TILA-RESPA Integrated Disclosure (TRID) rules and forms went into effect on October 3, 2015, ushering in widespread regulatory changes that have required credit unions to revisit their mortgage origination processes across multiple channels.
TRID replaced four disclosures — Good Faith Estimate (GFE), Initial Truth-in-Lending Disclosure, HUD-1 Settlement Statement, and Final Truth-in-Lending Disclosure — with a single Loan Estimate and Closing Disclosure. Additionally, TRID mandated new processes, deadlines, and archiving requirements to create consistency and accountability within the mortgage industry.
In February, Callahan & Associates surveyed 203 credit union executives from 46 states to evaluate the impact of TRID across four categories:
The effects of TRID on mortgage closing.
The primary causes of TRID delays.
The delivery timeline of mortgage disclosures.
The state of mortgage origination operations.
Finding: TRID Might Be A Bane For Most Credit Unions, But It Is A Boon To Some
According to the Callahan TRID survey, 96.1% of respondents have experienced closing delays over the past six months. The average number of days to close reported by respondents was 42. This is compared to an average closing goal of 31 days.
More than half of respondents reported TRID added five or more days to mortgage closing (54.7%), followed by delays of three or four days (34.5%), and one or two days (6.9%).
However, a segment of respondents — 3.9% — reported no delay in closings. This suggests some credit unions were able to successfully incorporate staff, training, and additional resources throughout the third and fourth quarter of 2015 to sustain mortgage origination timelines. Strategies to reduce closing delays include refining the origination process, focusing on pipelines, evolving staff skillsets, and adding resources to handle volume fluctuation.
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Finding: Settlement Collaboration Is The Leading Cause Of TRID delays
More than half — 51.5% — of respondents cited settlement collaboration as the primary cause of closing delays. New lender workflow between title companies and members, as well as refinement of processes and procedures, are creating turnaround roadblocks that credit unions have yet to overcome.
More than one-quarter — 26.2% — reported multiple areas were equally problematic. Settlement, system, member, and mortgage disclosure compliance were among the primary causes for closing delay reported by respondents. Open-ended survey responses noted timing issues with disclosures, difficulties in integrating mortgage origination systems with core processors, and challenges with title companies, realtors, and other settlement agents.
16.2% noted system issues as the primary cause of closing delays and indicated their mortgage loan origination and core processing systems are not fully equipped to handle necessary updates. To ensure credit unions are in compliance, software vendors must work toward incorporating critical changes across all platforms.
6.1% counted members as the leading cause of closing delays, which suggests some credit unions have members who are unable to provide documentation and other information in a timely manner despite enhancements to the Loan Estimate and Closing Disclosure.
Finding: The Majority Of Credit Unions Deliver Disclosures Quickly
As credit unions streamline their origination processes, they are assessing the delivery of critical forms to their members. The broad range of delivery timelines reported by respondents suggest credit unions are attempting to get ahead of delays by sending disclosures before the absolute deadline.
As credit unions streamline their origination processes, they are assessing the delivery of critical forms to their members.
One-third, 34.3%, of respondents said they deliver closing disclosures once all fees have been finalized. Another third, 34.3%, said they deliver disclosures once all underwriting conditions have been met. And slightly more than one-tenth, 11.0%, said they deliver disclosures 10 to 14 days prior to the expected closing date.
The remaining one-fifth, 20.4%, of respondents said they deliver three days before mortgage closing, the absolute deadline for delivering Closure Disclosures. This delay could be the result of several variables, including settlement collaboration, system, and member delays as well as extra precaution to avoid TRID violations.
A variety of TRID violations involve poor handling of forms, including:
Not delivering the Loan Estimate three days after the loan application is received.
Not delivering the Closing Disclosure three days before the mortgage closes.
Predating Loan Estimate delivery by prematurely sending the Closing Disclosure.
Finding: Most Credit Unions Originate For Portfolio And The Secondary Market
For most credit unions, the portfolio and secondary market play significant origination factors. The vast majority — 83.3% — of respondents said they originate loans to hold in their portfolio. But more than half — 66.9% — also actively originate for sale to government-sponsored enterprises (GSEs).
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A minority of respondents — 11.3% — said they solely originate for sales to GSEs. The new TRID rule creates a situation in which TRID violations could prevent future sales and put this segment at risk.
The remaining 5.4% of respondents did not indicate their origination purpose, only noting work with CUSOs, non-CUSOs, or referral partners.
To enhance mortgage origination operations, 15.3% of all respondents work with CUSOs while 3.0% work with non-CUSOs to leverage their expertise and resources. Meanwhile, 6.9% make referrals to other lenders when they are unable to accommodate surging application volume or ensure TRID compliance.
Despite delays resulting from TRID, credit unions can use this opportunity to look inward at their entire origination process as well as outward by exchanging best practices with peers to ensure mortgage loans close smoothly and member satisfaction remains high.