New guidance for RMBS loans may help market triage TRID errors: Fitch

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Fitch Ratings may use a new Structured Finance Association framework aimed at prioritizing only riskier TRID errors to assign grades to loans sold into residential mortgage-backed securities, reducing rating-related compliance burdens.

"Fitch believes that the application of the TRID Grid 3.0 will meaningfully reduce the number of minor compliance exceptions in RMBS pools; this refined approach should help the industry to concentrate its analysis on the operational focus of the more significant issues," the ratings agency said in a report Tuesday.

The association aimed the new version of its Compliance Review Scope for third-party due-diligence reviews at focusing attention primarily on errors in TILA-RESPA integrated disclosures where losses could occur.

"The SFA's new scope reduces testing and the identification of exceptions where the likelihood of actual losses is very low and eliminates testing where the compliance aspects do not carry assignee liability — including several duplicative compliance checks that are outside of TRID," Fitch Managing Director Roelof Slump and Director Amit Arora said in the report.

The SFA recently updated its guidance for the third time to reflect the Consumer Financial Protection Bureau's latest guidance and legal precedents related to TRID documentation concerns.

The CFPB could revise TRID, which is going through a periodic review as required under the Dodd-Frank Act. The bureau is accepting comments on the look-back through Jan. 21, 2020.

The 2015 disclosure rule was aimed at helping to improve consumers understanding of closing costs and based on parts of the Truth in Lending Act and Real Estate Settlement Procedures Act.

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