When the Consumer Financial Protection Bureau (CFPB) swept the industry with the TILA-RESPA Integrated Disclosure (TRID) rule in October of last year, lenders were faced with the new challenge of altering their disclosure and closing processes.
Now the question is which lenders, large or small, were able to come out on top following the TRID regulation.
Fannie Mae has the answer in its Q1 2016 Mortgage Lender Sentiment Survey Topic Analysis, which surveyed senior mortgage executives in February to examine lenders’ experiences with implementing TRID requirements, including challenges and operational practices, and lenders’ views about TRID’s impact on the competitiveness of the mortgage industry.
TRID was rolled out as part of the CFPB's "Know Before You Owe" initiative. Lenders are now required to replace the Good Faith Estimate and HUD-1 with two new disclosures: the Loan Estimate and the Closing Disclosure. In addition to the form changes, lenders also put pressure on lenders to be timely, accurate, and complete when processing the forms.
According to the survey, lenders, especially large lenders, seem to be using TRID to their advantage, with nearly one-third of lenders, and 44 percent of large lenders, indicating that moving TRID disclosures gave them a competitive advantage. Only 12 percent said TRID hindered competitive advantages.
Meanwhile, only 16 percent of small lenders said TRID created competitive advantages for their company.
Sheila Teimourian, VP & Deputy General Counsel at Fannie Mae noted, "Many small to mid-sized lenders indicate that larger institutions are able to invest more to upgrade systems and have in-house compliance resources to increase efficiency and competitive advantages."
The two biggest challenges lenders reported when implementing TRID were managing/coordinating with third-party technology vendors and communication with key origination and closing players. The report showed that 8 in 10 of those who cited coordinating with third-party technology vendors as a challenge during TRID implementation still consider it an issue.
Fannie Mae found that most lenders agree that TRID has extended the time it takes for a loan to close, with an average of seven additional days, but they do expect this time to shorten over time. Despite the increased time to close, 44 percent of lenders say they raised loan fees.
"The survey results confirm in large measure the sense that lenders and their service providers have had difficulties in transitioning to TRID, particularly among smaller lenders. As is evident from trade association and Congressional proposals in recent months, lenders remain concerned over how to comply with TRID and the consequences for non-compliance," Teimourian explained. "Although there have been some suggestions in media reports in recent weeks that lenders’ concerns over TRID implementation have receded somewhat, there is a growing sense of unease among the lender community over the interpretations and policies of due diligence firms and secondary market investors regarding TRID compliance."
She continued, "Finally, it will remain to be seen whether the competitive advantage that larger lenders reported as a result of TRID implementation will be sustained or whether small and mid-sized lenders will close this gap using their own resources or through innovative third-party vendors."
Click here to view the full report.