TRID continues to cause delays in closing
mortgages. This past January, it took an average of 51 days to close on
purchase mortgages, up five days from when the new consumer disclosure rules went
live in October, loan processor Ellie Mae reported this month.
The closing times have risen from an average of 40 days for purchase
mortgages in January 2015, the mortgage processor reported. Ellie's Chief Executive Officer Jonathan Corr said he expects the times to fall back somewhat.
“My sense, as I talk to folks, as I talk to lenders, is that they are getting more comfortable with it,” Corr said during a Monday interview with Scotsman Guide News. “They are seeing where some of the friction points are, or where some of the things weren’t as clear.”
TRID is a federal rule that changed the procedures mortgage professionals follow prior to closing as well as the forms provided to borrowers. For all mortgages, including refinances, it is taking an average of 50 days to close, up four days since the new rules went live.
Corr said the big changes under TRID are still causing some disruptions, and largely because lenders and other industry participants had to switch over to radically new systems after the Oct. 3 start date.
“They never had a chance to have a scrimmage on the field,” Corr said. “It happened overnight. You went from one process on one day to a completely different process the next day.”
Corr also said that the industry is still not entirely clear on how
the rules will be enforced — though he praised the Consumer Financial Protection Bureau for working with mortgage companies to date. He
also said the new TRID forms have made the process more user friendly for consumers, but lenders still have questions.
“I would say that there are elements of the regulation that
are probably not as crystal clear as they could be,” Corr said. "I think
lenders and the bureau are working through those. Other than things taking a
bit longer, I think it will reduce and ultimately it will be clearer for the
consumer, and it will be a smoother experience.”
Credit continues to loosen
Ellie also reported that average FICO scores on closed loans dropped three
points in January to an average score of 719 for a closed loan,
which is the largest drop since this past spring. Ellie's estimates are based on millions of loans that pass through its Encompass system. In the past year, FICO
scores on closed mortgages have declined from a high-water mark of 731 in March 2015.
Despite the drop, Corr said that underwriting standards haven’t deteriorated
that much from the extreme tightening that occurred after the recession, and credit could loosen further.
“I don’t think we are
back to an equilibrium,” Corr said. “We have been slowly coming back. As
you talk to lenders, and you talk to folks in the industry, the quality of
loans is at the highest as long as people can remember.”
Corr also said with rising equity as home
prices climb, along with continued low mortgage rates, the refinance market could still have
some life in 2016. He expects, however, that home purchases in 2016 will regain their
traditional place as the driver of mortgage volumes. He also agreed
with most market projections that mortgage volume will drop this year as
“Overall volume will
be down compared to last year, maybe 10 percent or so,” Corr said. “Are we
going to see big booms of origination volume? Probably not driven by the
purchase market, but there are a lot of things that are positive in the
marketplace that should allow folks to steadily make that transition to