Community lender confidential: Why TRID is far worse than anyone thought
“This is biggest event in my 23 years. And that includes the market crash.”
The dust that surrounded the tectonic shift that was the implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures rule in October is just now beginning to settle.
Opinions on the impact of TRID vary wildly depending on who you ask, giving insight into a disconnect that exists between the housing industry and the regulatory body that oversees it.
In a recent speech, CFPB Director Richard Cordray compared the October implementation of the CFPB’s new TRID rules to Y2K, telling the Consumer Federation of America Financial Services Conference that the housing industry’s concerns about TRID are looking like they were much ado about nothing.
But many that operate within the mortgage industry on a daily basis do not share that opinion.
In fact, many in the mortgage industry have about as diametrically opposed an opinion to Cordray’s view as humanly possible.
To get an understanding for just how far apart the CFPB’s opinion of TRID is from the industry itself, especially away from Wall Street, HousingWire conducted a series of interviews with community lenders about how TRID is impacting their business.
And the news isn’t good.
The lenders said that Cordray’s comparison of TRID to Y2K isn’t just off-base, it’s wildly disappointing.
“I read these articles and I’m like, what the heck? Where are these people coming from? I just don’t understand it. Because we’re going through so much turmoil and everybody I talk to has the exact same turmoil,” Kelly Welch of Equity Resources in Newark, Ohio, told HousingWire recently.
“People are all having the same issues,” Welch said. “We’re all just in a big boat trying to get to the end result, which is closing the loan, and it is very difficult right now.”
Welch, who is an executive vice president at Equity Resources, told HousingWire that the impact of TRID is far worse than anyone thought – and far worse than anything that has happened to the mortgage business in her more than two decades in the industry.
“It’s just very deflating to us,” Welch said of Cordray’s Y2K comparison.
“The reality of the situation is that I’ve been in this industry for 23 years and this is the biggest thing that’s happened to us,” Welch continued. “This is most time-consuming, biggest event that I’ve ever had to deal with in my 23 years. And that includes the market crash.”
Welch wasn’t the only one “deflated” by Corday’s Y2K speech.
Brad Livingston, the founder and president of Residential Wholesale Mortgage in San Diego, California, told HousingWire that his reaction to Corday’s Y2K speech was similar to Welch’s.
“It deflated us, because we’re all working so hard,” Livingston said. “And I think honestly that they just spoke prematurely. A month ago we weren’t even into the loan estimate stage. It’s been a heroic effort by our entire team and for them to read that it is no big deal is frustrating and demoralizing.”
Michael Bailey, senior vice president of mortgages and chief administrative officer of Yadkin Bank in Raleigh, North Carolina, said the Y2K comparison is “just bizarre in my mind.”
Bailey said that TRID is a “sweeping change” for the mortgage industry that required widespread reconfigurations of their entire system.
And despite those reconfigurations, which took immense effort to complete, Bailey said that the loan process is more complicated than it was before TRID – the exact opposite of the rule’s desired outcome.
“We’ve seen a significant drop in productivity,” Bailey said. “It’s taking twice as long to do everything. The net effect of that isn’t just an internal thing for lenders. It’s actually delaying closings and causing cancellations in some cases for consumers.”
Bailey said that his team is “nit-picking” every single document to make sure there are no minor errors that could “come back to haunt us in the future from a regulator or some sort of lawsuit.”
Operating with that level of fear is common among the three lenders that HousingWire spoke to.
“We’ve had huge anxiety at our company over doing it right. We want to do it right,” Welch said.
“At the end of the day, the goal is that we want the consumer to benefit from the new disclosures,” Welch said.
“The reality is that the new disclosures look great. But we need more help to reduce the anxiety we have over future litigation, and audits, so that we can do the best we can with the consumer,” Welch said.
“We don’t want to hold up closings to get that last little detail on the closing disclosure,” Welch said. “We really do want to close that loan just as much as everybody else does. We just need some help right now.”
All three lenders HousingWire spoke to identified a number of outstanding issues related to TRID that they need help on either from the CFPB or from legislators, in terms of a formalized grace period for the enforcement of TRID.
“Four to six months of regulatory and/or legislative relief is reasonable,” Livingston said.
“It’s going to take time to work through the technology glitches. Some of these issues are just coming to light now,” he continued.
“And to be honest, I’m not sure the CFPB even understands these issues. And it’s going to take time for them to offer some clarification,” Livingston said. “It’s really easy to draft regulatory rules and procedures but it’s the day-to-day reality, what does that really look like?”
And dealing with the immense compliance burden that TRID places on them is keeping the lenders from doing what they want to do, which is helping people buy homes.
“Having some reprieve for a certain period of time until some of these issues are sorted out would allow us to focus more on serving the consumer than we can right now, because we’re having to spend so much time going through these documents with a fine-tooth comb,” Bailey said. “That’s dragging us down.”
Livingston said that the customer is being overwhelmed by the amount of paperwork they receive, because lenders don’t want to run the risk of one tiny slip-up being the thing that invites a CFPB fine.
“We’re doing informational Loan Estimates after informational Loan Estimates,” Livingston said. “The consumer is just numb.”
But despite lenders’ best efforts, mistakes are still happening, and that has them scared.
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