It’s been almost four months since new home closing rules (the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosure (TRID)) took effect on Oct. 3, 2015.

How much have these new home closing rules impacted – also known as the “Know Before You Owe” initiative – mortgage lenders and vendors so far?

According to sources, it took an average of 49 days to close in both December and November – up from about 42 days in October, with TRID cited as a likely cause. Flagstar Bank, in its recently released fourth quarter earnings report, says TRID was a contributing factor to a 32%, or $22 million, decrease in sales for the quarter.

“TRID is delaying closings primarily through the title and attorney industries (mostly the seller’s counsel), which were not ready for this change and are fighting it every step of the way,” says Brian Koss, executive vice president of the Mortgage Network, one of the largest mortgage companies on the East Coast.

“The lack of clarity in TRID has added great pain throughout the industry, since everyone is interpreting the regulations differently,” Koss adds. “This is creating issues with tech vendors that support different companies and is causing confusion among title companies over what is ‘standard’ and among investors buying loans from the market. Each investor seems to be using a different interpretation of the TRID guidelines, causing backups with warehouse lenders and in correspondent departments. Add to this the fact that the typical borrower does not do what they are told and often delays reviewing and signing documents.”

Alec Cheung, vice president of product management and marketing at e-document technology firm eLynx, says, “Getting the fees right on the closing disclosure is challenging, and when errors are discovered, it often requires closings to be rescheduled in order to allow time to fix and re-disclose. As a result, lenders are providing for additional time in order to ensure they get the closing disclosure correct. The challenges are mainly stemming from the collaboration required between lender and settlement agent,”

“Like every extra layer of regulation that was added post-housing crisis, these new home closing rules (TRID) end up somewhere in the cost of the loan. In the end, the buyer is essentially getting forced-place insurance at a high cost yet does not take advantage of all the information and disclosures that are provided. The forms are much better, but at what cost?

“Lenders are bearing additional costs now of these new home closing rules, but over time, these temporary transition costs will abate,” Cheung adds. “What may not come down are the higher costs of compliance in general. The regulatory burden is heavier now with the likes of ‘Know Before You Owe’ and [the CFPB’s ability to repay/qualified mortgage rules], and consumers may, indeed, bear some of this cost through higher rates or fees.”
With respect to cost, yes, TRID has resulted in additional operating costs. The cost of technology solutions has gone up, and the function of the time it takes to complete data entry for testing compliance of multiple loan estimates and closing disclosures has increased four to 10 times, depending on how many disclosures and re-disclosures are provided in a file. This in itself creates more labor costs – which, ultimately, will be passed to the borrowers.”

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