With the Aug. 1 implementation deadline for the Consumer Financial Protection Bureau’s sweeping TILA-RESPA Integrated Disclosures (TRID) regulation drawing ever closer, one title company is offering lenders three tips to alleviate potential pain points they may experience during the transition.
“The upcoming changes will disrupt the way the real estate industry works together,” said Jason Vander Vlies, chief technology officer of Realty in Motion, an affiliate of NexTitle, a full-service title and escrow firm based in Bellevue, Washington.
“Title and escrow firms, lenders and real estate agents need to band together to work out an efficient system so operations can run smoothly on all ends.”
Part of the CFPB’s “Know Before You Owe” initiative, TRID consolidates four existing disclosures required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into two forms:
- A Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application.
- A Closing Disclosure that must be provided to the consumer at least three business days prior to consummation.
TRID requires that the Closing Disclosure be provided by either the creditor or a settlement agent. However, as with the Loan Estimate, the creditor retains ultimate responsibility and liability for ensuring that all disclosures are provided in accordance with the rule.
Executives from the nation’s top mortgage lenders have said that lenders will still rely heavily on the local expertise and knowledge of title and settlement agents to make sure that the information on the new forms is correct, but compliance with the new regulations will definitely require a shift in the timeline in which these responsibilities have been carried out for the last three decades.
That’s why relationships between lenders and title, settlement and escrow companies will become more important than ever, according to NexTitle.
Pointing to a recent study from Capsilon Corp., which found that almost half of mortgage lenders aren’t prepared to meet the Aug. 1 deadline, Vander Vlies said many lenders are still worried that the loan processing systems needed to handle the new forms will not be ready by August.
“The new rules will force the mortgage industry to take responsibility of items they have never previously handled, such as [Closing Disclosure] preparation, and will therefore be reliant on partners to provide compatible support,” Vander Vlies said, adding that a recent American Land Title Association (ALTA) survey found that majority of folks on the title and settlement services side do feel prepared to usher in the changes.
In preparation for the upcoming changes, NexTitle has compiled a list of tips for lenders to help ease the transition into the next era of mortgage closings:
1. Work with closing agents to determine their readiness and alleviate potential closing mishaps, which could result in delays at the closing table.
The National Association of Realtors is advising its agents that transactions will be delayed an average of 10 to 15 days. Lenders will need to work closely with title companies, specifically those that understand the new rules and have advanced software to support the system.
“Now is the time to talk with settlement providers and determine if they are prepared to work via an online collaboration portal. If so, what software are they using and which ones do they have some expertise with? This will help alleviate challenges that may arise during the closing process and ensure timely and sufficient turnaround,” NexTitle said.
2. Evaluate all vendors, who are an extension of your company. Check their backgrounds to ensure there are no hiccups.
With the shifting of liability to the lender, it’s more important than ever to ensure that your vendors take compliance as seriously as you do. Title insurance providers should be able to demonstrate that they — and the third-party vendors with whom they work — are acting in accordance with CFPB’s new rules, NexTitle said.
ALTA has developed a “Best Practices” program for its members that certifies that the title company you have chosen has implemented the policies and procedures the industry exercises to protect lenders and consumers while ensuring a positive and compliant real estate settlement experience, NexTitle noted.
3. Prepare employees for upcoming changes, or they will not be able to comply.
Employee readiness for TRID is key, NexTitle said. “A general orientation class for the entire staff will ensure a basic understanding of the upcoming changes, but for those working on the front lines or those dealing directly with consumers, they will need intensive training on the new rule and the new software. Start talking to your staff now and reinforce training early and often,” the title company advised.
4. Don’t let software updates slow you down. Update and test now — or deal with the headache later.
Software providers must revise their current software in order to create the new forms, and many are seizing the opportunity to create new online collaboration portals that will allow lenders and closing agents to work on the same form in real time, NexTitle said.
“The providers of the industry’s closing software are scrambling to get their products updated in time to meet deadlines while being forced to wait on the development of certain features from the online collaboration software providers,” the title company said. “Decide which software solution you will implement and talk with your settlement services provider to ensure that they will be able to work within that system. It is pivotal to test new systems prior to the implementation date.”
NexTitle is licensed in 38 states and has partnerships with several lenders and real estate brokerages.
