsibility to the wholesale lender, they are still the originating and document-collection entity with inherent liability if the wholesale lender makes a critical timing or disclosure error.
If you are a Mortgage Broker and using your wholesale lender in the above manner, I would suggest auditing every Loan Estimate, Change of Circumstance and Closing Disclosure that is sent to the borrower and keep it in your borrowers file. If there is a timing or disclosure issue prior to closing, it is a non-saleable loan in the secondary market under TRID and that loan must be originated again in its entirety. In other words, if you are going to utilize this methodology with your wholesale lenders I feel you should “trust, but verify.”
I suspect we will have to see how all this plays out, especially since we haven’t seen many loans close yet. However, I believe Mortgage Brokers should be very careful and monitor the process with their wholesale lenders with high scrutiny. They should not forget they originated and sold the loan and their borrowers will still look to them for answers. The last thing in the world that a Mortgage Broker needs is to find themselves liable for the failure of their wholesale lender.
Have Questions About TRID and This Liability Issue?
Do you have questions about the changes TRID brought, or the wholesale lender or mortgage broker liability issue? Mortgage Defense offers compliance consulting that can help you get through these industry changes without flaw.
Mortgage Defense President, Neill Fendly, is a Certified Mortgage Consultant (CMC) with over 30 years of experience in the mortgage industry and is well-respected throughout the nation and in Washington.
Contact Neill to learn how Mortgage Defense can help you by filling out the form on the website or by calling 704-574-0364. Don’t wait until it’s too late!