D-Day is coming and is completely changing how you communicate loan terms to borrowers. Are you ready?
MORE THAN a year and half ago, the Consumer Financial Protection Bureau (CFPB) issued the TILA-RESPA Integrated Disclosure (TRID) rule and asked the mortgage industry to prepare to use new forms and alter the way closings have traditionally been conducted. Since that time, the implementation of the new Loan Estimate (LE) and Closing Disclosure (CD) forms seemed far enough off on the horizon for people to breathe easy.
However, the Aug. 1, 2015, deadline is less than four months away and some experts are worried the industry won’t be ready. “The reality is that this is going to be expensive and cumbersome, and it’s going to be difficult, but in the end, the biggest challenge is how you are going to cope with it,” Stanley Middleman, president and CEO of Freedom Mortgage, said. “Companies need to dedicate tens of thousands of man hours to prepare for this, because as an industry, I’m still not certain we are prepared.” To start, mortgage professionals need to have an understanding of TRID’s changes and a system ready to accept the new documents is crucial to staying compliant. “As far back as we can remember, the loan process and the relationship around the consumer have centered around the TILA and GFE [Good Faith Estimate] forms and have served as a main vehicle to communicate the loan terms to the borrowers,” Gavin Ales, chief compliance officer at DocMagic, said. “Now, that is all about to change.”
As the regulation comes to fruition, mortgage originators need to ensure they are keeping good, consistent records, Ales added. They also need to make sure that their company’s systems are capable and ready for the new forms, along with keeping up communication between their lenders and document providers.
The TRID rule seeks to streamline the use and language of TILA and RESPA forms that lenders have provided to consumers applying for mortgage loans for more than 30 years by integrating the Good Faith Estimate (GFE) and initial TILA disclosure into one form, the Loan Estimate, which must be delivered three days after receiving a consumer’s application.
The rule also combines the HUD-1 and final TILA disclosure into another form, the Closing Disclosure, which must be provided to consumers at least three business days before the consummation of the loan.
Getting TRID fit
DocMagic worked with Richard Horn, former senior counsel and special advisor for the CFPB’s Office of Regulations, on its new TRID software. Horn led the final rule-making for TRID and the CFPB’s design, as well as qualitative and quantitative consumer testing of the TILA-RESPA integrated disclosures, according to Ales. The document preparation software vendor has also wrapped up beta testing on its software. “We received a lot of feedback from clients about what to change and what to keep,” Ales added.
DocMagic announced in February that its entire solution set now adheres to version 3.3 of the Mortgage Industry Standards Maintenance Organization reference model. MISMO establishes a common dataset that is essentially a prerequisite for lenders to use the CFPB’s new integrated disclosures and share the information about the disclosures with their industry partners.
Ales said the new TRID rule places 100% of the responsibility on lenders and once it is in effect, lenders will need to automatically and seamlessly exchange the data from this disclosure with its settlement agents and other partners, which is why DocMagic is launching a centralized platform between creditor’s and closing agent’s systems.
The secure portal will allow creditors, closing agents and consumers to access, edit, approve and validate data electronically, even supplying a log of events and actions like compliance audits and approvals.
Gone are the days of making last minute changes to loans, which is something that may be the most difficult thing for real estate and mortgage professionals to swallow. According to Peter Norden, CEO of HomeBridge Financial Services, the industry isn’t use to having full disclosures wrapped up within three days of closing.
“It’s no longer where you can change a closing number or a settlement number the day before the loan closes,” Norden added. “That is a major game changer for every realtor, every mortgage broker, and every closer.”
Also, mortgage brokers and originators can’t just move loans from one lender to another; something Norden said is a pretty common practice. “They would have to start from scratch.”
The form is typically prepared by an attorney, settlement or title professional in collaboration with a mortgage lender. Accuracy and completeness are critical as failure to properly prepare the forms will result in delays to a closing of a loan.