Many mortgage bankers are still waiting on software vendors to deliver new loan processing systems designed to handle mortgages after Aug. 1, when the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures rule, or TRID, takes effect — and some fear that if their systems are unable to process TRID’s new Loan Estimate and Closing Disclosure forms, they may be unable to offer some key loan products.
Those are the troubling results of a recent American Bankers Association (ABA) survey, conducted in April, which polled 800 member bankers about the progress their vendors have made in delivering systems related to TRID implementation.
Ready or not, TRID is coming. The sea change to the mortgage closing process has been almost two years in the making, as the CFPB released the final TRID rule in November 2013 to give the impacted industries time to prepare for compliance.
TRID consolidates four existing disclosures currently required by TILA and RESPA into two forms: a Closing Disclosure that replaces the HUD-1 that must be provided to the consumer at least three business days prior to consummation of the transaction; a Loan Estimate 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.
“It is critical that this rule is implemented smoothly so that it does not end up hurting creditworthy Americans that want to own a home,” said Cindy Lowman, chairman of ABA’s Mortgage Markets Committee. “Given the scope and complexity of these new rules, the implementation of this regulation will impose high costs on all lenders and consumers.”
A clear majority, or 76 percent, of the ABA’s survey respondents said they have been consulting with a vendor to assist with TRID implementation. However, 36 percent of those surveyed said their vendor has not yet provided a solid delivery date. Only a combined 21 percent of respondents said they have received the final and completed production software system.
Respondents who have either received their new systems or have a timetable for delivery were evenly split about whether they were provided their systems all at once or in stages, or if they are using multiple vendors.
But even for those who are ready or plan to be ready, only 77 percent of respondents said their systems will be able to process all of the types of loans they plan to offer.
Some said they will use multiple vendors or consider switching vendors to get this task completed. Others said they may produce specialty disclosures to handle these loan products in-house, but alarmingly, 21 percent said they may forgo offering these products until their systems can process them — which could limit the diversity of loan products available to borrowers in the first few months of implementation.
For those who haven’t yet received their systems, 21 percent said they expect delivery in June and 17 percent expect delivery in July. That leaves little time for most of those respondents to complete testing and training of the new systems, but of most concern are the 5 percent of bankers who said they don’t expect to receive their systems until after July.
“Should anything go awry, then the settlement will have to be delayed,” Lowman, who is also president of United Bank Mortgage Corp., in Grand Rapids, Michigan, said. “A delay in settlement could be a huge imposition to a buyer,” especially one who may be selling another house contingent on settlement or who is planning a move, she said.