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Oct. 3, 2015, was a historic day for the mortgage industry. After several false starts, that date was chosen by the Consumer Financial Protection Bureau as the implementation deadline for its Know Before You Owe rule. Also known as the TILA-RESPA Integrated Disclosure rule, or TRID, it sought to inform borrowers about costs before the closing date.
Now that a year has officially passed since that deadline, it’s easier to see exactly how the industry dealt with the massive changes.
The new rule was first unveiled to the industry back in November 2013, and after several changes to the implementation date, including initial deadlines of Aug. 1 and Oct. 1, the CFPB landed on Oct. 3, giving everyone in the industry a little less than two years to adjust.
The critical changes required by the new rule involve the delivery timing of the Loan Estimate and the Closing Disclosure forms to borrowers. The intent was to help consumers “understand their options, choose the deal that’s best for them, and avoid costly surprises at the closing table,” the bureau stated.
But what looked at first like deceptively simple form changes proved much more complex, requiring technology upgrades and process overhauls. Over the past year HousingWirecovered the trials of lenders, Realtors, settlement service companies and others involvedin mortgage lending as they struggled to adjust.
One of the first bellwether indicators of the rule's impact was time to close, which climbed to a high of 51 days in January 2015. By March, Ellie Mae’s Origination Insight Report showed that the time to close all loans had dropped to an average of 44 days, but it started inching back up over the summer months.
Complying with the new rule was made more difficult by the vagueness of some of the guidance from the bureau. In July the CFPB responded to that concern by issuing proposed rules and opening up a comment period in August.
The proposed changes include: tolerances for the total of payments, expanding the number of housing assistance loans that would qualify for exemptions, including cooperatives in the rule, and clarifying how a creditor could provide separate disclosure forms to the consumer and the seller.
While welcome, the proposed changes neglected to address several critical pain points, including the ability of lenders to share disclosures with Realtors, what changes can be made to the closing disclosure once it has been sent to consumers, how to accurately disclose title and settlement fees and how minor TRID-related errors affect the compliance of loans headed for the secondary market.
As the industry awaits final changes, several experts weighed in on what the market has gone through over the past year and what might be in store for the future.
Pete Mills, senior vice president residential policy with the Mortgage Bankers Associationsaid, “TRID was a massive undertaking from a systems and business processes standpoint. Although many anticipated the rule would significantly disrupt the closing process for consumers, the impact of TRID on consumers was mitigated because lenders and other participants in the closing process dutifully prepared for the final rule.
“And once it was implemented, lenders devoted major resources to overcome implementation challenges to make sure loans closed on time. Going forward, ongoing clarity from the CFPB, such as in the pending rulemaking, will be necessary to ensure consistency and reduce the costs of compliance,” he said.
National Association of Federal Credit Unions President and CEO Dan Berger said, “NAFCU appreciates the CFPB revisiting the TRID rule and, at first glance, there appear to be a few positive components that we strongly advocated for on behalf of our members. Most notably, the bureau has taken our advice regarding the codification of its informal compliance guidance.
“However, the bureau has not gone nearly far enough to address the numerous substantive compliance issues that have been highlighted by credit unions.
Tom Salomone, president of the National Association of Realtors, said, “The first year of ‘Know Before You Owe’ has offered consumers a clearer picture of their mortgage in advance of closing, and that’s a good thing, but lingering issues still remain. It’s encouraging that the CFPB acknowledges those concerns and is seeking to improve the TRID rule.
“The CFPB should use the open comment period to reiterate once again that it is just as acceptable now as it was before ‘Know Before You Owe’ for creditors and settlement agents to share the Closing Disclosure with consumers, sellers, and their agents. The CFPB’s consistent reading of those regulations will help cement a better understanding of this allowance within our industry,” he said.
Salomone continued, “While we are appreciative of the CFPB’s active engagement on this important issue and facilitating a functional regulatory environment for mortgage transactions, we are disappointed in Director Cordray’s departure from well-established law regulating marketing service agreements.
“The CFPB should remain focused on enforcing protections that benefit consumers rather than pursuing policy that causes unnecessary uncertainty for the industry,” he concluded.
Dana Ward, owner and manager of Real Estate Closing Solutions in Orlando, noted how the regulation affected title and closing companies.
“They have seen a significant increase in the amount of work required to close a financed transaction and have made enormous investments in computer and software upgrades,” said Ward.
“Transactional challenges remain within the lending industry to accurately disclosure to our buyers three days prior to closing. Regardless, our title partners work hard behind the scenes to get these transactions closed on time.”
Now that the industry has had time to understand TRID, Fenn Meents, chief growth officer, with iEmergent, explained that he is more positive on the future of the industry.
“TRID was such a massive undertaking for the industry. It was all hands on deck. Other initiatives to strategically increase revenue were selected as tier-two initiatives and put on an extended timeline for completion,” he said.
“As I talk with more lenders, now that they have taken a deep breath from TRID, they are looking at 2017 as a period where their enterprise’s resources, both human and financial, will not be as heavily monopolized by a single impending regulatory event."
With the bulk of TRID implementation behind them, Meents said that lenders are in the process of looking inward to differentiate themselves, often through technology.
“How can we implement new technologies to better serve our clients, increase operational efficiencies, and ultimately increase originations to gain market share? Now, with TRID past, it’s a story of building and executing a sustainable growth model," Meents said.