Checking the Closing Disclosure on Home Equity loans for Projected Payment accuracy.
Back to work after the holidays!
Trying to wade through compliance reviews of loans closed under TRID? No small task - just ask our team!
At least in the beginning, you're going to want to check all parts of the disclosures - make sure no mistakes are being made - whether caused by the system, human error, or something else.
But can you make it past page 1?
Specifically, how do you audit the Closing Disclosures' Projected Payments table?
Here's the simple 2-part lesson you'll have to remember:
#1) Top Part is Specific to the Loan
The first part (the highlighted part) is specific to the loan--not the property.
Mortgage Insurance Example:
Assume you're closing on a home equity loan where the first mortgage has $125 of mortgage insurance and a $400 escrow. The home equity loan has no escrow and no M.I. Mortgage insurance on this home equity loan will be zero. It does not matter that there is another loan associated with this property that has escrow and M.I.
#2) Bottom Part is Specific to the Property
The bottom part of Projected Payments (the part that is NOT highlighted), a/k/a Estimated Taxes, Insurance and Assessments is instead specific to the property, not the loan.
Flood Insurance Example:
Assume you are closing a home equity loan that does not have Flood Insurance. But there is Flood insurance on the first mortgage of $327 per month. (Remember that Flood insurance is included in the definition of Homeowner's insurance on page 1). In this example we have to disclose the
$327 for Homeowner's Insurance. Why? Because the bottom part of Projected Payments includes all costs relatives to the property - not just those with this particular loan.
In Other News:
Average price of a condo in downtown Boston set to exceed $1 million? B&T reports ...
QC announcement on TRID: Read SCA's memo to Quality Control clients reminding them that a Quality Control review does not equate to a compliance review, while basic TRID and other compliance issues will be noted by analysts.
Interesting article on how investors are handling TRID defects and the CFPB's response. And to see CFPB's letter itself - click here (unlike some, even some here at SCA, I'm not putting a lot of stock in any flexibility from them despite this).
Hey interested in how the Massachusetts Division of Banks is handling pre-approvals? Tune in to the MMBA's conference call at 10:00 am today (I'll start the call with an explanation of the UDAP issue).
What is your office holiday policy? I'm sure I can guess - a certain number of days permitted per year, "use 'em or lose 'em." But what if there were a better way? Let's look at the interesting case of Netflix. Netflix, remember, that dealt a crushing blow to the blockbuster and blockbuster-like video stores nationwide in a surprisingly short period of time. And they did that by being more innovative and forward-thinking than their sluggish counterparts in the video store chain business.
Netflix's vacation policy is to not have a vacation policy. Employees are allowed to take as much vacation time off as they like. This started (from an employee perspective) with the argument: "we're preparing reports and answering e-mails on nights and weekends, and the company isn't tracking those hours--why then are you tracking my holiday time?" But Netflix executives agreed to shed bureaucracy for a slightly different reason - it better supported Netflix's culture of innovation and work ethic. Why hire someone that you don't trust to work hard? Why judge an employee offof the time he/she spent at work instead of how much they accomplished? What's more important, time spent at one's desk or results? This type of freedom might be more common in the modern workplace.
There are skeptics - plenty of them! - but how did Netflix respond?
Paraphrasing one company executive - Netflix doesn't have a clothing policy either. But so far, no one has shown up to work naked. By the way, if you think this a crazy idea, you'll have to take it up with not only Netflix, but also such companies as General Electric and LinkedIn.
"Leaders traffic in idea creation. The best leaders I know are ferociously disciplined about seeking them out and incredibly committed to stewarding them as well."
- Bill Hybels
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