By Chris Gillock
The mortgage origination industry is still coping with the disclosure challenges and complexities of TRID – the T.ruth in Lending, R.eal Estate Settlement Procedures Act I.ntegrated D.isclosure regulations. These are quite well-intentioned changes, of course (“I am from the CFPB, champion of exploited consumers….”) but all of these good intentions generate unintended consequences. Capital sources are paranoid about buying loans that violate TRID and getting hung with fines and other bad things by the CFPB. I heard about the following story from the news feed from “Inside Mortgage Finance.”
By Paul Muolo
A nonbank lender had a $910,000 jumbo mortgage rejected by its secondary market investor because of a $19 TRID-related mistake on the disclosure form and ultimately sold the loan in the “scratch and dent” market at a $70,000 loss.
The CEO of the company spoke to IMFnews about the loan under the condition he and his firm not be identified. The secondary market investor, he said, was a top-ranked commercial bank that’s active as a correspondent buyer of jumbo loans.
The CEO said the investor in question gave his nonbank a short amount of time to fix the $19 overcharge and when the funder finally did the investor came back and told the originator the refund was too late by four days. “They basically told us to pound sand,” said the executive.
With the sale of this jumbo mortgage rejected, the nonbank then sold the loan in the scratch-and-dent secondary market and ultimately took a loss of roughly $70,000. “The real punch in the gut is the investor taking 30 days to review” the mortgage, he said. “Then they said it’s not up to their standards.”