When the Consumer Financial Protection Bureau (CFPB) announced in November 2013 it was streamlining four different documents — including initial and final Truth-In-Lending disclosures, Good Faith Estimates, and HUD settlement statements — into just two, commonly referred to as TILA-RESPA Integrated Disclosures (TRID), financial institutions were shocked to discover they’d have only until Aug. 1, 2015, to comply with this new standard.
CU QUICK FACTS
State Employees’ Credit Union
Data as of 06.30.15
HQ: Raleigh, NC
12-MO Share Growth: 7.30%
12-MO Loan Growth: 10.38%
Although an administrative error later caused the CFPB to move the TRID effective date to Oct. 3, credit unions across the country have already started reaping the fruits (or potentially, the lack thereof) of their preparation for this changeover.
State Employees’ Credit Union ($30.8B, Raleigh, NC) is one of the former, having started preparing for TILA-RESPA changes one year prior to their first announced implementation date, says Mark Coburn, senior vice president of lending development.
Along the way, the North Carolina cooperative developed an in-house training program that prepared every employee in its lending department with the knowledge and practice needed to meet the TRID deadline without hiccup.
TRID Training In Action
As of second quarter 2015, real estate loans comprised 82.4% of SECU’s total loan portfolio, well above the 54.4% average at credit unions larger than $1 billion in assets. So when mortgage lending rules change or new regulation is introduced, the large credit union pays serious attention.
SECU’s decentralized lending strategy means any of its lenders in more than 250 branches across North Carolina can approve mortgage loans. And with 1,800 certified mortgage loan originators (MLOs) spread throughout this footprint, it can be a challenge for the credit union to disseminate information.
To combat these issues proactively, in August 2014, SECU’s loan administration staff began attending conferences, reading publications, and receiving counsel from lawyers to determine TRID’s impacts and develop a training curriculum. By February 2015, the three-part training plan was ready to go.
The ultimate goal was to not shock our lending staff or our members. We heard all along people would not be ready [for TRID], and we felt if we did not address that proactively, it would interrupt our business and service.
First, Coburn’s department sent out up to two monthly memos starting in February and continuing through the deadline. Initial memos contained introductory TRID information, but as the months passed, they took a more practical shape and described how different parts of the rule were going to change the credit union’s operations.
For example, TRID required SECU to add fields in its loan origination system to capture additional information. The credit union wanted its lenders to be comfortable with the revised system, so it educated lenders and let them use the system in real life.
“We introduced the new screens early on so employees could get used to collecting that data and seeing a different screen pattern,” Coburn says.
Second, the credit union’s senior vice presidents of lending recorded a 45-minute audio presentation that covered information from both the TILA and RESPA disclosures. The credit union paired the audio recording with a PowerPoint presentation and sent the package to every lender at the credit union.
Third, it introduced a Train the Trainer program, which required one lender from each branch to attend one of 10 day-long SECU-sponsored sessions around the state. Once completed, the lender, now a designated subject-matter expert, was then responsible for training the rest of his or her branch staff.
The credit union followed up both the PowerPoint presentation and the Train the Trainer sessions with written assessments authored by Coburn and his team. These included questions on the timeline for providing different disclosures to members, how long a member has to review the disclosures before the loan can close, and what information is included in the disclosures.
SECU expected lenders to receive a grade of 90% or higher — an ambitious, yet necessary, requirement.
“The ultimate goal was to not shock our lending staff or our members,” Coburn says. “We heard all along people would not be ready [for TRID], and we felt if we did not address that proactively, it would interrupt our business and service.”
Post-Rollout Best Practices
The Oct. 3 TRID deadline was not a finish line for credit unions. In many ways, it was also a starting point.
“I think folks are now pretty fluent in the main parts of the rule,” says Amanda Phillips, director of compliance offerings counsel for Accenture Mortgage Cadence, a New Jersey-based provider of loan origination software and electronic document management services. “But as much as we think we’ve thought of everything, things come up, questions come up, and there will be some kinks to work out.”
Below, Phillips breaks down six “sticky-wickets” credit unions will need to manage in the early stages of TRID.
TOLERANCES WORK DIFFERENTLY UNDER TRID.
Fees for appraisals, credit reports, flood certification, prepaid property taxes, and prepaid HOA dues are all now zero tolerance.
LENDERS DISCLOSE TITLE INSURANCE DIFFERENTLY UNDER TRID.
In a purchase transaction, lenders are used to disclosing the discounted bundled lender title premium and the full owner’s premium. Under TRID, however, the amount disclosed in a lender title insurance policy is the amount of the premium without any adjustments that may be made for the simultaneous purchase of an owner’s title.
“You literally have to take the full owner’s title policy and then subtract the full lender’s title policy to get the discounted owner’s,” Phillips says. “This means credit unions must disclose the whole lender’s and the discounted owner’s title policies.”
TRID REQUIRES CREDIT UNIONS AND SETTLEMENT AGENTS TO COMMUNICATE BETTER.
No matter which party prepares the closing disclosure, the borrower must receive it three days in advance of closing. Phillips says credit unions must make sure they have updated policies and procedures to clarify lines of communication with settlement agents.
TRID COULD POTENTIALLY IMPACT STAFFING CAPABILITIES.
TRID’s shortened turnaround times can go hand in hand with the need for more staff or a change in roles within an institution. Because credit unions are lending at a historic pace, there might soon be a shortfall of experienced lending and compliance employees on the market, Phillips says.
TRID REQUIRES LENDERS TO CLARIFY POLICIES AND PROCEDURES.
TRID states lenders should make disclosures based on the best information reasonably available at the time. But what does that mean?
Developing clear policies and procedures to outline what qualifies as reasonable due diligence is critical, Phillips says. She recommends creating internal FAQs and other documents to give lenders a quick reference guide.
CREDIT UNIONS SHOULD ANTICIPATE ADDITIONAL LIABILITIES.
Under TRID, there exists a private right of action for borrowers to file suit against lenders, Phillips says. “Will borrowers actually start filing private lawsuits?” she asks. “I hope not, but you never know.”