It’s been more than six months since the mortgage industry rolled out the new Truth in Lending Act (TILA), Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure (TRID) rule, and data is starting to suggest that the industry might be getting the hang of things. While the initial implementation period is behind most of us, there is still work ahead to streamline compliance in support of the disclosure requirements, work out operational kinks between vendor and lender integrations and anticipate additional changes as the Consumer Financial Protection Bureau (CFPB) as they continue to clarify industry questions.
According to the National Association of Realtors’ March 2016 REALTORS® Confidence Index Survey Report, the average closing time for mortgage loans fell to 41 days, down from 43 days from previous months and representing the shortest duration since October 2015. The metric has come down nearly a week in average closing time since TRID implementation. In November, December and January, immediately after the new disclosures rolled out, average days to close jumped up lingering around 46 days.
Andy Crisenbery, senior vice president Operations at eLynx, comments: "As lenders gain experience with the new processes, timelines and forms, they are seeing some general efficiency gains which is helping shorten the overall time to close. However, despite shorter average closing times, not all lenders are experiencing the same results. Some lenders still have outstanding issues and questions about the TRID regulations. Others are finding that the processes they put in place to meet the TRID deadline aren't scalable and their workflow created bottlenecks, or has potentially left the lenders at risk of penalties when the CFPB starts cracking down on non-compliance."
There are some positive signs that some of the industry's concerns about TRID may be addressed. The CFPB may announce changes or clarifications that will hopefully resolve some of the outstanding issues and questions. On April 12, 2016, the CFPB hosted a webinar to address post-implementation questions from various stakeholders. The agency also added to its growing Questions Index — a product of more than half a dozen webinars seeking to hammer out TRID details.
On April 28, 2016, CFPB Director Richard Cordray sent a letter to industry trade groups, including the American Bankers Association, Financial Services Roundtable, Mortgage Bankers Association and National Association of Federal Credit Unions. In his letter, Director Cordray said the agency was “pleased to see some of the most recent data … indicating that closing times are now shorter than they have been for the past year and that closing rates are rising to their highest levels since the data was first monitored in August 2011.” Recognizing “that there are places in the regulation text and commentary where adjustments would be useful for greater certainty and clarity,” Director Cordray also announced that the CFPB would publish a Notice of Proposed Rulemaking on TRID in late July.
In the meantime, lenders with closing times above the industry average should look at ways they can improve their operational efficiency. There are a couple of key areas where inefficient processes can extend average closing times: collaborating with settlement agents to collect fee information; comparing preliminary and final fees to see if a redisclosure is required; managing the compliance calendar to help ensure that regulatory timelines are met; and, delivering documents manually and requiring wet signatures. Today, mortgage technology vendors, including eLynx, have proven solutions that can help automate each of these bottlenecks.
As impactful as bottlenecks can be to efficiency and compliance, they may not be the greatest problem lenders face six months after the regulations went into event. To date, lenders have enjoyed a period of relaxed enforcement by the CFPB. But this is likely to come to an end and many in the industry expect the CFPB to begin ratcheting up their oversight of TRID compliance. For lenders concerned with the risk of exposure for non-compliance, now is the time to shore up internal processes and procedures to help ensure consistent compliance throughout their organization. Data collected by Black Knight Financial Services suggests that even lenders who have invested in technology and processes to help them with their compliance initiatives don't always see the results they expect. Lenders who have mandated use of the TRID-focused tools and processes showed consistently higher adoption rates within their organizations than did lenders who did not mandate their use.
Automation is the key for efficient, scalable processes that can help lenders reduce their closing times. Lenders who retain their inefficient legacy processes risk falling further behind as closing times continue to improve across the industry. But even lenders who put the tools and processes in place need to mandate the use of them, institute educational programs to train personnel on best practices, and set up internal audit and enforcement programs to support consistent compliance. The CFPB’s upcoming Notice of Proposed Rulemakings should provide a clearer roadmap to more comprehensive understanding and implementation. eLynx will continue to track TRID developments and help its clients meet their compliance demands.