The American Land Title Association (ALTA), the national trade group for title insurance underwriters and agents, polled more than 500 title professionals about their current state of preparedness for the significant changes to come in just three months when implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure (TRID) rule TRID rule begins on Aug. 1. An overwhelming majority of title insurance professionals feel they are ready to comply with TRID, but they are concerned about how the new forms and deadlines will impact the time it takes to close a typical transaction..
Released by the CFPB in November 2013 as part of its “Know Before You Owe” initiative, TRID consolidates four existing disclosures currently required by TILA and RESPA into two forms: a Closing Disclosure (CD) that replaces the HUD-1, which must be provided to the consumer at least three business days prior to consummation of the transaction; a Loan Estimate (LE) that replaces the Good Faith Estimate designed by HUD under RESPA; and the “early” Truth in Lending disclosure designed by the Fed under TILA, which must be delivered or placed in the mail no later than three business days after receiving the consumer’s application.
According to the survey, nearly 63 percent of title professionals are on schedule in their training and preparation efforts. Nearly 30 percent admit they are behind schedule, but still confident they will be ready by Aug. 1. Only 8 percent of respondents said they are behind schedule and not hopeful that they will be ready by the implementation deadline, either.
The confidence of title professionals should not surprise anyone, as ALTA and the title and settlement service industries have taken the lead in training and education efforts since the CFPB released the final TRID rule in November 2013.
ALTA recently announced it has extended its series of regional TILA-RESPA Integrated Disclosure Forums due to high demand, and will offer another forum on June 23 in Denver.
But how are other industries faring in these efforts? Of particular concern to the title industry is the level of readiness of lenders — which are responsible for ensuring compliance by everyone involved in mortgage closings — Realtors and homebuilders, and how their preparedness may affect their ability to collaborate with these parties. Title professionals are also concerned about their ability to comply with the three-day rule for completing the Closing Disclosure form, to ensure that all disclosures are accurate and to train their staffs.
When asked about the number of hours their companies plan to devote to training on the new rules and forms, a majority, or 33 percent, of respondents said they expect to spend 11 to 25 hours on these efforts. About 24 percent said they expect to spend 10 hours or less; nearly 23 percent will spend 51 to 75 hours or more; and 20 percent will spend 26 to 50 hours.
Software issues are also a top concern for title professionals. Nearly 33 percent of respondents said they have at least seen a test version of the software they will need to complete the CD form. Nearly 21 percent said their software vendors have not yet rolled out the software changes or upgrades, but have scheduled a demo.
But 40 percent of respondents said they have neither seen the new software nor have a demo scheduled. Interestingly, about 7 percent of respondents said they weren’t sure about this question.
One of the looming questions on everyone’s mind is how long closings will take under the new regime. Most respondents, or 87 percent, said they expect closings will be delayed or take longer to complete using the new forms. Some respondents said the new regulations will cause transactions to take up to 60 days to close, while others believe the new forms will tack on an additional two to three weeks to the closing process.
One person pointed out how this will impact REO sales and the strict closing deadlines: “The three-day rule will lengthen the lender’s process, most likely delaying the closing from the seller’s close-by date. This means the agents will need to get an addendum to extend the closing date, which takes additional time to get the seller’s approval and signature. This could potentially become a vicious circle of delays.”
Another respondent noted that, “With the way business has always been conducted in this industry, a dramatic change like this will not happen overnight. There are too many hands in the cookie jar to make this go smoothly and to complete the assigned tasks on time.” But the same person added, “Lenders I’ve spoke [sic] with seem to have a timeline already in place for when the order comes in. The three-day rule cuts down a lot of the time lenders have to work on things.”
Although the goal of the TRID rule is to help consumers better understand the homebuying process and the costs of homeownership, most title professionals are skeptical that the rule will accomplish this goal. According to the survey, more than two-thirds of respondents believe the TILA-RESPA forms will not help the CFPB meet its objective of helping consumers understand or be better prepared to understand the costs of buying a home.
“The contents of the Closing Disclosure Form is [sic] great and I love the first page details. However, I believe the average consumer will choose to ignore the remainder. It is all about how much is my payment and how much do I bring to closing. Beyond that, most simply do not care,” one respondent said.
Meanwhile, only 15 percent said they believe TRID will help consumers better understand their transaction. While some said the forms may display fees in a more readable fashion, consumers will still want and need to read it and understand it.
“While the new forms are generally understandable, there will be confusion about the title premiums, just as one example. We will probably need to use a simple closing statement to help the borrower and seller understand,” according to one person who took the survey.
Continuing its ongoing efforts to prepare for the new rule, ALTA is looking for real-life situations in which consumers may have been affected by delayed closings — specific examples of incidents where concessions were made at the last minute or title professionals encountered an issue with the lender, for example. The association said these anecdotal stories could be included in the testimony of ALTA President Diane Evans when she testifies before Congress about the TRID rule later this month. For more information, click here.
This story has been updated.