Published on June 15, 2015
Written by The Servion Group
Lending professionals know the implementation of the TILA-RESPA Integrated Disclosure rule is rapidly approaching. By August 1, the rule will take effect, and those working in the industry will need to accommodate the upcoming changes.
What is TRID?
According to the Consumer Finance Protection Bureau, the implementation of TRID is reflective of the historical effort to help protect consumers during the loan application process.
Lenders, now primarily referred to as creditors, must provide two separate forms when individuals apply for a home mortgage. One form is called the Truth In Lending Disclosure, and the second is the Good Faith Estimate. Because these two separate forms are sometimes confusing to consumers, the CFPB fused the two documents together as a part of the TRID initiative – the Loan Estimate, or LE. By simplifying the process, consumers can have a more concrete understanding of what is expected of them when applying for a home mortgage. Individuals applying for a loan can clearly understand any risks, key features and associated costs when signing the paperwork presented to them by a creditor.
How does the loan application timeline change?
One of the most troubling aspects of TRID that many creditors are concerned about is the timing requirement the new rule mandates. The creditor must supply the Loan Estimate, which replaces the Good Faith Estimate and the Initial Truth In Lending Disclosure, to the borrower in no less than three business days after receiving the loan application.
After reviewing the terms and fees, if the buyer finds the conditions suitable, the consumer must return the Intent to Proceed to the creditor within a 10-day window. Once this is received by the creditor, all parties can expect to move forward with the loan application process.
The Closing Disclosure must be received by the buyer three business days prior to closing. This is the synthesized form with digestible language the consumer can easily understand fully, which combines the Final Truth In Lending Disclosure and HUD-1 Settlement Statement.
Unfortunately, these timing restrictions leave little room for error. Delivering disclosures directly may help ensure the process goes quickly and smoothly. Additionally, a clear understanding of the new TRID regulations will help consumers feel more confident when applying for a home mortgage.
What are the keys to effectively adapting to TRID?
Being aware of the upcoming rule change is the first step to smoothly transitioning into this new requirement, according to Mortgage Compliance Magazine.
Training and educating all employees, partners, and anyone associated with the lending process, such as real estate agents, is crucial to successful adaptation. Creditors should also ensure consumers are aware of the changes being implemented and how they will impact them when applying for a loan.
Communication is another key when transitioning to the new lending environment. Lending organizations should hold meetings and sessions that encourage attendees to ask questions regarding the new expectations and process that accommodates TRID. Encouraging consumers to openly communicate with creditors and their real estate agent is key. For example, if a borrower is going on vacation during the loan application process, he or she should inform the lending organization and all other real estate professionals working with him or her to help keep everyone on the same page. Additionally, this gives everyone an opportunity to develop a plan of action to keep the application process on track as much as possible.
Fortunately, the mortgage industry allows for easier adaptation to changes in regulations.
"When implemented correctly, technology allows organizations to scale operations with fewer resources," said Jason Roth, senior vice president at ComplianceEase, according to Mortgage Compliance Magazine. "While, in many industries, that scalability is most important for dealing with increasing volume, in the mortgage industry it is equally critical for keeping up with increasing regulatory complexity. In this way, the leverage that technology offers can be much greater for the mortgage industry than it is for other industries."
What are the penalties for not adapting?
If a lending operation fails to comply with the new regulations, fees will be issued. Failure to properly adhere to regulations and disclosures results in a fee of $5,000 each day for a single violation. If the violation continues, the fee will increase to $25,000 per day, and if the lending operation commits these violations knowingly, the fee skyrockets to $1 million per day.
What are the benefits of TRID?
Housing Wire indicated TRID's purpose is to make the lending process more efficient and more understandable.
"What TRID is forcing you to do is to become more efficient, and this is actually good for lenders," said Motivity CEO Tyler Sherman, according to Housing Wire.
An improved process for lending bodes well for all parties involved.