The TILA-RESPA Integrated Disclosure (TRID) shook the mortgage industry over two months ago, and it's after-effects are still being felt around the industry.
Just yesterday, Moody's Investors Service surprised the entire housing industry with a report that showed that TRID compliance violations are a widespread epidemic in mortgage originations.
According to Moody's analysts Yehudah Forster and Lima Ekram, a number of third-party firms reviewed recent residential mortgage loans for TRID compliance and found violations in over 90 percent of the loans. The report showed that many of the TRID violations were only technical, but still prove that lenders are struggling to comply with the new regulation.
First Tech Federal Credit Union CEO Greg Mitchell sat down with MReport in an interview to discuss some the hurdles that credit unions are dealing with. What is the biggest issue among credit unions you may ask? None other than America's most-talked about piece of regulation at the moment: TRID.
1. What is the biggest challenge that credit unions face in the mortgage industry? How can these issues be resolved?
Today, if you look at the challenge for credit unions—similar for commercial banking mortgage producers—there is TRID compliance and ensuring that members/customers understand why this being done and why the organizations are experiencing some changes in case there are delays from the way consumers are typically accustomed to securing a home in the mortgage process.
As an industry we have 'moved the cheese' from the consumer and that's creating a fair amount of confusion that the mortgage industry as a whole including title companies, escrow companies, Realtors, and borrowers. This is a huge challenge. We are hoping [these challenges] pass over time as more and more people become familiar with the process of TRID, but if you look at today's challenge, I think that would be making the shift from a refinance market to a purchase market.
2. With the recent Moody's data-that showed 90 percent violations in TRID loans, how will this pan out moving forward and how can this resolved in the industry? What are credit unions doing to get over the 'TRID hump?'
To the best of our knowledge, all of our TRID loans are compliant because we got ahead of this project and ensured that we made changes internally to make sure we get it right because the consequences of [violations] are significant. I think we are in pretty good shape.
I think part of it is it's really educating all of the people that are involved in the mortgage process about what's required, what it going to require, and what is the standard. The way to fix that is to spend more time talking. First Tech Fed along with First American Title are actually going out and doing educational sessions with title companies, escrow companies, and Realtors to educate them on TRID requirements.
While financial institutions are prepared, or many financial institution are prepared, others in the mortgage industry are not.
3. What is the largest piece of regulation that credit unions are currently facing? How can they maintain compliance and avoid costly penalties?
It's TRID! It's really all about TRID. In fairness to the CFPB, they are actually trying to create a process which provides more transparency and understanding on the part of the American consumer. In meetings with the CFPB, I am not sure they understood the complexity of the [TRID] process and what that really meant. Until the system—and that's broad from the Realtor all the way through Fannie Mae, Freddie Mac, and investors—run through a few cycles with TRID, it's going to be difficult and burdensome. Just like learning a new foreign language, it takes a fair amount time to begin to speak that language and understand it properly, but once you process your point then you can become quite fluent. We need to learn to speak that foreign language and become fluent on accelerated doses and TRID is that new language.
Click here to learn more about First Tech Federal Credit Union.
Editors Note: If you want to read more about what today’s top credit union CEOs predict for the coming year be sure to catch the February 2016 print edition of MReport, where hot topics affecting credit unions will be explored in depth.