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TRID pushes mortgage industry into tech age

The mortgage industry a year ago was grappling with a new set of consumer-protection regulations called TRID (also known as the Know Before You Owe rule), which went live in October 2015. Now the Consumer Financial Protection Bureau (CFPB) has just closed public comment on its proposed revisions to TRID. Joe Tyrrell, executive vice president at loan-origination software-provider Ellie Mae, spoke with Scotsman Guide News during the Mortgage Bankers Association’s annual conference in Boston this week and shared his thoughts on how the industry is adjusting to TRID and the future role of technology in the mortgage business. 

TyrrellHas the industry fully adjusted to TRID?

Well, there are two aspects of TRID — first the rules that have come out. From Ellie Mae’s perspective, we worked really hard to make sure that we didn’t just introduce new fields and forms, but that we actually introduced calculations and workflows to help out lenders adjust as best that they could. The challenge with Know Before You Owe is that the CFPB just recently reopened comment period, and there is going to be proposed changes. Once those changes come out, then we are going to have to react again as an industry. So, it is unknown what those changes, or the extent of those changes, will be. From Ellie Mae’s perspective, we have a very close relationship with the CFPB and with our lenders, so we are trying to be as proactive as possible in preparation for receiving those changes and then making it as painless on our lenders as we can. Until those final rules are out, there will still be a bit of uncertainty, and the process won’t be completely done because we won’t know what the final rules will look like. 

From Ellie’s origination reports, closing times have come down. So, would that be an indication that the industry has figured TRID out?

What is great about the origination report is that it is really looking at a very broad spectrum of lenders. The one thing they all have in common is that they are on our platform. So, these are going to be lenders that are going to be more inclined to adopt technology, to leverage it, to try to focus on automating the process as much as possible. Also, from the origination perspective, we look at the time that we engage the consumer to the loan’s funding. There are other aspects of Know Before You Owe that go after the funding process. When we look at the lender community on our platform, we feel as if we have helped them to adapt very well; but, with the broader market, you have lenders that are not necessarily leveraging technology to the same level. So, we can see some disparities. 

Are the regulations driving companies toward a digital mortgage?

I think the more the regulations play a part in our industry, the more you have to look for technology to be leveraged. Not just from the perspective of automation, but also for the consistency to meet and apply these rules. The lender today has to deal with regulation at the federal level, at the investor level, at the state level; in some cases, at the county level. And so, with all the loans that are processing, it is really difficult to ensure that everyone is going to meet all of those requirements, without leveraging technology. Technology is going to keep them within those guardrails. So, the more regulation that comes into our industry, the more we believe people are going to have to leverage technology, not just to adhere to the rules, but to thrive and be able to grow their business while adhering to the rules.

Will the new reporting requirements under the Home Mortgage Disclosure Act present a major technical challenge?

No, I don’t think so. That is what technology is intended to do, is to be able to help automate [the analysis] of data sets. The thing we look at is, what is the intent? If you look at the intent of the HMDA [Home Mortgage Disclosure Act] changes, really what that is about is to ensure that no customers are being locked out of homeownership, focusing on fair lending. If you look at what the CFPB is intended to do, it is trying to make the whole mortgage process easier and consumable for the borrowers. It is trying to protect consumers to ensure that they really understand what they are going to owe before they enter into a mortgage transaction. What we do is support the intent, which is to try to make the process more transparent for people and try to make sure that everybody can be included. But there is so much change fatigue that lenders have had to go through over the last several years. Our focus is really on how to we help our lenders focus on running their business, while they leverage us to make sure that they stay compliant.

The mortgage industry is doing quite well this year, and originations are up. Are you optimistic about the next year or two?

I am optimistic because we know that the largest generation in history in the United States, the millennials, have not yet meaningfully entered into homeownership. Every study that you see has above 90 percent of them saying that homeownership is an important part of their plans. When you think about the opportunity to embrace those millennials as they start to enter the market, it is a huge opportunity for us to help them, by educating them, not just on financial literacy, but mortgage literacy. This is a generation that was brought up on the internet, so they are used to being able to hold things in their hand and to swipe, and use mobile devices. If we can meet their expectations and educate them on the opportunities of homeownership , we think there is a huge opportunity in the next several years as they start to enter the market.

The other thing that I would say is that it is not just about technology and making sure that we can make credit available. It is about the loan programs. I have been very pleased to see that the GSEs [government-sponsored enterprises] and even some of the large national depositories have been willing to extend credit beyond where they have typically have in the past. After the credit crisis, everyone really kind of normalized around an 80 percent loan-to-value model. Now, what we have seen is that conventional loans go beyond the 80 percent. We are coming together to understand that credit is important, that this is a loan that still has a significant amount of collateral behind it. The ability to take these products and to allow for more people to participate by going to higher loan-to-values, without necessarily compromising the credit risk, is another huge opportunity to bring in more people to homeownership.   


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