The American Bankers Association (ABA) has released the results of a post-TRID (TILA-RESPA Integrated Disclosure) mortgage lender survey showing that some banks are so burdened by the complex regulation, they are charging higher mortgage loan fees to consumers.
And while that finding is sure to raise eyebrows at the Consumer Financial Protection Bureau (CFPB), which had consumer-friendly goals in mind in implementing Know Before You Owe, the ABA says its survey results warrant the bureau taking a close look at some of the uncertainties and compliance concerns that persist even five months after TRID took effect.
Respondents cite additional training, audits and reviews
About a quarter of the 548 banker participants in ABA’s survey reported that TRID’s heavy compliance burden has increased the total cost to the consumer to obtain a loan.
Those increases are occurring in origination, closing and settlement, attorney, appraisal, loan lock, processing, administration, abstracting and application fees, the bankers told ABA.
Why the increase? The survey suggests that complying with the 1,800-page TRID rule requires additional compliance staff and training, third-party compliance audits, pre- and post-closing and legal reviews and loan origination system (LOS) testing.
“Banks have higher costs, and they are looking to recoup those,” said Robert Davis, an executive vice president at the ABA. “Some banks that have not raised fees have indicated in communications with us that they are not going to raise any fees until they see how things settle out.
“This is a very competitive market, so you can’t just go taking wild shots. You want to know what the permanent, long-term costs are going to be, and many banks are waiting for more empirical evidence about the impact of TRID to be available before making those decisions.”
The price tag on compliance
How much of an increase are consumers paying? According to the respondents, it’s anywhere from 1 to 75 percent, with an approximate increased cost of 15 percent per transaction.
The average added compliance review and due-diligence processes cost per bank was about $300 per transaction, but some banks reported as high as $1,000 in additional costs.
Davis explained that the ABA could not ask specific questions about fee charges “because as soon as a collective body starts collecting and publishing information about fees, it’s viewed as trying to set prices and raises antitrust issues.”
The ABA’s survey also concluded that TRID has caused loan closing delays anywhere from 1 to 20 days; bankers are still waiting for LOS updates and are having to resort to using manual workarounds; and many banks have been forced to eliminate certain products such as construction loans, ARMs and home equity loans as they feel the rule does not provide adequate compliance direction.
Calling for clarification
The CFPB has not commented on the survey’s results, but Davis said, “I hope their reaction is that the increase in costs, the delays in settlements and some of the other issues raised here are directly attributable to uncertainties in the application of the rule in certain areas.”
“The bureau has a lot of things to do and it may want to move onto other things, but this is a very complex rule,” Davis continued. “Beyond the complexities, there are ambiguities about certain applications.
“There is still a need for a cleanup of the rule and clarification of certain issues to reduce the number of unknowns. We really want the CFPB to dedicate resources to these issues by creating a small task force to work with the industry on about 15 to 20 issues that we feel need resolution.
“We feel those issues can be addressed by more interpretation, but we want that to be made available to the public and to the courts.”
ABA’s survey polled banks of all sizes and locations about their post-TRID experiences during the first two weeks of February.
