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   ARTICLE   |   From Scotsman Guide Residential Edition   |   March 2016

Lead the Way With TRID

New regulations give originators the opportunity to regain control of the mortgage process

Lead the Way With TRID

Now that the initial shock of the new consumer-disclosure rules known as TRID has passed, mortgage professionals can take a deep breath and review what is working and what is not. This is the perfect time for the mortgage industry to recover from the headaches and begin to take advantage of the opportunities created with TRID — the Truth in Lending Act and Real Estate Settlement Act Integrated Disclosure rules that took effect this past October — and see it for what it truly is at its core.

TRID is a chance for originators to lead and build their business through future referrals. A seasoned originator can take advantage of the new forms required by the rule, giving them the opportunity to truly guide their borrowers all the way through the mortgage process.

As required by TRID, the new Closing Disclosure form, which summarizes the loan’s terms and fees, has to be presented to the consumer prior to a loan closing, meaning mortgage originators now get the opportunity to disclose the final figures to borrowers before anyone else. They get to steal the thunder from the closing attorneys, because now everyone is seeing and using the same unified document set.

After several months, it is apparent many vested parties have issues with TRID. The loudest outcry is coming from mortgage professionals who previously had great clout in the loan-closing process, like paralegals and closing attorneys, because TRID has put the control of closing loans firmly in the hands of the mortgage broker or banker.

Taking the power back

Before TRID, the Good Faith Estimate at the outset of the mortgage process had absolutely no resemblance to the Department of Housing and Urban Development (HUD) Settlement Statement created by an attorney at closing. This key difference made the HUD document the one everyone waited to see. Now, originators are in control of the documentation everyone wants, and they have the ability to use this as part of their processes.

The way to take advantage of these changes is clear, and that is to be the leader guiding borrowers through the process. The Closing Disclosure form is now the gospel, and once the lender issues this document, there can be no changes — without prompting potentially deal-killing delays in the closing process. Like most lenders, mortgage originators see that all loan-related fees, including attorneys’ fees, need to be disclosed upfront. Because of this, attorneys essentially give originators their fees when the Loan Estimate form is prepared at the beginning of the process.

Originators are in control of the documentation everyone wants,
and they have the ability to use this as part of their processes.

Unless a title issue arises, the attorneys are done until it’s time to sign the final documents. This gives control back to the originator as an extension of the Loan Estimate and Closing Disclosure process. Once the originator issues the Closing Disclosure form, there should be no further changes to the document, which means the broker is firmly at the helm of the closing process.

Every day, attorneys and Realtors see loans that don’t close on time because of TRID. This creates more awareness of the rule and the changes it has brought to the mortgage process. Although many issues in the past could cause internal delays — often linked to appraisals and the creation of appraisal-management companies (AMCs) — this is the first time an error by a closing attorney or Realtor can cause a major delay. TRID has made them all more aware of the potential for delay, which again puts the control back in the hands of a high-quality originator.

Recent changes, such as the creation of AMCs, improved consumer protection by making the mortgage process less susceptible to manipulation. Although AMCs protect the borrower by creating a wall between originators and appraisers, that process is not something much of the public understands. The perception for borrowers is simple: Appraisals, which used to happen behind the scenes, suddenly cost more money and can cause delays in closings if not managed properly. Thanks to TRID, however, originators now have new tools for making the mortgage process more transparent for consumers. One of those tools is the Closing Disclosure form, which has condensed what was previously hundreds of pages of dense documentation down to five pages that are fairly easy to read.

Many mortgage brokers are changing their processes to include issuing a Closing Disclosure form at the time of loan approval — which is in advance of the final closing. So at the same time they are collecting the necessary items from the borrower to finalize the loan transaction, they also can finalize and provide to the borrower the Closing Disclosure form outlining the final loan terms and closing costs. This eliminates delays in the actual closing process and puts the originator at the center of the process — providing the broker with the ideal opportunity to communicate with the borrower, as well as involved Realtors and attorneys.

Some originators, for example, operate as brokers and lenders. When doing so, some home-purchase loan business is conducted as correspondent lenders — which originate loans in their own name and then resell them to other lenders that service them or package them for the secondary market. So these broker/banker originators are in a position to issue the Closing Disclosure form themselves at the loan-approval stage and start the clock ticking on the 72-hour window required between the delivery of the form and the consummation of the loan. By taking this step at the time of loan approval, the originators cut out any delays at the end of the process.

Perfect opportunity

A broker or lender who just points to TRID as a reason for delays is missing a golden opportunity to show people that mortgage brokers are in control of the industry. If brokers really look at the Closing Disclosure, it is a far cleaner document than the revised, post-Dodd-Frank Good Faith Estimate. Originators need to embrace these changes and use them to further their business. The key to making TRID work is communication, with clients and Realtors, early and often in the process.

There should be no drama once borrowers have signed the Closing Disclosure form.

Another positive for mortgage brokers is the further consolidation of the pool of available closing attorneys. Fewer attorneys are trying to cross over into real estate as a secondary way of earning a living, which is good news for everyone. If more and more mortgage originators do find themselves acting as one-person shows, it is even more reason to control the process and get the Closing Disclosure to the borrower as soon as the required information can be compiled.

There should be no drama once borrowers have signed the Closing Disclosure form, because originators will have gone over exactly what is being completed at the closing table well in advance with the borrowers. It really requires originators to be more in control of the process and to communicate every step of the way with the consumers.

•  •  •

TRID, like everything else the industry has faced in the last half-decade, presents challenges. Mortgage originators are up for this challenge. TRID is finally something that can potentially affect everyone else in mortgage lending, and that helps create awareness. Hurdles in the past made the job more difficult, but TRID actually clears up some bad disclosures and lets brokers set the tone.

If mortgage originators are slow in getting the Closing Disclosure form to the borrower, they will be slow in closing loans. As an industry, originators need to take control of the new Closing Disclosure form and make it a seamless part of the transaction. The increased awareness and transparency this form provides to consumers allows brokers to get back in a leadership role. Take advantage of this systemic change, and become a leader in your own market. 


 


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