TRID Can Be Challenging, But Lenders See Opportunities Too
By Tim Ahern | July 21, 2016
Lenders may have scrambled last year to meet the requirements of the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosure (TRID) rule. But as the adjustment to working under the new regulation continues, many are seeing new opportunities.
“We’re very bullish on the housing market,” says Kurt Noyce, president of Embrace Home Loans, which has its corporate headquarters in Newport, RI, and operates in 47 states. “And we are continually seeing indicators supporting a sustained growth trajectory,” he says.
“Interest rates continue to be competitive,” Noyce adds, “and provide great opportunity for all segments – first-time homebuyers, dream-home builders, second-home purchasers, and empty-nest downsizers. Referral partners and borrowers are, more than ever, seeking a personal connection with their financing advisor. That’s a strategy we’ve long pursued, and thus we feel very good about the future of our business.”
As for TRID, Noyce is not so sure that CFPB requirements for lenders to revamp their disclosure and closing process are actually making it easier for homebuyers.
“The challenges with TRID continue to be the gray areas – specifically around process nuisances,” he says. “That’s leaving lenders uncertain, and often forces them to effect overly conservative approaches that may impair the customer experience the regulation was intended to enhance.”
Adopting TRID processes has required lenders to add “substantially more resources” and has increased costs, he notes, which are “ultimately finding their way to the price customers pay for our service and solutions.”
The average cost of writing a new loan surged from $4,500 in 2008 to more than $7,700 in the fourth quarter of 2015, according to Mike Fratantoni, chief economist at the Mortgage Bankers Association. TRID is among new regulatory initiatives largely driving the cost increase and greater industry focus on quality control.
(Editor’s note: See related coverage “Rising Costs to Originate Spur Innovation” in The Home Story.)
Lenders Weigh In on TRID
Noyce is not alone in his assessment Of TRID.
Through its quarterly Mortgage Lender Sentiment Survey®, Fannie Mae’s Economic & Strategic Research (ESR) group surveyed senior mortgage executives in February on their experiences implementing TRID. Nine in 10 lenders agreed that TRID had affected the time it takes to close a loan, on average adding nearly seven additional days. However, most lenders expected to shorten that time as they gain more experience.
Looking at loan fees due to TRID, half of the lenders surveyed reported no changes, but 44 percent said they had raised them. No lender reported lowering fees.
More than three-quarters of the lenders surveyed reported that “managing/coordinating with third-party technology vendors” and communicating with key players – such as buyers, sellers, and loan officers – were their two biggest challenges in implementing TRID.
Some lenders – particularly larger ones – appeared to be leveraging the situation to their advantage. Nearly one-third of lenders (and 44 percent of larger institutions) said that moving to TRID disclosures gave them a competitive advantage. And only 12 percent said it put them at a competitive disadvantage.
Many small to mid-size lenders indicated that larger institutions were able to invest more in upgrading their systems and had in-house compliance resources to increase their efficiency and competitive advantage.
It remains to be seen whether larger lenders will retain that advantage. Or whether smaller lenders will close the gap using their own resources or innovative third-party vendors.
Beating the Competition
In the midst of TRID challenges, Noyce says, “the opportunities reside in developing a process that creates an experience for customers and clients superior to the competition – building a more informed staff, a more communicative outreach, and a more efficient outcome. To do so, lenders need talented trainers, system developments, and fulfillment specialists.”
Noyce says his company is also busy preparing for the Millennials. As the largest demographic, he expects them to play a major role in shaping the housing finance industry.
Millennials will increasingly be counting on housing finance solution providers “as more and more of them rise above their student debt and seek housing alternatives,” he says.
“This is the most digitally competent generation ever. Mortgage banking must enter their world, not the other way around. And we are doing just that. From app development to advertising focus, from process changes to staff personnel alignment – we are building the mortgage experience for the future.”
Estimates, forecasts, and other views expressed in this article should not be construed as indicating Fannie Mae’s expected results, are based on a number of assumptions and may change without notice. How this information affects Fannie Mae will depend on many factors. Neither Fannie Mae nor its Economic & Strategic Research (ESR) Group guarantees that the information in this article is accurate, current, or suitable for any particular purpose. Changes in the assumptions or underlying information could produce materially different results. The ESR Group’s views expressed in this article speak only as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
Tim Ahern is a writer in Fannie Mae’s corporate communications department.