TRID Has Increased Our Clients’ Defect Rates

It has been widely reported that the TILA-RESPA Integrated Disclosure (TRID) requirements has lengthened the number of days it takes lenders to close loans. Now we have definitive evidence that TRID has also increased lenders’ Overall Net Defect Rates as well.

From the inception of TRID (October 2015) through the first quarter 2016 our clients’ Overall Net Defect Rate averaged 38.5%, up 30% from the period from the fourth quarter 2013 through the third quarter 2015.

This increase was primarily due to the following ‘TRID findings’:

  1. No evidence the Preliminary Closing Disclosure was received/acknowledged at least three days prior to closing.
  2. No Preliminary Closing Disclosure in the file.
  3. The Loan Estimate column of the Calculating Cash to Close box on the Closing Disclosure did not match the most recent Loan Estimate.
  4. Tolerance Violations with regard to certain fees on the Closing Disclosure.
  5. Seller information not complete (usually address).

We know, based upon our daily communications with our clients that they are all working diligently to improve their loan origination systems and their internal procedures to reduce the ‘TRID Findings’ that we report to them each month and it seems to be paying off. When drilling down on our quarterly data, we find their Overall Net Defect Rates are starting to come down.  Our clients Overall Net Defect Rate averaged a high of 46% in December 2015, however January-March 2016 their Overall Net Defect Rates have come down in each of these three months.  As we wrap up the audits for the second Quarter 2016 and begin the third quarter audits, it will be interesting to see if this downward trend continues.

Culp QC, Inc is a nationwide provider of mortgage quality control services to the mortgage industry on a nationwide basis. We are currently audit approximating 600 files per month from 55-60 lenders in 24 states.

Bruce E. Culp


Culp QC, Inc