Fitch Ratings: SFIG Proposal Marks Significant Progress on TRID

A recent report from Fitch Ratings provides positive commentary on SFIG’s draft proposal to standardize the approach to the scope of review for exceptions under the Truth in Lending Act – Real Estate Settlement Procedures Act Integrated Disclosure rules (“TRID”). “Initial due diligence sampling of prime jumbo mortgages in the secondary market has indicated many compliance issues thus far, most of which appear to be good faith errors. The ambiguity in the rule and a lack of judicial precedent has caused uncertainty on how to assess the materiality of the errors and how to resolve them,” stated the Fitch report.

As reported on Friday, participants of SFIG’s RMBS 3.0 Due Diligence and Data Disclosure work stream, particularly the third-party review firms, distributed the draft proposal for comment regarding a standardized approach to the scope of review for exceptions to TRID rules, consistent exception grading, and consistent remediation considerations. Over the next few weeks, SFIG members expect to vet the proposal through the committee process and incorporate the final product into the RMBS 3.0 Green Papers.

SFIG would highlight that this proposal is an attempt to standardize a response to outstanding compliance issues under TRID at this early juncture and expressly assumes that regulators and courts will interpret TRID in accordance with the principles of liability set forth in a letter from Richard Cordray, the Director of the CFPB (the “Letter”); however, it is critical to note that there is no guarantee the exception grading and remediation reflects how courts and regulators, including the CFPB, may actually interpret and/or enforce the rules as written, and that they may do so in a manner that is contrary to the statements and position of the Letter. Furthermore, when asked, the CFPB has refused to state formally that it will abide by the Letter.

This proposal serves only to explain how the member firms would grade risk and recommend resolving TRID violations IF the CFPB and the courts enforce the rules in a manner consistent with the Letter.

A conference call has been scheduled for Tuesday, March 29th for RMBS 3.0 members to learn more about the proposal from the third party review firms that were instrumental in its drafting. To join the call or any of SFIG’s RMBS 3.0 working groups, please contact Amanda.Bateman@sfindustry.org

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