- The nation’s largest mortgage banking co-op held its biannual member conference in early August.
- Interim CEO of Lenders One, Daniel Goldman, said lenders are prepared for TRID and clamoring for better technology.
- Tapping into the millennial market is another big concern of mortgage professionals.
Heading into the home stretch of 2015, which will be marked by significant changes brought about by the Consumer Financial Protection Bureau’s (CFPB) highly anticipated TILA-RESPA Integrated Disclosures (TRID) rule and a potential Fed interest rate hike, mortgage industry professionals are carrying around a great deal of optimism for the near term.
That’s the sentiment expressed by Daniel Goldman, interim CEO of Lenders One, the nation’s largest mortgage banking co-op.
Fresh off of Lenders One’s biannual member conference, held Aug. 2-5 in Washington, D.C., Goldman shared his “state of the mortgage industry report” — and to borrow a phrase from the better-known “State of the Union” address, the consensus among the 450 mortgage professionals who attended the conference seems to be that the state of the mortgage industry is strong, Goldman said.
“A year ago or two years ago, there was a prevailing, pessimistic, ‘woe is me’ attitude in the industry,” Goldman said.
“But after the slight boom in the housing market at the beginning of the year, combined with low mortgage interest rates, folks feel good about where they are at. They know that even with a slight rise in interest rates, business may go down a bit, but at the end of the year, they still expect to finish strong.”
“This conference, compared to our others, which usually have a lot of folks on the sales side, had more people on the compliance and operations side, folks who really want to understand what the biggest challenges facing the industry are,” he said.
And there are plenty of challenges looming before the industry. Here’s a look at the three topics that are currently on the minds of many mortgage professionals, according to Goldman:
1. Looming regulatory changes finally come to fruition. As if the CFPB’s Ability-to-Repay/Qualified Mortgage (ATR-QM) rule didn’t present enough challenges to the mortgage industry, the CFPB has an even bigger fish to toss into this crowded regulatory pond: TRID, or as the bureau recently decided it should be called, the Know Before You Owe rule.
The 1,800-page, leviathan TRID rule and its accompanying regulations are nearly two years in the making. The CFPB released the final version of the rule in November 2013, putting the affected industries on notice that they had until Aug. 1 to prepare their staffs, operations and software to handle the changes to the closing process.
Amidst tremendous industry outcry to postpone the Aug. 1 effective date — and rumors that many of the top loan processing software providers weren’t even close to having their new systems complete, tested and ready for rollout — the CFPB threw the industry a bone in June when it announced that, due to an “administrative error,” it would change the effective date to Oct. 3.
“The big question we had for everyone at the conference was: ‘Are you ready?’” Goldman said.
“We were very pleased to see that the general feedback and consensus was that people are ready and appreciated the extra two months to test their systems. Not one member said they weren’t ready. They have all been testing their systems and running shadow loans to see how the process will work.”
Having to run two processes simultaneously — one to handle applications taken before Oct. 3 and another to handle those taken after TRID formally takes effect — may present some difficulties for some companies, “and I think there is apprehension, but we’re going to find out pretty quickly how painful it is,” Goldman said.
“I think we should know by the end of October or by mid-November what the level of pain is for folks and how well their systems work,” he said.
It may take a few months to iron out the kinks, and like many other industry groups, Lenders One is hopeful that the CFPB will make good on its promises to pull back its compliance reins for a while until certain sticky, real-world situations get handled.
But Lenders One is also concerned about how TRID will change the way mortgage professionals interact with real estate agents, brokers, title professionals, settlement agents, closing agents and others, Goldman said.
“So much of TRID falls on the lender, but clearly, those other parties will play such a key role in compliance,” he said. “Communication will be crucial in terms of ensuring that TRID’s time frames and disclosure requirements have been met, and that the customer is being taken care of. Hopefully, those parties are doing their homework and research and making sure they are in a good position to handle the changes.”
2. Time to embrace technology
The mortgage industry — and to a great extent, the title and settlement service industries, as well — have been clamoring for the use of Web-based technologies to make the closing process more efficient for at least 20 years. But progress in this area has been mired down in uneven regulations, making some states more ahead of the game in terms of adoption.
That changed earlier this month — around the same time as Lenders One’s conference — when the CFPB announced preliminary results from its ongoing eClosing pilot program, a research initiative launched in April 2014 to explore whether electronic closing processes offer measurable benefits to mortgage borrowers (and also part of the bureau’s “Know Before You Owe” consumer finance education effort). Could e-closings finally become a reality?
“I think we did need to hear from regulators and agencies that they are in favor of and want this,” Goldman said. “There has been a strong desire to get it done, but clearly, we are finally breaking through — and it will be the mainstream practice in the future.”
The use of technology to make the mortgage process more efficient and transparent is good news for all real estate industry sectors, Goldman noted.
“There is a lot of technology that is value-added and intended to answer the question, ‘What more can I do for the Realtor?’” he said. “Whether it’s having mortgage apps that can be used on a hand-held device or mobile tool, or technology that helps borrowers get information on the status of their loans in real time — these seem to be the main technologies they are asking for, and that is what we are working to be able to supply them.”
3. Tapping into the millennial market
“Obviously, with what we have been through in the past five to six years and all the major changes we have seen, those who are industry veterans feel like they have lived through wars in their minds, and they have been fighting in the trenches. I think about how resilient mortgage folks have been, but we definitely have members who are focused on bringing the next generation onboard,” Goldman said.
That means figuring out how the millennial generation will fit into current industry norms and work environments, and what particular skills or fresh eyes they may bring to the table, he said.
“There has been so much dialogue around millennials and their electronic approach to communication and focus on social media. So much of what they do is online. That all plays into the millennial buyer,” he noted. “Not that many years ago, the prevailing view was that people use the Internet to shop, not to purchase. That clearly has changed, and we’re seeing that paradigm shift throughout the industry.
“The industry will continue to evolve as we see that next generation of Realtors and loan officers, as well as the market, evolve,” Goldman said.
Lenders One’s next conference will be held in March in New Orleans.
“By then, we will have TRID under our belts, and any new guidelines and regulations will be out, and we will continue to focus on education, training and these conversations. They are not going away — they will have picked up even more speed by then,” Goldman said.
Lenders One represents nearly 17 percent of the national mortgage originations market. Its members span the retail lending spectrum, from community banks to credit unions to independent shops with volume from $10 million a month all the way up to more than $1 billion a month.