Following TRID on Investment Properties
To what does TRID apply to? Does it apply to a loan secured by investment properties? Can we use the TRID disclosures anyway if it's easier for us?
Okay. We're all getting ready for TRID. One basic question that may pop up is - on which loans are we using TRID? Well, the basic answer is that TRID applies to all closed-end consumer loans secured by real property.
A couple of quick notes ...
"Real property" vs. "Dwelling"
Note that - unlike ATR/QM - TRID applies to loans only where secured by land. ATR/QM applies loans secured by a dwelling. So if your friend Sonny Crockett wants a loan secured by his sailboat, which is where he sleeps (i.e., is his dwelling), then ATR/QM applies. But TRID doesn't! Because Sonny's sailboat isn't attached to real property. This is how it will work with mobile homes - if they're attached to real property, then TRID applies. If not, then TRID does not apply.
"Consumer" -- Investment
Note also this only applies to consumer loans, i.e., it does not apply to "business purpose" loans. The vast majority of loans on investment properties will be "business purposes" and, therefore, will be exempt from TRID. (For more on the specific dividing line, see this old newsletter.)
But, you ask - what if we want to use the TRID forms on investment properties voluntarily, just to make things easier on our workflow? And that brings us to today's topic ...
Voluntary Use of TRID = Okay (Mostly)
First of all, just to answer the question- Yes, it is permissible to use the TRID forms for investment properties. Some lenders may find it is simply easier to follow TRID on investment properties, even where it's not strictly required. In this environment, speed is king- and if this helps speed things up- fine! (Of course, others may find the opposite, and take the time to have a separate process for investment properties).
Strictly Speaking
Here is the specific rule: lenders may voluntarily use TRID on any loan unless the old RESPA/TILA disclosures still apply.
There are two examples of this:
Any loan prior to August 1, 2015. Because the old rules still apply, you cannot voluntarily give out TRID disclosures prior to 8/1.
Certain loans after August 1, 2015 where TRID does not apply, but the old RESPA/TILA disclosures still do. For example, TRID does not apply to reverse mortgages. But the TIL/GFE does apply to reverse mortgages. Therefore, you cannot follow TRID on reverse mortgages.
So the point is that you can use TRID on investment properties because RESPA/TILA disclosures have never been required on business-purpose loans.
Other Considerations
Just because you can, doesn't necessarily mean you should. (And there's no implied recommendation here - which decision is best will simply vary by institution). Is it better to "overdisclose" here? Is it more cumbersome to give unnecessary disclosures - or does it actually make your process simpler?
If you do decide to do this voluntarily, here are a few things to consider:
Better finish what you start. If you decide to comply with TRID on a transaction that would otherwise be exempt from TRID, we expect regulators to treat that transaction as if TRID really does apply. So get it right! While there's nothing official, we've heard regulators over the years recommend against voluntarily using the GFE/TIL forms for this reason. Just expect that if you give a disclosure - even if not required- you're going to be bound by it. Even if maybe you could fight this, the documentation and headache to do so may tip the risk/reward balance in favor of just giving in.
You're either in or you're out--if you begin a transaction as TRID, it should be completed in compliance with TRID. (Same thoughts on this point as above).
You could always keep following the current GFE/TIL format instead of TRID. Of course, most institutions won't want to have two separate tracks running simultaneously.
It might look like you don't know what you're doing. You don't want the regulators to think you did this by accident, better to clarify this is intentional.
In other news:
In the U.S. overall, it's 35% cheaper to buy than rent (up from 33% last year). But this varies by geography- different in Louisiana than Oregon ... here's an interesting chart from Trulia where you can look up these statistics by geographic region (27% cheaper to buy in Boston, 35% cheaper to buy in Springfield, 41% in Pittsburgh).
In what's catching the attention of many, the CFPB has actually taken action against individual executives and originators, as part of an action that's so far required $35.7 million in penalties to be paid. The individuals have been banned from the industry and themselves subjected to $600+ in fines.
They say that compensation has evolved into only a secondary form of motivation for the American worker. Sure, people want to be compensated fairly, but there are many other things that sincerely motivate them. Opportunity for personal growth. Feeling like you're making a difference, that you're part of something bigger. Dr. Bob Nelson says that "One of the strongest tools in a business's arsenal for increasing motivation is recognition." Now - a company can't take this too far ... I remember my father complaining that, "I have enough cheap plaques for 'salesman of the year,' [I remember one that was awarded for "Highest Profit Margin"- was he supposed to hang that up in his office for clients to see??] I'll just take the check please!" But that doesn't mean you don't need both. Here are some "Low cost recognition ideas" from Dr. Nelson's website:
Written thank-you notes (challenge managers to write 10 notes to staff before the next meeting)
All-Star Award (gift certificate and paperweight, posted in quarterly public newsletter)
Read letters from satisfied customers
Shirts and jackets
"Way to go" letter sent to individual and all locations
Employee of the month: free lunches for the month Extra Mile Award: For doing something extra
"All hands on Deck Meeting:" Quarterly meeting with award presentations
Managers Club Award: Voted on by employees.
"Hall of Fame." Display employee rewards and certificates on company's "Hall of Fame"
Morale Squad: Small group of volunteers with a small budget that they use for any type of moral building event
"Lifesaver Award" -- Rolls of lifesavers candy given quarterly to high achievers with email announcement of individuals and theirachievements. Lifesavers delivered personally by President.
Recognize improvement, not just top performers!
"In motivating people, you've got to engage their minds and their hearts. I motivate people, I hope, by example--and perhaps by excitement, by having productive ideas to make others feel involved."
- Rupert Murdoch
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