Many of the problems we have seen with TRID have been a result of the disconnect between lenders and settlement agents. Lenders and settlement agents need to get on the same page. It is important to remember in the current regulatory environment, especially under the Consumer Financial Protection Bureau (CFPB)’s TILA-RESPA Integrated Disclosures (TRID) rule, the lender is responsible for accurate and timely delivery of key disclosures to the borrower.
Historically, the lender prepared early disclosures, often without collaboration with the settlement agent, and the settlement agent carried the burden of preparing the HUD-1 Settlement statement. Now, due to the strict tolerances on fees and high potential fines to the lender, most lenders are preparing the new forms (Loan Estimate and Closing Disclosure forms) themselves and requiring information from the settlement agent earlier in the process.
The collaboration is often via phone or email and not centralized or audited. Since the lenders are on the hook for completing these forms correctly, they need stricter controls and more streamlined processes to reconcile data between the lender’s main system, the loan origination system (LOS), and the settlement agent’s system-the title closing system.
The good news is that lenders and settlement agents are now collaborating, but that collaboration is usually manual. Unfortunately, lenders that are trying to collaborate manually are experiencing numerous issues, such as lack of security, inability to scale, compliance, liability, increase in time and cost, and an incomplete audit trail.
Some lenders claim that the reason they have resisted using electronic portals and collaboration platforms has been due to cost and integration issues, and some are still using email (both encrypted and non-encrypted) and even fax to communicate with closing agents.
For lenders that want to resolve the disconnect with settlement agents, electronic collaboration is key. Lenders need to view electronic collaboration as a competitive advantage.
Here are a number of advantages that electronic collaboration provides:
>> Lenders with the ability to get the CD out earlier
>> Risk mitigation
>> Speed, which can reduce timing pressure from regulators
>> A shift from paper and snail mail to electronic disclosures and proper e-consent that delivers cost and resource savings
>> A complete and secure audit trail to meet regulatory requirements and audits
>> Lenders with the ability to more easily maintain compliance
The right electronic collaboration solution can provide true real-time chat and messaging throughout the collaboration process. Not only does this improve communication between lenders and settlement agents, but it also provides visibility for all parties throughout the entire process.
In addition, lenders can automate post-closing to do’s and receive the final title policy electronically. Knowing when and how documents have been recorded – with the option to e-record—provides for faster turnaround time.
Electronic collaboration can also help with UCD delivery. If a collaboration portal is based on the UCD and MISMO 3.3 standard, then a lender can already be collecting and collaborating on the data in the format it will have to be ultimately delivered to Fannie and Freddie. No further transformation would be needed.
The right technology solution will normalize the data. The delivery of the Uniform Closing Dataset to the GSEs is right around the corner, with testing opening up later this year; therefore, TRID solutions should be based on the MISMO 3.3 standard.
Electronic collaboration can significantly reduce these post TRID issues that continue to persist for many lenders.
About The Author
Paul Clifford is President of Simplifile. As President, Paul manages all aspects of Simplifile’s corporate strategy. Recognized as an e-recording industry founder, Paul frequently presents at state and national industry trade shows and conferences. Prior to founding Simplifile, Paul served as the Director of Corporate and Strategic Planning for iLumin Corp., where he was responsible for researching, modeling, and creating strategic business plans and projects, including an automated mortgage transaction initiative for Freddie Mac and Fannie Mae.