How to disclose a Gift of Equity with TRID?
Hope that everyone is having a safe and fun holiday season so far, and that you're getting extra time to spend with family and friends.
Have a borrower receiving a gift of equity? How nice for them!
How are you planning to disclose that under TRID? Well, that's actually a little tricky (shocking, I know!). But here's how we would recommend you do it.
Loan Estimate (if known)
Disclose a gift of equity in Adjustments and Other Credits on the Loan Estimate (if you know about it).
It doesn't fit in here perfectly, but we have verbal confirmation from the CFPB and common sense on our side. If the gift of equity isn't disclosed here, where would it go? There isn't any better spot for it. And it doesn't make sense to ignore this on the LE. Let's say the gift of equity is for $40,000. Does it make any sense for us to give a disclosure telling the borrower they're going to need to bring an additional $40k to the table? No. That won't help any borrower make an intelligent or informed decision about one of the biggest financial experiences in his/her life.
Closing Disclosure
It's safe to say that this should be disclosed in Section L. as an "Other Credit" - meaning it will likely wind up in L06. What to call it? Why not just "Gift of Equity" - keep it simple!
Well, that's your TRID tidbit for the day. Thanks for reading! And since I think people are starting to think that this is a TRID-specific newsletter, I just want to publicly remind everyone that this newsletter started before anyone was even thinking of TRID, and (hopefully!) will continue long after TRID's been replaced with something else. So while TRID seems to have dominated lately, we'll try to throw a better mix in going forward.
In Other News:
Moody's reports a 90% error rate on TRID disclosures. HousingWire reports. And SCA reports 100% error rate so far per our most recent poll (at our Christmas party yesterday). We've been reviewing TRID loans by the truckload - give us a call if you'd like us to help you with this.
Are you a Massachusetts lender that discriminates against borrowers because of "genetic information?" No, I'm sure you're not! But that IS the law, so make sure it's reflected in your fair lending policy. Here's the link to the full statute, look for the part pertaining to mortgage lending.
Very important to read the head of CFPB's enforcement's recent public comments about the upcoming enforcement trends. Ability to Repay, Loan Officer Compensation, MSAs, and (yes) TRID sits at the top of their list. Oh and remember that grace period? Well so much for that! Here's an excerpt from the article:
The CFPB heard those calls but no further breaks on enforcement will be given, Hagins said. "The effective date of the rule was Oct. 3, and that's still the effective date of the rule," Hagins said. At one point during a panel discussion, he interrupted Charles Clark, the director of consumer services in the Washington State Department of Financial Institutions, to drive home the point. "I want to be perfectly clear," Hagins said. "There is no grace period from the bureau."
A small boy was walking along a beach at low tide, where countless thousands of small sea creatures, having been washed up, were stranded and doomed to perish. A man watched as the boy picked up individual creatures and took them back into the water.
"I can see you're being very kind," said the watching man, "But there must be a million of them; it can't possibly make any difference."
Returning from the water's edge, the boy said, "It will for that one."
"Compassion is not religious business, it is human business, it is not luxury, it is essential for our own peace and mental stability, it is essential for human survival."
- Michael Porter
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**These are our opinions. We're not authorized, or willing, to express those of others.**