<< Absorbing continued from Page 35
Continued on Page 38 >>
The expression “set it and forget it,” as popularized by infomercials in
the 1990s, now seems to be the mantra for the mortgage industry as
we continue to assimilate new regulations. This was certainly the case
with the recent implementation of the new Truth in Lending Act and
Real Estate Settlement Procedures Act Integrated Disclosure (TRID)
rules. For nearly two years, lenders and their vendors spent countless
hours and much of their technology budgets on new TRID solutions
and redesigning workflows.
Now that the Oct. 3 TRID-implementation deadline has come and
gone, and the mortgage industry is back to business as usual, it’s worth
looking back to consider why the implementation was so di;cult, what
the industry could have done di;erently and what can be done better
Studying these will help the industry learn from its successes and failures, as well as help establish best practices for improving TRID processes
and implementing future regulations.
What went wrong?
Although the industry certainly decried the enormity of the implementation task at hand (new timelines, new forms, new tighter tolerances and
much more), it possibly wasn’t taken as seriously, early on, as it should
have been. Deep down, many people may have believed someone else
— such as a vendor or document company — would solve the issues, or
at least that regulators would grant a lengthy grace period.
How lenders of di;erent sizes approached the challenge also may have
played a factor in the scramble that took place ahead of the deadline this
past year. To some extent, solving for TRID became a tale of two markets:
Large lenders, many of which spent years building or customizing their
mortgage-compliance technology speci;cally for their businesses; and
small to midsize lenders, many of which started later and relied on vendors for out-of-the-box technology.
Then there was the buy-or-build decision. The jury is still out on
customized solutions, but the verdict is in on the vendor community, and it’s not entirely positive. Some vendors had poorly thought-out
solutions and last-minute bugs, or they didn’t address issues until after
TRID’s e;ective date.
This obviously caught the attention of CFPB Director Richard Cordray.
At this past October’s Mortgage Bankers Association Annual Convention
and Expo, Cordray said, “Some vendors performed poorly in getting their
work done in a timely manner, and they unfairly put many of you on the
spot with changes at the last minute or even past the due date. It may
well be that all of the ;nancial regulators, including the Consumer Bureau, need to devote greater attention to the unsatisfactory performance
of these vendors and how they are a;ecting the ;nancial marketplace.”
Are you compliant?
At the most basic level, TRID requires lenders to provide borrowers with detailed information about the true cost of their mortgage, the components
— such as fees, interest and taxes — that make up the cost, and to make
this information available so there are fewer surprises at the closing table.
There are basically two approaches that lenders and vendors can take
to assure that they are complying with the rule. They can rely on predic-tive controls that prevent them and their suppliers from inputting the
wrong data, calculating costs incorrectly and missing deadlines. Alternatively, they can use detective audits to monitor the quality and timeliness
of the information they are delivering.
In the mortgage industry, preventative and detective controls improve
not only customer satisfaction, but also regulatory compliance and the
bottom line. Preventative solutions assist lenders in identifying and correcting eligibility issues or preventing data errors from happening in the
;rst place. For errors and issues that can’t be prevented, detective solutions can help by auditing TRID-disclosure timing, changed circumstances and fee tolerances across all disclosures to determine if changes are
allowable under TRID or if revising the disclosure is permitted or required.
When it comes to TRID compliance, both approaches are necessary.
What have we learned?
Several important lessons came out of TRID implementation. Among the
most important are that everything is likely to be more complicated and
time-intensive than originally thought, and those who delay in adopting
the best-available technology will regret that decision in the future.