We asked a hand-picked group of experts to identify the single biggest challenge in complying with the new Integrated Disclosure rule. They had a lot to say.
Q: What has been the single biggest industry challenge in preparing for compliance with the Truth in Lending Act (TILA)-Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure rule, better known as TRID?
(Editor's note: All responses came before the announcement about the newly anticipated Oct. 1 effective date.)
Director of eServices
"The answer to this question is like the old parable about asking the three blind men what an elephant looks like. Depending upon which one you ask--and the approach they take--the answer could be substantially different.
If you are the lender, ensuring proof of receipt of delivery for the Closing Disclosure may be one of the biggest concerns--but that is not a major challenge.
If you are the title agent, getting the closing costs (fees) right on the document (since it's dynamic) will be a concern. If you are the LOS [loan origination system] vendor, adding all the new data field requirements and producing it in the new MISMO 3.3 format is a big challenge.
And finally, if you are the doc-prep vendor, you have to ensure that all the fee data gets in the right APR [annual percentage rate] buckets so that the GFE [Good Faith Estimate] and TIL are correct. Since you've lost the fee detail granularity with the elimination of the HUD-1 fee lines, ensuring the accuracy and rep and warranting will be a major concern.
However, we all know that it cannot be broken down into just a few key elements. You have to ensure a legal and compliant process from the initial Loan Estimate to providing legal evidence of proof of intent to proceed to reconciling the initial against the final disclosure, to ensure you are within legal tolerance thresholds, to confirming receipt of delivery of the final Closing Disclosure document three days prior to consumption. This is an extensive process that will require a full electronic system and audit trail to capture and record proof of compliance for all these events, from application to closing."
Attorney and Vice President of Products
Compliance Systems Inc. (CSi)
For CSi, the most difficult challenge has been in persuading financial institutions to recognize the gravity of the TRID changes early in the process.
The TRID changes have three dimensions, all of which affect lenders. There's a data-collection aspect that requires lenders to ask the right questions at the right time in the loan process. There's a presentation aspect that's focused on how data gets packaged and formatted for consumers on disclosures per the CFPB's [Consumer Financial Protection Bureau's] requirements. And then there's an operational aspect that determines optimal efficiency for satisfying aspects one and two. If lenders have not used a wide lens to plan their implementation of TRID, then they may stumble on [Oct.] 1.
To help our client institutions prepare as early as possible, CSi released our TRID solution to our LOS partners a year in advance of the CFPB's deadline for rule implementation. We did this so that our partners would have ample opportunity to integrate to our solution technology and request process refinements, but just as importantly to allow our clients to work with the solution, build out their operational methodology and develop appropriate internal training to support TRID compliance.
That said, it's ultimately up to institutions to assess how the TRID rule will impact their own unique lending products and business objectives, and then do what it takes to optimize their shops ahead of the deadline. Our greatest challenges as a solution provider are not about the technology, but about client education and support.
For lenders and settlement agents, we see collaboration as the greatest challenge. Lenders will be on the hook to provide the Closing Disclosure, a new document that replaces the final TIL disclosure and the HUD-1, which were previously provided by the settlement agent. This change shifts additional liability onto lenders and increases their dependency both on automated risk mitigation and data exchange with the settlement agents. Lenders have more risk, but less direct control to exercise in the process. Oversight is going to be critical."
Chief Executive Officer
"Everyone is deeply concerned about TRID (and they have been for a while), and by now the 'TRID-ready' proclamations are everywhere. But our organization is in constant contact with hundreds of lenders and 20,000 or so title and escrow companies throughout the country and, based on our observations, as many as 75 percent or more aren't ready for TRID.
Most lenders are not up to speed on the specifics of the rules and the requirements that they need to follow, and haven't dealt with the issues at the more practical level that they need to.
They know the forms are changing from the initial Truth in Lending (TIL) disclosure and Good Faith Estimate to the new Loan Estimate (LE). But the part that they're missing is: How does closing data get into the LE? Because that is a very big challenge with lots of very detailed nuances to it. Regulators will want to know that data is being displayed in an accurate way--and unfortunately that is going to be a challenge.
The problem is compounded because many lenders use tables and templates or disparate sources to quote, and then sort of 'massage' the close into compliance at the end. That simply won't work. There is so much more stress on the timeline under the new 'three days before loan consummation' standard that significantly increases the likelihood of forced redisclosure, which could impact rate locks, client satisfaction and more.
Everyone is talking about collaboration and that is certainly important, but how data is aggregated, calculated, formatted and mapped--accurately, in a compliant way--under the new guidelines is the bigger challenge.
We see lenders anticipating [being able] to lean on their vendors to give them the information in a way that doesn't totally disrupt their workflow process, and most vendors are completely ill equipped to do it. So that conversation needs to be brought down to the street level in a very practical way or there is going to be real chaos.
On the closing-agent side, many are still working with their lenders to determine who is handling the Closing Disclosure (CD) and how. Come [Oct.] 1, that's legally the lender's responsibility; but what we're hearing is that the lenders are assuming they will be overburdened and are developing rules of engagement with their title and settlement partners to help them with the CD.
That means in order for a closing agent to do business with a lender, they'll need to be familiar with the lender's platform. Why is that important? Well, closing agents will need to be trained on multiple platforms. But more importantly, they'll need to be up to...