Had
an interesting phone message from a colleague attending a Mortgage Bankers
Conference yesterday. It went something
like this:
“Just got out of a really
interesting session. A great deal of
debate and discussion on being able to validate the TILA APR
at mortgage closing with the new mortgage
disclosures. Each of the panel
members computed a different rate for the same loan. The animated discussion
was about which one was right. There is
great concern that at closing you have to gather documents from multiple parties
and pull information together from these various documents. One mistake and you have a situation.”
Sometimes, it takes a while for certain chickens to come home to roost.
Back
in the fall of 2010 when the interim rule about what, at Carleton, we call the
“MDIA Payment Disclosures” proposal was published, it was clear that one of the
deficiencies of the attempt to overhaul mortgage disclosures was that the contract
itself did not display the actual payment schedule that other TILA disclosures
were derived from.
In
short, there isn’t the proper information on the contract disclosure to
compute/validate the TILA APR.
Since
our focus is on the calculations and disclosures, that fact was a glaring
drawback in our view. We opined exactly
this issue to the Federal Reserve Board of Governors, they actually promulgated
the original interim rule, during the industry comment period.
At the time in
exploring this issue with regulators at both the national and state level, we
got pretty much the same response, “well, examiners have to look at the HUD-1
anyway, they can get the payment information from there”.
After
29 years in the Carleton Research Department, I can’t even tell you how many
times I have worked with auditors, compliance officers, attorneys, and
examiners who believed an APR value was incorrect only to realize the issue was
with in accurate data entered into the
APR check program they were using. This when all the payment information
required was still in the Fedbox on the contract.
Now
the expectation is to pull critical information from other documents? Have you ever noticed how many numbers reside
on a completed HUD-1 form?
It
just seems that the new disclosures have opened a huge door on the opportunity
for inaccuracies ranging from simple lapses to egregious errors on the part of
auditors who now have to play detective with an assortment of documents.
More
information isn’t always better information.
*If
you would like to view Carleton’s official comment letter to the FRB concerning
the MDIA Mortgage Payment Disclosures, click on the link below:
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