I was amazed but not surprised when I read the results from the 2016 American Bankers Association TRID Survey. It was conducted between February1st and February 17th, 2016. The survey of 548 participants included banks with a wide array of asset sizes across a large geographic area. Despite this diverse pool of respondents, the responses relating to the effect of TRID were almost uniform. Some of the findings:
1.) 73% reported that their Loan Origination System (LOS) still has not been fully updated for the TRID rule
2.) 83% reported that they were manually bypassing LOS systems due to system limitations
3.) 77% reported increased delays in closing
A resounding 94% reported that they would like the current informal grace period for “good faith efforts” to be extended. What would that accomplish? Probably nothing! So what happened? Obviously, we have a problem.
However, let’s put that into perspective and really look at what the word “problem” really means. Problem is defined by Merriam-Webster’s as: A difficulty in understanding or accepting; something that is difficult to deal with; an intricate unsettled question; a feeling of not liking or wanting to do something; a source of perplexity, distress, or vexation. The opposite of a problem would be a correct solution. Malcolm Forbes once said, “It’s so much easier to suggest solutions when you don’t know too much about the problem.”
So let’s examine the current problem from the two perspectives that I believe are causing most of the problems.
1) What is the strategy to create the LE/CD? In order to comply with TRID and meet its rigid disclosure specifications, the Model/Forms must be followed exactly. For example, if all applicable fees for a subsection on page 2 of the Closing Disclosure do not fit in the space provided, the Rule requires (1) borrowing lines from another subsection within the table, (2) borrowing lines from the other table on that page when all subsections in the table are full, and (3) expanding to two pages when both tables are full. You must precisely follow those steps in order, without the use of an addendum. Conversely, there are certain pieces of information (e.g., property address, borrower and seller data, etc.) that must render on an addendum if they don’t fit in the space provided. The TILA-RESPA Rule states that many of the required disclosures may only render when the feature applies to the loan. The Adjustable Payment and Adjustable Interest Rate tables may only appear if the feature(s) apply to the transaction. There are several YES/NO questions that cannot be check boxes. The Projected Payments table can have 1-4 columns depending on the number of payment changes, but cannot have blank columns.
The architecture for the Loan Estimate and Closing Disclosure solution are far and away a complex and challenging project. The only way to satisfy these disclosure requirements is with a solution that evaluates data and dynamically assembles tables, sub-sections within tables, and pages based on the transaction. You can no longer rely on documents, forms, or templates to assemble and disclose information or choose when to use an addendum and when to dynamically assemble a table. Instead, appropriate software must be implemented to maintain compliance with the Rule. The solution is data-driven dynamic documents.
2) What are the changes needed in the process flow? If there ever was a time for the mortgage industry to consider change, it was when the CFPB first announced the Integrated Disclosures. Some organizations did take this opportunity to develop and incorporate new workflows, while others tended to automate with little, if any, attempt at process efficiencies or new ways to look at the process. Since the lender is legally responsible for the LE/CD collaboration, within tolerance limits, it behooves the lender to control the interaction with the settlement agent. The solution may be the emergence of closing portals to help mitigate some of these issues facing lenders with multiple settlement services.
So what happened? There is no question that TRID was complicated. Initially, there was some pushback to the CFPB as some perceived these requirements as a technology challenge or barriers to implementations. Compliance Systems, like some others, spent countless hours analyzing the rule and developing a solution. A technology initiative of this magnitude needs to be thoroughly documented and stress tested with every possible transaction scenario. That was the time for quality control. Unfortunately, looking at all the issues that have been vented, in appears that was not done. No excuse!
Final Thought: This is part of the overall problem in the mortgage industry. We are resistant to change. We don’t challenge ourselves. Don’t look at how we do business today but instead look at how we want to do business tomorrow. Think about the current problems and business trends and design a system for the future.