The Dangers of ReDisclosure

Under the new TRID rules, failure to offer the borrower a CD that closely resembles the LE puts the lender in a precarious position. Redisclosure is only permitted if certain details of the deal change. If possible, this must occur at least three days prior to closing, possibly pushing out the close another three days. Redisclosure is costly, time consuming and irritating to consumers. It can cause problems with business referral partners who need to close real estate deals on a schedule in order to better serve borrowers who are in transition between residences. Perhaps most significantly, it opens up the lender to other TRID-related problems, like botched timelines, that could render the loan unsellable. If the lender makes an error on the CD and cannot redisclose, the lender must absorb the loss.

We wrote about this at some length in our new white paper on TRID compliance and in this article on MReport.com.

As you would expect, lenders have worked to avoid these problems by making certain that every cost and fee on the CD is known in advance so that it will always match up with the LE and preserve the timeline. Providing this kind of accuracy is as easy for smaller settlement services companies as it is for larger firms, but since lenders have traditionally not included them in their fee databases they have pushed them out of some deals in favor of larger title networks for which they already know the accurate fees in advance.

We noticed this trend early on and took steps to protect these smaller firms, and also lenders who were in danger of seeing the dismantling of local business referral machinery they had counted on for years to generate new business.

Some will argue that without an alternative, it’s far better to make fewer loans that you know you can sell than to make many loans that you may end up holding when TRID problems make them unsellable. The truth is that even if their loans are salable, lenders who do not have a good TRID solution will spend more money to close when they absorb losses due to incorrect LEs. Also, there is significant reputation risk from borrowers who feel that they are the victims of a “bait and switch” scam and report it to the CFPB.

What lenders really need is the ability to create “plug and play” title networks based on their own preferences that are capable of delivering guaranteed accurate fees in time for the LE that do not change when the CD is issued. Fortunately, technology currently exists to make this possible. Find out more about it in our new White Paper. It’s available now on our website.

Does TRID Compliance Come Down to Communication?

The Consumer Financial Protection Bureau’s TILA/RESPA Integrated Disclosure was designed to provide -- first and foremost -- more clarity to consumers, who have traditionally been underwhelmed with the process of closing a mortgage loan. A few have said that the new disclosures accomplish this, but others question it.

Regardless of what the new rule did for consumers, its impact on the mortgage industry has been significant. We wrote about this in a new white paper that is available now on our website. It was also covered in a story published by MReport last month.

No one can argue against the fact that the mortgage industry has always had a problem communicating with its borrowers. Under federal law intended to provide more complete information, the industry has been driven to deliver pounds of paper disclosures to the borrower, few of which are ever read and even fewer of which are understood by consumers.

The fact is that prior to TRID, borrowers did not have a clear picture of what the loan would cost them to close until they were sitting at the closing table. There were often surprises, which were never pleasant for the borrower. In survey after survey it was made clear that mistakes at the closing table were the No. 1 complaint lodged by consumers against our industry. The CFPB stepped in to change that with its TRID rule.

Under TRID, lenders are required to disclose accurate costs within days of the borrower’s completion of the loan application process (as defined by CFPB). Then when the loan underwriting process is complete, lenders are tasked with disclosing again at least three days before the loan is closed. The numbers on the first disclosure, the Loan Estimate (LE), and the latter, the Closing Disclosure (CD), have to line up very well. And that’s where one of the most serious problems our industry faces with TRID becomes evident.

But does this new process make anything clearer to today’s mortgage loan borrowers? Whether it does or not, the industry is now being held accountable to this new standard. Get our white paper and learn about the only clear path to TRID compliance.