Michael Chan is vice president for ComplianceEase. He is responsible for companywide initiatives, including
managing relationships with financial institutions and government agencies. Chan also spearheads efforts,
in conjunction with the Conference of State Bank Supervisors and the American Association of Residential
Mortgage Regulators, to transform the state examination process into a more automated and uniform environment. Before joining ComplianceEase, he was an information technology consultant to several Silicon Valley
technology companies. Reach Chan at email@example.com.
Why were the largest lenders more ready for TRID? They had the luxury
of greater planning, more resources to focus on the issue and more time
to communicate and educate their partners and vendors.
Historically, the mortgage industry has been slow to adopt the newest
technologies. Many mortgage-technology systems used within the industry are not using Mortgage Industry Standards Maintenance Organization (MISMO) Version 3. 3. They use workarounds, which is unfortunate
because MISMO 3. 3 is better-suited than earlier versions for working with
multiple disclosures, as required for TRID compliance. Although participation has grown significantly over the last year and a half, it hasn’t been
enough to make MISMO 3. 3 a fully-embraced industry standard.
That, however, might change in the near future. In 2017, Fannie Mae and
Freddie Mac will begin requiring lenders to submit their loans using the
Uniform Closing Dataset (UCD), which uses the MISMO 3. 3 data format.
To help prepare for the UCD delivery requirement, the government-sponsored enterprises highly recommend lenders work with their
vendors and service providers now to implement and use the UCD.
What comes next?
Down the road, even more will be expected of lenders under TRID. One
aspect of the rule has been overlooked by some solutions. According
to private-sector legal counsel, TRID requires lenders to monitor all fee
changes on all Loan Estimate forms and not just compare the final Loan
Estimate and the final Closing Disclosure. According to the CFPB’s published TRID examination procedures, a lender “may use a revised estimate
of a charge instead of the amount originally disclosed if the revision is
due to one of the reasons” specified in the TRID rule.
Lenders, therefore, need to have a solution that can monitor all Loan
Estimate and Closing Disclosure delivery-timing sequencing, fee changes,
reasons for revising fee disclosures and change tolerance, if any, between
those fees that were disclosed in “good faith” on a Loan Estimate and
those on the Closing Disclosure. The solution needs to retain evidence of
compliance — TRID places substantial data-retention requirements on
lenders — and be easily accessible to regulators and examiners.
A typical examination at the state level, and even at the federal level,
can require at least two to three years’ worth of data. Data includes not
only the Loan Estimate and Closing Disclosure, but any other documents
or communication records that impact those disclosures. For example,
if a settlement company had a last-minute change on a particular fee,
such as the title insurance fee, the lender would be responsible for reissuing the Closing Disclosure. The lender, however, would need to have
documented evidence on the fee adjustment, whether it’s an e-mail or a
collaboration platform record, and it would need to be easily accessible if
an examiner checks to see what caused the fee change or tolerance error.
An average set of initial disclosures, including all state-specific documents and agency requirements, combined with the closing package,
can be anywhere between five and seven megabytes. Capturing and
storing all of the disclosed and revised documents, such as the Loan Estimate and Closing Disclosure forms, can easily require each mortgage
loan file to be 10 megabytes. Capacity is not the issue, but logically categorizing and storing all of these documents along with the electronic
data so that it is contemporaneously accessible is even more vital going
forward because of TRID.
n n n
Over the past few years, there have been a lot of patchwork solutions —
not just with TRID, but also with other previous rule implementations, such
as the Qualified Mortgage requirement in 2014 and RESPA reform in 2010.
In working with vendors, there can be a strong tendency to bandage over
problems as a bridge to provide what is necessary to get by in the short
term. Although bandages can be a helpful interim solution, they don’t
address larger issues and can result in a continual battle to stay afloat.
If lenders and vendors have only addressed TRID by adding short-term
fixes, such as new data fields or custom codes to a legacy loan origination system, they may find themselves disappointed and frustrated in the
coming months. Something as big as what the industry just went through
will require a holistic re-assessment to ensure long-term compliance.
Winston Churchill once said, “Now this is not the end. It is not even
the beginning of the end. But it is, perhaps, the end of the beginning.”
When it comes to TRID, that is exactly right. n
<< Absorbing continued from Page 36