With the TILA-RESPA Integrated Disclosure (TRID) rule deadline rapidly approaching October 3, 2015, lenders are gearing up for the upcoming changes but not without a few worries. Brad Schaltenbrand, director with Navigant’s Financial Services Practice sat down with MReport to discuss a few TRID-related concerns and some viable solutions to these issues.
1. Lenders can take the following steps to help ensure that they are current with CFPB compliance:
- Complete CFPB Readiness Questionnaire – Review the CFPB Readiness Guide and complete the included questionnaire to identify and remediate potential areas of non-compliance prior to October 3rd.
- Evaluate Policies and Procedures – Review policies and procedures for compliance with TRID (origination, processing, closing, post-closing). Update or develop procedures for any gaps identified.
- Manage Vendors – Identify and evaluate third-party providers and service level agreements to ensure their processes and technology are up to par and in compliance with TRID.
- Conduct Training – Develop training materials and deliver training for all employees and external vendors to ensure they understand the changes to technology, business process workflow, and controls along with their roles and responsibilities.
- Test Readiness – Prior to October 3rd, run test cases through systems and processes and review or hire third-party expert to review the results to determine if they are in line with TRID requirements.
- Establish Ongoing Monitoring Process – Post October 3rd, review customer complaints and test or hire third-party expert to test loan applications for compliance with TRID requirements, leveraging the CFPB TRID Exam Procedures as a starting point to develop test plans.
- Remediate – Proactively remediate any issues identified as part of your readiness testing and ongoing monitoring activities.
2. The CFPB’s goal is to achieve a more streamlined and consistent consumer experience in mortgage origination. The following steps can help lenders enhance the customer experience:
- Provide a consistent, positive experience for customers. Embrace digital closing platforms to provide a seamless experience.
- Consider providing workshops or other materials to educate consumers on the new TRID process, timelines, and disclosures.
- Proactively and transparently communicate and manage borrower expectations. Keep the borrower informed of the status, next steps, and timing from application to closing.
- Address any issues promptly.
- Avoid moving closing dates unnecessarily.
3. With TRID, the CFPB is driving to a completely electronic workflow for mortgage loans, so lenders can optimize their workflow by taking the following actions:
- Upgrade or implement technology that gives them end-to-end electronic workflow including imaging, electronic disclosure delivery, and e-sign capabilities to reduce paperwork, meet delivery deadlines, shorten the process cycle time, and provide evidence of receipt.
- Ensure systems incorporate the new data elements and standards in MISMO v3.3 (Mortgage Industry Standards Maintenance Organization) and the latest UCD (Uniform Closing Dataset issued by Fannie Mae and Freddie Mac) to support the new disclosures.
- Automate rules and controls in their systems to minimize or eliminate human errors around fees, tolerances, formatting, etc.
- Prior to October 3, lenders should run test cases though their systems and processes and review the results to determine if they are in line with TRID requirements.
4. Training and awareness will be critical elements of an effective TRID compliance program. The following steps can help maximize these important aspects:
- Update and / or develop policies and procedures for compliance with TRID.
- Develop and execute a communication plan to prepare their employees, management, and external vendors for TRID.
- Establish a TRID point of contact or “HelpDesk” to address and resolve questions and issues as they arise.
5. I believe that the TRID learning curve and managing customer expectations around closing times will be the biggest hurdle for lenders. It will take time for borrowers and lenders to get used to new TRID processes, timelines, disclosures, and rules. At the onset it is going to take longer for borrowers to close on a loan under TRID. Lenders will be challenged to manage and meet borrower expectations. Proactively educating and communicating with borrowers and embracing digital closing platforms will help.
Other significant challenges may include:
- Title insurance premiums. TRID requires the disclosure of title insurance premiums at full rates instead of reflecting the actual rate that adjusts for the simultaneous pricing of lender and owner title insurance. This is inaccurate in most states and will confuse borrowers.
- Construction loans. Construction loans are exempt from RESPA disclosure requirements, but not exempt from TRID. Lenders are asking the CFPB for more guidance on how to disclose short-term construction loans and single-close loans including both interest-only and permanent financing components.