The introduction of the TILA-RESPA Integrated Disclosure rule, or TRID, in October has led to utter chaos in the mortgage industry—or so some would have you believe.
Matthew Pointon, a property economist at Capital Economics, however, begs to differ. In fact, any disruption generated by TRID, he says, has been on the sales side, not the consumer side, and will be short-lived at best.
TRID rules are meant to give homebuyers more information with which to vet lenders and compare the cost of mortgages more effectively. Borrowers are also given more time. The new rules require lenders to provide estimates of all the costs of a mortgage to customers three days prior to closing.
“According to some lenders, the change has led to more market turmoil than the financial crisis,” Pointon says. “By contrast, the head of the Consumer Financial Protection Bureau has claimed the implementation of TRID is going smoothly.”
So who’s right?
Well, there was some disruption in the run-up to the launch of the new rules. Mortgage applications spiked the week before TRID became official and then crashed the week after. But the new rules, Pointon says, have no direct bearing on the cost of credit or its availability. Further, he says, applications for home purchase in December reached their highest level in almost six years.
TRID has, however, disrupted the sales process a bit. “There are three main measures,” Pointn says. “Existing sales, new sales, and pending sales. Both new and pending sales have shown no significant movement since October.”
Existing sales, on the other hand, plummeted in November, which, Poinotn says, “looks to reflect the timing of when sales under each measure are recorded.”
New and pending sales are measured at contract signing, after the mortgage has been applied for, but before it has closed. But existing home sales are recorded at contract closing, after the mortgage has been completed. Given how new and pending sales are measured, then, it’s no surprise that those sectors are unaffected by TRID, Pointon says. The dip in existing sales, however, “is likely to be due, in part, to an increase in the time it takes to close a mortgage and will have pushed some existing sales from November into December.”
Delays, however, have been rather brief. Ellie Mae data from November showed the time it takes to close a mortgage has risen from 46 to 49 days.
“Overall, the evidence suggests that the TRID regulations have had only a modest impact on home sales,” Pointon says. “There is no evidence that mortgage applications have decreased, and the share of applications that close has increased since October. That suggests existing home sales will bounce back in December.”