The road to a successful TRID rollout has been full of starts and stops over the last year-and-a-half. Concerns remain, but there have been improvements to the mortgage origination process that have come as a response to the new rule and the industry can expect a continued focus on enhancing the mortgage disclosure process.
The implementation of the TRID rule was such a large piece of regulatory change, with years of discussion prior to rollout, that it is likely anyone who is not new to the housing industry already has a general understanding of the rule.
The original TRID rule was a 1,888-page beast and is incredibly complicated. The bottom line is that TRID integrates the TILA and RESPA disclosures into the new Loan Estimate (LE) and Closing Disclosure (CD). The CD must be received by the borrower(s) no less than three business days prior to consummation of the loan.
These are not the only rule changes, but they are the most significant in impact on both consumer and industry.
How did the mortgage industry prepare for TRID?
The implementation of the TRID rule has been an expensive endeavor for the housing industry. Systems and software had to be updated for the new disclosure forms, both to create them and to accept them, and employees had to be trained on how to implement the new rules and keep their team compliant. Some mortgage lenders have created a new “disclose specialist” position within their workforce because of the complexities involved in staying compliant. Many of these costs are ultimately passed along to the consumer.
Prior to rollout, there was a surge in the use of pipeline analytics to analyze an origination team’s workflow “TRID readiness”. Floify customers utilized the Floify pipeline to analyze how many days prior to contract closing their team was getting the clear-to-close to ensure that they would be compliant with the three-day rule.
One of the greatest movements to come from TRID has been the embracement of eSignature. If you use the mailbox rule, the closing disclosure would need to be sent out three days prior to when it needs to be received, for a total of 6 days in advance of closing. Other options include using costly overnight shipping services to buy another day or two. In response to the need for a better delivery system, eSignature has come to the forefront as a solution that provides instant delivery and acknowledgment of receipt.
What are the ongoing concerns
The biggest question in the housing industry, as it pertains to the rule change, is if TRID is negatively impacting the time-to-close. The data at hand is inconclusive, but the fear is that because of the strict delivery window of the closing disclosure, any errors in that process would lead to days or weeks of delays. Any delay in closing has the potential to have a significant negative ripple effect on both buyer and seller.
Another concern that remains is in the stability of the rule itself. It is widely viewed as an overly complicated measure that is continually scrutinized by industry groups with an eye on improvement and clarification. In early April the CFPB released proposed amendments to the rule, but some insiders felt that they fell short in addressing all of the issues in the rule. It is clear that TRID will continue to undergo changes in the coming years.
Finally, the industry is carefully waiting to see how the CFPB is going to handle the enforcement of TRID. Thus far, lenders have been operating under a sort of “good faith” moratorium to allow them time to implement the necessary changes and get their staff trained on the changes. That will eventually end, and nobody really knows at this point what types of actions can be expected from the CFPB as it pertains to enforcement.
How can the industry continue to improve the disclosure process?
One solution is to build upon the creation of the disclosure specialist employee that was referenced above. This is an effective strategy for medium-to-large lenders that can centralize the disclosure process and utilize technology to ensure that the process remains consistent and compliant across all of their branches. Floify recently launched Disclosure Desk, a new function that allows loan originators and compliance teams to manage the entire disclosure process right from their Floify account.
The secondary benefit to this arrangement, after the improved consistency in disclosures, is that it would relieve mortgage brokers and their teams from the burden of creating, sending, and executing disclosures on a stressful timeline while also fulfilling their other duties.
For smaller independent brokerages, the best solution is to leverage the technology that is available to enhance workflow and efficiency. Mortgage software systems like Floify allow for the sending of disclosures through an eSignature system that is integrated into the loan document management portion of the platform. If utilized within a well-constructed workflow this can shave days off the disclosure sending process and save money that may have been spent on expensive parcel delivery.