0
0
Lenders are diligently preparing to issue the new Loan Estimate and Closing Disclosure for their loan apps as of August 1st.
That’s good because, although CFPB says they will be easy on enforcement, the law still goes into effect. There is no guaranty from consumers and their lawyers that they will also be understanding to those lenders that made a “good faith effort” toward compliance. BTW, has anyone defined this “good faith effort”?
Much work is needed beyond the new forms. By now, I think most lenders realize this is a major change in how the lending process and related loan closing gets done. The front end is not all that different.
Issue a form that provides the consumer with an estimate and breakdown of what they can expect to pay at the closing. Fee tolerances are a little more restrictive so lenders need to make sure there originators and Brokers know what fees to disclose and how much.
Fees paid to the lender for required services like an appraisal cannot change once disclosed unless there is a bona fide change. That meaning something the lender couldn’t anticipate or expect. This is pretty much as it is now, except no more 10% tolerance on such fees.
The 10% still pertains to the aggregate of the fees for services the consumer can shop for, as long as they are not obtained from a lender’s affiliate. Oops, no more tolerance.
No tolerance on the transfer taxes just like before. Lenders need to get this right or it could cost quite a bit of money in rebates or cures at the Closing.
The big change comes in getting ready for the Closing. I read somewhere that today about 25% or so of loan closings get delayed for various reasons. Not all being the lender’s fault.
Under the new rule the lender, not anyone else, is now responsible for delivering to a buyer/borrower the new Closing Disclosure at least 3 full business days prior to the loan consummation. Not a big deal? Think about it…
This form must also be accurate in every way, including seller and Realtor fees and expenses/adjustments. What lender does that now? Most have difficulty getting the closing papers to the table more than a few hours before the closing. Now, everything needs to be wrapped up and ready to go 3 full days before the closing. Are you prepared to do that? Don’t forget the requirements for the pre-closing audits, including those for FHA loans beginning in September. This is one more change that requires you to be prepared.
I’m not trying to scare you (maybe a little) but it’s a lot more than just a couple of new forms. It’s a major operational change in how a lender does business.
It’s a change that a lender cannot accomplish without some help from technology, training, staff and their closing agents. You need the systems and knowledgeable people to originate, coordinate, track, monitor, check and re-check the lending process from beginning to end.
If you are only preparing to issue two new forms… you are in trouble. To be ready for TRID, you need to be prepared to change how you do your business, and your people and systems need to be prepared to do so as well. Don’t depend on CFPB’s benevolence. You may not get a shot at a do-over.
