TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/239959
Feature The lending process is moving more toward the use of more automation, and the fee management process must be a part of this evolution. a different system than the one used originally to generate estimates, a service provider has no way of knowing the initial quote or the parameters used to produce that estimate. When rate divergences occur, the service provider does not have the opportunity to review and honor the initial estimate, which, in most cases, a business owner certainly would do to secure that business. A connection between the fee generation system and the ordering system would allow detailed fee quotes to be sent to the service provider with the initial order, creating a bidirectional, electronic workflow. Lenders use a single system that connects the fee generation system and the ordering system to transmit quotes directly to the service provider for review. Thus, any discrepancies can be addressed as another way to prevent an unwelcomed surprise or a compliance violation later in the process or at the closing table. Additionally, issues often arise with the quote, or legitimate fee changes occur after the quote is provided. For instance, there may be lender-side changes in 26 | The M Report circumstance, such as changes to loan amount, which could affect title fees. There may also be legitimate service provider generated changes that happen after the initial order, such as the need for additional title insurance endorsements or multiple notary visits. Implementing an electronic ordering system and connecting it to the fee management system makes it simple to manage these fee-change workflows. Like almost everything else, these fee changes circle back to compliance and must be tracked in detail. The CFPB only allows specific situations to trigger fee changes and subsequent re-disclosure. For audit purposes, a fee management system should track each change in detail. Managing Fees Through Closing F ee management culminates when the borrower arrives at the closing table. The fees on the HUD-1 are represented in yet another system, managed by the closing agent. This means that lenders could still be responsible for fees to cure RESPA tolerance violations at the closing table. Recording fees and transfer taxes can be very difficult to calculate accurately, especially in a large geographic region. Title and settlement fees can be equally as difficult when working with several service providers. A thirdparty fee management provider could be the best option, but a lender would be wise to choose a third-party provider who reimburses the lender for any RESPA cures paid. The CFPB's newly finalized loan estimate disclosure (LED) and closing disclosure (CD) replace the GFE and HUD-1, and lenders' fee technology must accommodate the August 2015 implementation date. Despite the obvious new format of the documents, there are two changes for lenders to be mindful of. First, the fee tolerance (allowance for change in fees between the LED and CD) for affiliate service providers is now at zero percent. For lenders that have affiliated service providers, this means it is now even more important to represent fees accurately on the initial disclosures. Second, unlike the HUD-1, the CD does not have numbered fees. For fee management systems that relied on the line numbers to manage fees, this creates added complexity. Lenders would be wise to verify that their existing fee management systems or third-party fee management providers can map fees to the new LED and CD. Even after the loan closes, fee problems can still surface, usually in the form of compliancerelated problems. As an example, certain fees are not allowed on FHA and VA loans, and local statues can come into play in determining what fees can and cannot be charged. To ensure a lender is compliant, fees generated in the mortgage process should be connected to mortgage compliance software that specifically checks for fee compliance. This makes it possible to address any fee inconsistencies in a timely manner, helping lenders ensure consumers are satisfied and tolerance violations essentially disappear. Once the process reaches the actual closing table, it is too late to fix these issues that likely could have been prevented by using an automated system. At this point, a lender's sole option is to pay the RESPA cures. Lenders' responsibility for communicating accurate fees to consumers does not begin and end with the GFE. They are accountable for every stage of the process, and not using a common system throughout ultimately means they forego compliance and customer service—both of which are necessary to remain in business. The lending process is moving more toward the use of more automation, and the fee management process must be a part of this evolution. Lenders large and small now have the opportunity to embrace this change and the benefits that the solutions offer—almost immediately—on their bottom lines.