Last October, the Consumer Financial Protection Bureau introduced the TILA-RESPA Integrated Disclosure (TRID) rule. TRID was designed to make it easier for borrowers to understand the loans they are being offered and compare them to other loans in order to get the best deal. However, almost a year later, it appears that TRID has had the opposite effect, causing more mortgage defects instead of making loans easier and less error-prone.
Following TRID's implementation in 2015, Moody's produced a report in which more than 90 percent of the mortgages reviewed had at least one TRID violation, although most of these errors were simply technical mistakes that did not affect the amount of the loan or the borrower's qualifying status. Now another report produced by ACES Risk Management (ARMCO) shows that the number of errors is increasing, and they are no longer harmless defects. Instead, more and more mortgages include serious TRID violations that must be addressed.
The ARMCO report looked at more than 50,000 mortgages made by over 60 lenders. The analysis shows that in the two quarters following TRID's implementation, serious mortgage defects rose. By the fourth quarter of 2015, the mortgage defect rate was 1.21 percent, up from 0.77 percent in the previous quarter. The first quarter of this year saw a defect rate of 1.92 percent. Almost all of these defects fall into the areas that TRID is designed to cover.
On a positive note, mortgage package documentation defects, which were previously fairly high, have decreased thanks to the CFPB's TRID reforms.