Nearly two months into the new TRID world and the impacts of the Consumer Financial Protection Bureau’s Know Before You Owe mortgage disclosure rule, also called the TILA-RESPA Integrated Disclosures rule, are starting to come to light.
Despite reports saying that TRID hasn’t caused any major lending delays, the key word in all the reports is ‘yet.’ And while the issues may not be creating giant hurdles in the mortgage industry, they are still a direct result of TRID.
According to HousingWire sources, some companies in the title industry are reporting that they've encountered unforeseen issues due to TRID, but those issues are not preventing them from the normal course of business.
However, according to the source, after consideration, one title company did choose that it would not perform the new TRID loan closings because of the liability that the new rule poses, citing they have had no hands-on training, only training through web sites and printed information, causing them to feel unqualified enough to do the best job.
And that’s not the only company having trouble. The source also noted that a land title company in Colorado said they had two transactions last week that did not close because the lender did not meet the delivery time frame for the closing disclosure.
However, issues in the title industry shouldn’t come as a giant surprise.
In a hearing before the House Financial Services Committee’s Housing and Insurance Subcommittee in May, Diane Evans, president of the American Land Title Association, addressed the glaring issue in the new TILA-RESPA Integrated Disclosure Rule in regards to title insurance.
“For the majority of real estate transactions, the rule requires a complicated formula that will disclose to consumers an inaccurate price for title insurance. Under this new rule, the CFPB actually mandates that the correct and actual price of title insurance products be withheld from consumers,” Evans said in her testimony before the subcommittee.
And the title industry isn’t the only sector starting to see side effects from TRID.
“There has been a spike in the number of real estate agents requesting commission advances from our company recently, and this seems to have at least a correlation with TRID,” said Jake Kucheck, director at Express Cash Flow.
“The thought is that even if there is no massive delay or impact caused by TRID, or if we simply haven't seen it yet, agents have nonetheless had a change in their psychology due to the expectation of longer transactions, and thus, more of them have requested advances against their commissions,” Kucheck said. “Whether it’s because real estate agents are scared of what happened or scared of what might happen we can’t say.”
However, he noted that seasonal trends do play a part too since there are typically fewer real estate transactions in fall months. As a result, agents may be stretching their budgets already due to a seasonally expected reduction in income.
The industry’s game plan
The industry, including the National Association of Realtors, the Mortgage Bankers Association, and more than a score of other trade associations, have been pushing the government to pass the Homebuyers Assistance Act, which provides a four-month grace period for businesses that are working in good faith to comply with the new 1,888-page rule from the CFPB.
Rep. French Hill, R-Ark., sponsored the bill, H.R. 3192, which passed the Financial Services Committee on July 29 with a bipartisan vote of 45-13, but prominent Democrats also championed it.
Rep. Brad Sherman, D-Calif., one of the co-sponsors of the bill, said the bill would help ensure access to mortgage credit during the hold-harmless period because it would allow small lenders to work toward full compliance without penalty.
Defying the threat of a White House veto, the House on Oct. 7 passed bipartisan legislation to help homebuyers avoid delays and disruptions when closing on their new homes by a bipartisan vote of 303-121.
The measure is currently waiting to go to the Senate for consideration.