ComplianceEase: 17 Percent of Loans Fail for TILA and 6 Percent for RESPA Tolerances
September 3, 2015
According to loan analysis from ComplianceEase, 17 percent of the loans it audited during the first quarter of 2015 failed for Truth in Lending Act (TILA) while 6 percent of the loans were outside of the Real Estate Settlement Procedures Act (RESPA) tolerances.
The analysis was based on a cross-section of 700,000 audits that were performed in ComplianceAnalyzer and RESPA Auditor.
ComplianceEase estimates the average RESPA reimbursement was $328 for the 6 percent of loans that failed the RESPA tolerance test and $740 for the 2 percent of all loans that had an uncured RESPA violation (i.e., an error discovered by an attorney, borrower or regulator after closing). This means that these defects are adding, on average, $28 per loan to the costs of origination, and that’s before the new TILA-RESPA Integrated Disclosure (TRID) rule takes effect in October.
In addition to reimbursement, the new TRID rule has a three-tiered civil money penalty that can range from $5,000 per day to $1 million per day for “knowing violations.”
The analysis also showed that one year after the enactment of the Qualified Mortgage (QM) rule, 4.5 percent of QM loans failed Safe Harbor tests and 11 percent of loans were categorized incorrectly as to their QM status.
“Based on our analysis, closing defects are already an expensive problem for lenders under the current rules, and are about to get riskier and more expensive under TRID,” said John Vong, president of ComplianceEase. “Lenders and settlement service providers will need to work together so they can produce higher quality loans and not add to the already high costs of origination.”
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