[mdunker]

I am trying to figure out if the regulation has changed in calculating the total of payments that will go on the LE. I don’t recall seeing anything changing, however my software provider is doing something different. I thought the total of payments is calculated by adding the amount financed to the finance charge. My software vendor is taking these two numbers then also adding in the fees that are charged.

Topic

[rcooper]

Look at 1026.37(l)(1)(i) and 1026.38(0)(1) for the calculation (see below).

Paragraph 37(l)(1)(i).
1. Calculation of total payments in five years. The amount disclosed pursuant to § 1026.37(l)(1)(i) is the sum of principal, interest, mortgage insurance, and loan costs scheduled to be paid through the end of the 60th month after the due date of the first periodic payment…

Paragraph 38(o)(1) Total of payments.
1. Calculation of total of payments. The total of payments is calculated in the same manner as the “In 5 Years” disclosure pursuant to § 1026.37(l)(1)(i), except that the disclosed amount reflects the total payments through the end of the loan term. For guidance on the amounts included in the total of payments calculation, see comment 37(l)(1)(i)-1.

Loan Costs are outlined in 1026.37(f).

[Alma Arriaga]

With the recent TRID Amendment that takes effect 10-1-2018, we now have a tolerance limit on the disclosed $ amount for “Total of Payments”. Since this is a disclosure that is calculated by our loan origination system, what is the expectation for lenders to monitor that tolerance? And, what do we compare the final disclosure to? TRID requires that we compare APR from between versions of the Closing Disclosure but with respect to the (Total of Payments) disclosure, the LE discloses a 5-yr. term but the CD is a $ amount to the “end” of the term. Would you provide clarification on how to go about “manually” checking that we are within tolerance OR: will our loan origination systems do this automatically?

Also, what is the CURE when we are out of tolerance? Is there a “separate” TRID Cure or do we go by what has always existed by the statute?

Just need general guidance on how to implement a quality assurance step in our process to ensure we are within tolerance and what we are comparing the final disclosure to?

[jholzknecht]

TRID not only requires you to monitor the APR from the LE to the CD, but you must also make sure your disclosed APR is accurate when compared to the actual APR. This is nothing new; the comparison has been required since 1969.

The tolerance for the Total of Payments (TOP), which only appears in the CD, has also existed since 1969, but instead of the previous $0.00 tolerance you now have $100. The TOP is calculated by adding together the principal, interest, mortgage insurance, and loan costs.

You should monitor all applicable tolerances. I would assume that whatever loan origination software system is used by your bank will properly calculate the TOP. But we have seen cases where the system accurately calculates the number, but it is still wrong because of an entry error by the bank, for example, an item that should be included in the loan costs is not included in the loan costs.

Neither the law nor the regulation contains a cure for TOP violations, but presumably adjusting the TOP so the borrower does not pay more than disclosed would “cure” the violation.

[Author]

Replies