"It has long been an axiom of mine that the little things are infinitely the most important."--Arthur Conan Doyle, The Memoirs of Sherlock Holmes
You don't have to be Sherlock Holmes to conclude that the rollout of the Truth in Lending Act (TILA)-Real Estate Settlement Procedures Act (RSPA) Integrated Disclosure, or TRID (Know Before You Owe) rule hasn't been the catastrophe that some observers feared. But at the same time, TRID has and is continuing to cause closing delays, loan rejections and heightened anxiety within our industry. The reason--with a nod to Sherlock Holmes' creator--is that "the little things" have inevitably taken on great importance.
This is good and bad. Good in the sense that the little things are identifiable and fixable. Bad in the sense that this may provide a false sense of confidence when it comes to TRID--causing some industry participants to take shortcuts that, over time, could have significant consequences.
Off to a rocky start?
Just after the new rule took effect, the Consumer Financial Protection Bureau (CFPB) gave the industry a temporary reprieve. In a letter to the Mortgage Bankers Association (MBA), CFPB Director Richard Cordray noted the scale of the endeavor facing our industry and acknowledged "there inevitably will be inadvertent errors in the early days."
Cordray went on to say, "Our examiners will be squarely focused on whether companies have made good-faith efforts to come into compliance with the rule."
But despite these assurances, investors remained highly cautious and this, in turn, has created problems for correspondent lenders trying to sell their loans to aggregators. In a report on how TRID was affecting the pipeline of post-TRID loans going into residential mortgage securities, Moody's Investor Services, New York, found that 90 percent of the loans reviewed by due-diligence companies appeared to fail for TRID compliance issues.
The rating agency's report, which was based on only a small sample of about 300 loans, observed that many of the defects were "reportedly technical in nature, such as the need to use the same spelling convention."
According to the American Bankers Association's (ABA's) 2016 ABA TRID Survey, released on March 1, 2016, of 548 banks responding, roughly 75 percent reported that TRID is delaying loan closings by eight days, on average, with some institutions reporting delays of up to 20 days. And more than 490 bankers said front-boarding and loan...