Shanell Cramer, a partner in Alston & Bird’s Finance Group, discusses the impact of the “know before you owe” mortgage disclosure rule (TRID) ahead of the May 11 Finance Forum.
The “know before you owe” mortgage disclosure rule (known in the mortgage industry as the TILA-RESPA Integrated Disclosures Rule, or TRID) has been in effect for about seven months—how are lenders adjusting to the new requirements?
The implementation of TRID resulted in a striking change for the mortgage industry and necessitated significant expenses to overhaul technology systems, revamp closing processes and implement new training. Although lenders appear to have survived the short-term effects of TRID, they continue to complain of increased closing times, drops in profitability and decreased productivity, all the while continuing to struggle with TRID compliance generally.
Has TRID had the feared chilling effect on the residential mortgage market?
I wouldn’t say “chilling effect”—but there is definitely a lot of uncertainty about TRID compliance in the market. The industry is anxiously awaiting more guidance on how to deal with violations; there isn’t yet a developed market for TRID-failed loans. Lenders are obviously concerned about the financial implications of having a substantial amount of unsold loans in their inventory, and warehouse lines of credit are becoming increasingly clogged with these loans.
Do less-regulated non-bank lenders have an advantage over heavily regulated traditional lenders here?
No, TRID does not discriminate among lenders. The real advantages simply belong to those lenders that have access to money and resources. Larger lenders appear to be more prepared for TRID due to their ability to more readily absorb the costs of technology overhauls and access to additional manpower. Community lenders and credit unions, on the other hand, have experienced an immense burden and considerable costs that they are less likely to absorb and cannot pass on to consumers. The fear is that small lenders and community-based lenders will be priced out of the market in the new post-TRID industry.
Is TRID driving more collaboration among lenders, brokers, settlement service providers and technology providers?
Indeed. The efforts of the Mortgage Bankers Association and the Structured Finance Industry Group (to name just two) in mobilizing the industry to address concerns regarding compliance with TRID are no less than extraordinary. This collaboration directly resulted in the CFPB announcing just two weeks ago that they will reopen TRID to address certain ambiguities identified by the industry.