There’s Got to Be a Morning After TRID
TRID. It sounds like a bad science fiction movie: “The Day of the TRID.” And currently, a lot of lenders are nervous that the TILA-RESPA Integrated Disclosure could become a real life horror show come August 1st, when they are required to merge their Real Estate Settlement Procedures Act and Truth in Lending Act disclosures.
However, many lenders are hoping and expecting that the theme song they will be listening to on August 2nd is the old Maureen McGovern classic from The Poseidon Adventure: “There’s Got to Be a Morning After.” Then the question will become, “What’s next after the Day of the TRID?”
I have to confess my fondness for RESPA and TILA. As a journalist, I have been covering RESPA for twenty years, and TILA for maybe half as long. They have provided endless opportunities to fill space for the last couple of decades. Remember how Congress and regulators would punt the RESPA football between them? Remember HUD’s RESPA “police”? The ones who would make a big bust once a year or so? When I edited an originations newspaper, I used to claim we had published a story about RESPA in every issue, 12 times a year, since 1993. I was joking, but, truth in writing as with truth in lending, that estimate wasn’t far off base.
The time for laughing at old RESPA stories has come to a halt. The Consumer Financial Protection Board is signaling there will be no extension to the August 1st deadline. They aren’t playing around and I don’t think they are going to have much tolerance for noncompliance. Prudent lenders should be well on their way to compliance by now.
Integrating the two tasks has proved to be easier to conceptualize than to implement. The problem came from having RESPA administered under HUD and TILA by the Federal Reserve. When the CFPB took them both on, it could, and did, ask the industry to streamline the two into one.
Becky Walzak, President of rjbWalzak Consulting in Deerfield Beach, Fla., told me the devil is in the details here. For a lender’s LOS, there are something like 2,500 new calculations that have to be programmed. That’s a lot of changes. Revisions to LOS internal processes have to be done as well, and people have to be trained to implement those. Additionally, you don’t want to finish your process at the eleventh hour, because lenders are going to have to test before going live.
“People have been scared to death about this thing,” she told me. Her advice for those late out of the gate on the implementation? “There are still training sessions on this. Go out there and get on it.”
However, she doesn’t see too many slowpokes out there. “I haven’t talked to anybody who hasn’t spent time on understanding what this is all about and working on it.”
So, it’s August 2nd and you’re heaving a sigh of relief. What’s next on the agenda? Besides a well-deserved vacation, Walzak thinks lenders will start focusing back on lending fundamentals, like the details of their securitization efforts or how to generate more mortgages.
Lenders need to revisit their technology “to do” lists that have been put on hold and focus on operational efficiencies that includes preparation for survival in the new world that we will all wake up to on August 2nd.
Vendors can spend their new “free time” constructively by developing better systems for risk management for their clients. “They should identify more data issues,” she says, like reconciling the differing data that go through LOS and MBS systems.
What if lenders are nervous about a subsequent visit from their friendly regulators at the CFPB? Walzak thinks there’s an opportunity to learn online. “They should look at every guide and see what are they going to be looking for and what’s their risk,” she advises. That said, having your documents and data easily organized and accessible when requested will ease the pain of the visit. When regulators ask for a set of documents, you’d better be able to wave your “magic wand” and have them appear. Having them wait while you request files from offsite storage or dig through an antiquated document management solution will not bode well. An EDM solution with on-demand bulk retrieval of documents and files is invaluable.
So, not much rest for the weary! And there’s one thing to always keep in mind in the mortgage space: simplifying things can be very complicated.
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By: Mark Fogarty