Title Source Blog How TRID Has Affected the Industry, and What's Still to Come

It's been just over two months since the Truth in Lending Act (TILA) - Real Estate Settlement Procedures Act (RESPA) Integrated Disclosures (TRID) rules went into effect, and a lot has changed in the housing and mortgage industry as a result. But what exactly is different with TRID, and why? And what changes can be expected for the future?In this post, we take a look at how TRID's "Know Before You Owe" mortgage rule is changing the industry, what hasn't changed, and what changes may be on the way.The Worries That Didn't MaterializeWhen TRID took effect on October 3, there were certainly voices who predicted implementation would paralyze the market. "Don't say you weren't warned," one piece in the Freeport, Illinois Journal Standard even told potential homebuyers. Thankfully, the mortgage and housing industries didn't suffer catastrophic consequences as a result of the new disclosure forms and procedures.Last week, Consumer Financial Protection Bureau director Richard Cordray went so far as to compare the dramatic build-up to Y2K. "Reports from participants across the market seem to be indicating that implementation of the new rule is going fairly smoothly," said Cordray. "So it seems that these anxieties were much like the errant predictions of technological disaster stemming from Y2K, which of course never materialized."Cordray wasn't alone. Mortgage Bankers Association president and CEO David Stevens also made the Y2K comparison last month on CNBC. "I think it was a Y2K analogy where expectations of the worst happening just weren't there," he noted.As HousingWire's Ben Lane noted, mortgage applications were in fact "all over the board" during October. A surge in the week preceding implementation was followed by a drop of equal measure in the new rule's first week. However, as FBR & Co., an investment banking and institutional brokerage firm, reported in its October report, the volatility is expected to be "short-lived." In fact, the fourth quarter of 2015 is expected to eclipse the fourth quarter of 2014, with FBR & Co. predicting "$363 billion of total originations in 4Q15, with purchase originations of $181 billion relatively stable from 4Q14's level of $173 billion." How TRID Is Changing Mortgage and Real EstateThe absence of an industry catastrophe, of course, doesn't mean that TRID hasn't changed mortgage lending and real estate transactions forever. It has.For lenders, just getting ready for TRID has been the most difficult part. Austin Kilgore wrote in National Mortgage News about a September survey that revealed the strain:When asked to gauge the difficulty of various TRID requirements, 44 percent of lenders assigned one of the top two ratings to the document changes of the new Closing Disclosure form. In addition, 39 percent of lenders gave that same rating to document changes of the new Loan Estimate form.Elsewhere in the same survey, 37 percent of the senior-level mortgage industry respondents expected their firm to spend $50,000 or more on new compliance, while 35 percent had spent more than six months getting ready for implementation.For title companies, the accuracy of information and communication with industry partners has been paramount. Erin Sheckler, president of NexTitle, a Washington state-based title company, told HousingWire's Troy Garrison that it was critical to get these right. "If the information provided by the settlement service provider or title insurer is incomplete or changes, the initial Loan Estimate will have deficiencies, potentially requiring re-disclosure," said Sheckler. Her company has responded by instituting new checks to make sure the information provided is accurate.As far as challenges, Sheckler noted it was the calculation method required by the CFPB which posed the most difficulty. For some states, the method can result in inaccurate title premium quotes on the new disclosure forms. "It's created confusion and inaccuracy despite the stated goal of the CFPB of increased transparency," surmised Sheckler.For home buyers and sellers, delays appear to be the biggest concern. Writing for the Daily News Journal, Ann Hoke reports that some lenders had advised their new potential borrowers that new loan applications could take up to 75 to 90 days to close. Fortunately, many lenders who have invested the time and resources in TRID preparation expect closing timeframes to remain around 30 to 45 days.Some Real Issues Facing the IndustryMore than just changing the way the industry does business, some notable problems have come to light in the first days of the legislation for businesses as well as consumers.For one lender, a bug found in a vendor's software package meant entrusting their TRID compliance to an old typewriter stored away in a supply closet. Carrie Wood, CEO of central Pennsylvania's Timberland Federal Credit Union, told the Credit Union Times and a Congressional subcommittee how the 9,800-member, $59-million lender began completing the new Loan Estimate and Closing Disclosure forms manually in October after a vendor's data processing system encountered a problem. Problems such as Timberland Federal's don't only result in delays in the closing process. Such delays in turn can also mean higher costs for mortgage loan consumers."It's costing the borrower, because when they have to lock an interest rate in for longer; more people are taking out 60-day locks, which cost more than 30-day locks," said Roger Kumar, president of Trident Mortgage Group, in an article in last month's Mortgage Professional America Magazine. "For example, a 60-day lock on a $400,000 loan could cost $1,000 to $1,500 more."Both of these examples underscore the care with which lenders are approaching the new regulations. A new survey from Wolters Kluwer Financial Services released after the implementation of TRID found banks are increasingly concerned with compliance issues. Overall, concerns were up seven percent from last year's survey, with one-third of respondents concerned about how TRID would be impacted by their "collaboration with stakeholders." A quarter of respondents cited "last-minute changes that trigger closing delays" as their top TRID regulatory concern.These concerns weren't allayed before TRID's implementation, as many government entities held out before endorsing an official hold-harmless grace period for industry players. Still, NexTitle president Erin Sheckler cautioned against relying fully on such grace periods, as they don't protect lenders from lawsuits or investors.The Problems We Could Still SeeDespite these reports, some say it's too early to tell what the true effect of TRID will be. Others warn of future downsides that have yet to materialize. Jonathan Corr, president and CEO of Ellie Mae noted in an interview with HousingWire that "It is still too early to see if there will be impacts stemming from the Know Before You Owe changes that went into effect [in October]."Craig Martin, mortgage and financial services practice leader at J.D. Power and Associates, worried that Millennials could be put off by complex regulatory measures, writing, "New inefficiencies could hamper the industry as it stares down a generational shift in its core customer base toward borrowers who have become used to consumer experiences being quick and user-friendly." Clearly, there have already been some effects of TRID for both businesses and consumers. What comes next is likely to determine whether we remember this legislation as offering positive consumer protections, or creating unhelpful regulatory burdens.