ComplianceEase reports that its compliance management platform, ComplianceAnalyzer with TRID Monitor, can now test TRID, RESPA 2010 and pre-2010 forms to validate California’s per diem interest calculations.
According to a May 2017 release from the California Department of Business Oversight (DBO), “under the per diem statute, a borrower cannot be required to pay interest for more than one day prior to the disbursement of loan proceeds from an escrow on a principal obligation under a promissory note secured by a mortgage or deed of trust on real property with up to four residential dwelling units” unless certain exceptions apply.
Four of the top 10 non-bank lenders in the nation have been fined a total of $13.3 million in the last year and a half due to per diem interest calculation violations. The overcharging of per diem interest remains one of the most common violations by lenders.
The California Per Diem Interest Test in ComplianceAnalyzer audits a lender’s calculation for the maximum allowable amount of additional per diem interest that may be charged (or the minimum amount of interest to be credited), and based on the data provided, will provide a “pass,” “fail,” or “not tested” (typically due to lack of data) result, the company says in a press release.
The new functionality is automatically applied if a lender selects a California License (i.e., Finance Lender License, Real Estate Broker License, Real Estate Corporate License, Residential Mortgage Lender License, or Exemption Letter) or selects the California Regulatory Examination Lending Policy.
In addition, examiners using ComplianceAnalyzer with TRID Monitor can perform audits that apply the California Per Diem Interest Test by using the new Lending Examination Format (LEF) file for electronic examination (e-Exam).
“One would think that the per diem interest calculation should be simple and straight forward, but it is not the case for California,” says John Vong, president of ComplianceEase, in the release. “Many lenders are still relying on their loan origination systems (LOSs) for compliance auditing, but I would compare that to a sales deal involving snow and Alaska; unfortunately, it’s a fool’s errand. LOSs are in the business of originating loans. Regulatory compliance is an altogether different animal.
“Additionally, violating California’s rules for per diem interest can be a costly error for lenders,” Vong adds. “With ComplianceAnalyzer’s new California Interest Per Diem Test, lenders will be able to audit all of their documents to ensure compliance and to correct any variances before they become violations. It will also help regulators by eliminating manual work during the examination process.”