Published on November 05, 2015
Written by The Servion Group
The TILA-RESPA Integrated Disclosure Rule, also referred to as TRID or the Know Before You Owe Rule, was implemented on Oct. 3 of this year. According to the Consumer Finance Protection Bureau, the TRID regulation applies to most consumer credit transactions involving real estate property. This makes understanding the impact of TRID on the loan process critical to those working in the real estate and lending industries.
The Know Before You Owe Rule is intended to ensure a more transparent lending experience for the consumer. By simplifying the language used on the lending forms and providing potential borrowers with more time to review loan documents, consumers can feel more confident in their decisions to agree to the terms and conditions surrounding a U.S. home mortgage.
In addition, TRID condensed all the required paperwork down to only two forms. The Loan Estimate (LE) and the Closing Disclosure (CD) can be reviewed by the consumer without overlapping information or confusion.
While the purpose of the TRID regulation is necessary to provide a positive experience for interested borrowers, there may be some hang-ups during the adoption of this new rule.
"It will take some time for industry professionals and consumers to become familiar with the updated process."
The 10 business day period provided for LE review and the three business days given for CD review are intended to ensure consumers better understand the terms of the loan, according to MarketWatch. However, the extra time may lead to closing delays.
"It can push the closing six days out, but we're talking about business days, so if it falls on a weekend, it could be even longer," said Benjamin Nierberg, executive vice president of business development with Proper Title LLC, as reported by MarketWatch.
Additionally, because this regulation is so new, it will take some time for industry professionals and consumers to become familiar with the updated process.
"It's going to take about three months before everybody gets comfortable with this," said Joe Parsons, a senior loan officer at mortgage lender PFS Funding, according to MarketWatch.
Mortgage lenders and TRID
While many mortgage lenders have worked to ensure a smooth adoption of TRID, it is critical to ensure a firm's approach is sustainable, according to a white paper published by Capsilon.
Outsourcing is one option that may be appealing to lenders. It removes the burden of adapting TRID from lenders and better ensures complete compliance with the new regulation. Furthermore, a vendor that has more expertise surrounding the Know Before You Owe Rule can ensure more efficiency when processing loans.
It is critical that lenders evaluate their current platform and how well it complies with TRID. Without efficient loan processing that adheres to the new guidelines, lending firms run the risk of decreasing loan production and ultimately a negative experience for consumers.
Faster loan intake will improve lending efficiency and enhance an establishment's ability to generate new leads and build its business.