What A Difference Three Days Make

The TILA-RESPA Integrated Disclosure rule (TRID) is scheduled to take effect on October 3 after nearly two years of industry-wide hand-wringing. And, while the industry has had ample time to prepare for the changing regulations, lenders and settlement partners continue to be particularly concerned about the so-called “3-day rule,” and how this review period might lengthen time to close.

In short, one of the requirements of TRID is that lenders must provide borrowers with the Closing Disclosure (CD) three business days before closing the loan. Unless the CD is hand-delivered, the time period will typically expand to six or seven days in advance of closing (three days in transit, three days for review, plus one day to cover a Sunday or Federal holiday, if applicable). This three-day review period has been a catalyst for lenders to re-evaluate their current loan processes to identify ways they can “buy back” time so as not to lengthen the time to close. Gone are the days when last-minute changes to loans were routine, and settlement agents were printing final disclosures minutes before arriving at the closing table. In fact, many industry insiders are expecting a one- to-two week delay in closings once TRID takes effect, and are predicting that closing dates may be pushed out even longer until the industry can adjust to the changes to deliverables and their related timelines.

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How can the industry cope with the three-day review period without adding a week or more to the time to close? As lenders re-evaluate their loan processes, forward-thinking lenders will realize that technology that automates key steps throughout the loan process, including TRID tolerance checks, is critical to satisfying the three-day review period without lengthening time to close. The right technology automates key steps along the loan production cycle, from onboarding to post-close compliance checks, reducing labor by up to 80 percent. And, as a result, lenders who leverage technology to speed the loan process will enjoy a compelling competitive advantage in delivering faster, on-time closings.

For example, automated document recognition technology automatically identifies, names and indexes more than 250 common loan documents, speeding the onboarding of loans by as much as 90 percent. This technology also provides a missing documents report to alert lenders of any missing documents to ensure that lenders are onboarding complete, compliant loans. As another example, data extraction technology replaces the manual “stare and compare” model of humans visually scanning numerous documents to compare data across document to ensure data integrity. Instead, technology is able to automatically extract critical data from loan documents, compare values and run the data through rules engines, flagging any values that fall outside of established parameters and require review by a human. This exception-based approach reduces labor costs while ensuring a consistent, repeatable process that eliminates human error.  This automation saves valuable hours and days – time that can be allocated to complying with the three-day review period, and more.

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Finally, electronic transaction and electronic closing capabilities, including E-Signatures, expedite the delivery and signing of mortgage-related documents, including borrower disclosures, saving the time required to print, assemble and ship physical documents. Not only do electronic transactions streamline the process and save valuable time, but they appeal to a new generation of consumers who have become more comfortable with electronic transactions in their everyday financial lives.

While TRID will ultimately improve the loan process for borrowers, it is likely to disrupt the loan life cycle for lenders, including lengthening time to close. Lenders can re-capture precious time along the loan life cycle by leveraging technology to automate key steps in the loan process, completing key tasks up to 80 percent faster. Rather than accepting that complying with TRID, including the three-day review period, will lengthen close times by a week or more, lenders should re-evaluate their entire loan process to understand where they can introduce technology to buy back hours, and days, from key steps in the loan manufacturing process – hours and days that are better allocated to the three-day review period, as well as other timeline-based deliverables.

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