Many Banks, Mortgage Brokers Are Having Trouble Meeting Deadlines
Change is often difficult in the financial services industry, but in the case of the mortgage lending business, where many housing laws have been in place since the 1970s, change can be particularly challenging. A perfect example is the Consumer Finance Protection Bureau’s (CFPB) new mortgage disclosure requirements, also known as TRID. Many lenders are having problems implementing the CFPB’s new TRID rules which results in widespread delays in loan closings. Needless to say, these closing delays are causing headaches among home buyers and realtors across the country. A word to the wise–home buyers need to choose an experienced mortgage lender who has invested the time and resources in complying with the CFPB’s new TRID requirements.
On October 3, 2015, the CFPB began requiring mortgage lenders to furnish a completely new set of disclosure documents to home buyers when they apply for, and close on, their mortgage. Designed to make the mortgage process as transparent as possible, the CFPB combined two well-known documents, the Good Faith Estimate and the Truth-in-Lending Disclosure, into one comprehensive document known as the Loan Estimate, which is presented to the customer at loan application. In addition, the CFPB expanded upon the HUD-1 Settlement Statement–the primary disclosure that consumers review at their loan closing—and created a new Closing Disclosure.
“What’s the Big Deal?”
You might be asking yourself, “So what’s the big deal, don’t mortgage lenders add new disclosures to their closing documents all the time?” Well, as the old saying goes, the devil is in the details and many banks and mortgage brokers are having a devil of a time generating accurate TRID disclosures. As a result, these lenders are delaying or postponing loan closings in order comply with the TRID requirements. For home buyers and realtors who have committed to a 30-day deadline to close, such delays can be a nightmare. According to a recent industry report by Ellie Mae, the average time to close a mortgage loan is now 44 days. Such a long period of time is not exactly music to the ears of the nation’s realtors who are accustomed to loan closings that take 30 days or less.
The Good News
The good news is that experienced mortgage lenders who have invested heavily in TRID compliance are meeting their customers’ deadlines. A prime example is James B. Nutter & Company, a national mortgage lender headquartered in Kansas City, Missouri who has yet to postpone a single loan closing due to a TRID issue. Nutter has spent millions on TRID compliance and implemented additional reviews of their TRID documents. As a result, the new TRID rules haven’t interfered with Nutter’s ability to close loans on time.
However, for inexperienced lenders, there are many reasons why the new TRID rules are causing them headaches. To begin with, these lenders have to spend considerable money to retool their internal systems in order to comply with the new rules. The new TRID disclosures must also be extremely accurate. With only a few exceptions, the CFPB requires that the closing costs disclosed to the home buyer at application be the same as the closing costs they sign for at closing. If there’s a discrepancy in the closing costs, the lender is now required to pay the difference. This “standard of perfection” which lenders must now meet has resulted in lenders having to spend extra time double-checking their documents. If the lender should find an error in their numbers, they must issue new disclosures to the borrower. In either case, the lender’s processing time can increase significantly.
Lenders are also now required to provide a copy of the CFPB’s Closing Disclosure to the borrower three business days in advance of the closing and it must be accurate. Given the risks of a lender having to cover the cost of any errors they might make, you begin to understand why those lenders who haven’t invested in understanding or complying with TRID are having problems.
Bottom Line: Consider Carefully
So choose your mortgage lender carefully and ask them what their track record has been with respect to complying with TRID. You’ll probably receive a pained expression and perhaps a sarcastic laugh in return. However for experienced lenders like James B. Nutter & Company, it’s just business as usual.