December 10, 2015
/ by Craig Mitchell
Financial institutions and mortgage lenders have been gearing up for the biggest change to hit the mortgage lending industry in 40 years – the TILA-RESPA Integrated Disclosure rule from the Consumer Financial Protection Bureau.
Otherwise known as TRID for short, it’s imperative that marketers within these institutions understand how TRID will affect consumers and how a lack of preparedness could ultimately impact their institution’s brand.
How will new regulations affect your customers? Read our free “Regulation & Compliance: The Cost of Being Uninformed” white paper to find out!
It’s important to understand that these new rules are intended to simplify the disclosure and loan-closing process for consumers and better prepare buyers for their mortgage transaction.
Educating your customers on how the streamlined application process will actually empower borrowers to make better informed decisions and prevent surprises at closing is imperative to ensure that borrowers aren’t overwhelmed by more rules to an already daunting life decision – e.g. the home-buying process.
The TRID changes are focused on two key areas.
There will be consolidation of several documents, reducing the amount of paperwork. The former “truth in lending” and “good faith estimate” documents are replaced by a single “loan estimate.”
These simplified documents will require only the essential elements to a loan application, including name, income, Social Security number, the property address, an estimated property value and the requested mortgage amount. Additional documents may still be requested, but now a loan estimate can be provided before turning over those documents.1
Paperwork leading up to closing will also be streamlined replacing the “truth in lending” and HUD-1 Documents with the “closing disclosure” form. This is a single document that will include key details like loan terms, estimated costs and the cash needed to close.1
Consumers will have more time to review the information. Loan estimates must be sent or mailed to the borrower within three business days of the application submission, and the three days prior to closing the borrower must receive the closing disclosure.1
Finally, that three-day rule also comes into play during the closing where documents must be shared with borrowers three days prior to closing. There is now a three-day waiting period if any major revisions are needed for this document. If revisions are made, a revised closing disclosure must be provided.1
The TRID rules were designed to benefit consumers, but what if there are unintended or surprising consequences discovered during the regulations’ rollout?
Smart financial institutions should monitor consumer sentiment on this issue to confirm that consumers do indeed feel these new rules are helping to make the process easier —as they are supposed to—and that they believe that lenders are getting it right.
Reputational damages are an indirect pitfall if creditors do not comply with TRID guidelines.
For example, the TRID rule prohibits habitual under- or over-estimating the amount of closing costs. This alone can garner significant regulatory fines, but it can also expose creditors to consumer frustration, loss of consumer trust, loss of clients, negatively impact consumer sentiment and cause reputational damage.2
This is an especially critical time for both consumers and financial services firms as newly minted regulations are rolled out. Staying on top of what your customers are saying on social media about the mortgage process, good or bad, is paramount to the success of your organization. Find out how today!
1bizjournals.com, “3 Ways New “Know Before You Owe Act” Will Improve the Home-Buying Process, October 19, 2015
2nationalmortgagenews.com, “Avoiding the Indirect Pitfalls of TRID Compliance,” October 19, 2015
Images: 401(K) 2012, Mark Moz (Creative Commons)
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