By: Elva Coffey-Sears
Concerned about implementation planning? We’re here to help!
Section 16 of the CFPB’s TILA-RESPA Integrated Disclosure rule – Small entity compliance guide (http://ow.ly/JoA2l) enumerates the following four practical implementation issues that an institution may include in its compliance implementation plan including identifying:
- Affected products, departments and staff
- The business-process, operational and technology changes that will be necessary for compliance
- Impacts on key service providers or business partners
- Training needs
The discussion surrounding these four implementation issues briefly touches upon the need to understand changes software programs require while emphasizing the importance of being in close touch with vendors to confirm scheduled upgrades meet compliance needs and timelines.
To support the new Integrated Disclosures, loan documentation system vendors have a monumental task of developing new forms, programming new calculations and testing the output. However, conversations with clients and colleagues alike lead me to believe that creditors are underestimating the significance of their involvement in software-vendor activities.
Despite the indemnities, etc., included in your contract with the vendor, your primary regulator will hold your institution accountable for any violation of the new disclosure rules. Therefore, it is important to ask yourself, “Does my implementation plan include sufficient time for testing the output of my loan documentation software prior to the mandatory compliance date?” In addition to testing the calculations and appropriate classifications of the various fees, pre-implementation testing should include, but is not limited to, verification of the:
- Accuracy of forms and language, including required labels, headings, sub-headings, statements and cross references
- Correctness of formatting (such as capitalization, bold font, rounding, truncation and decimal places)
- Inclusion of the required tables on the appropriate pages for each type of transaction (purchase, refinance, construction, etc.) and product (fixed, variable, balloon, negative amortization, etc.)
- Adherence to limitations on the number of items disclosed and utilization of an addendum
Remember to budget time to develop testing procedures (to date, examination procedures have not been published), while taking time to work with your vendor to resolve any discrepancies that may be identified during testing. This will ensure you’re set for success!