TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/409279
Th e M Rep o RT | 15 feature F our years ago, the Dodd-Frank Wall Street Reform and Consumer Protection Act unleashed 49 new and revised regulations on the mortgage industry. Since then, lenders have dealt with restructuring of the regulatory agencies, the introduction of the Consumer Financial Protection Bureau (CFPB), Quality Mortgage (QM) and Ability to Repay (ATR) standards, capital reserve requirements, and many other changes. If lenders think the end is near, think again. At the end of last year, the CFPB announced chang- es to the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) that would require completely new disclosure documents and a new closing process for all first-lien residential mortgage loans. These modifications will force lenders to undergo significant changes in both their documen- tation systems and their closing workflow. While the reforms are intended to simplify communi- cation by providing borrowers with consistent, essential infor- mation no matter where they get their loan, the truth is that this seemingly simple form will be a complex adjustment for many mortgage lenders. As the August 1, 2015, imple- mentation date looms, there is still time for lenders to make necessary adjustments to business processes and build high-tech infrastructures from the ground up in order to integrate the "Know Before You Owe" documents throughout their business platforms. Though it will be a burden to lenders, with the right approach, lenders can miti- gate the impact of the new rules by leveraging electronic documents to maximize productivity without sacrificing excess expenses. By embracing digital docu- ments, the opportunity exists to streamline and refine the disclo- sure process, leveraging electronic document technology to improve compliance reporting, reduce paper expenses, and better meet the needs of borrowers. Understanding the New Disclosure Rules F inancial services as a whole are shifting to a more con- sumer-centric model, and lenders must keep up to speed with what borrowers need and want. For more than two years, the CFPB has been working with the industry and consumers to test a combined disclosure that will replace the GFE (Good Faith Estimate) and TILA (Truth in Lending Act) disclosures imple- mented in 2010. This form, also known as "The Loan Estimate," is designed to clearly communicate both the immediate closing cost estimate as well as outline the full terms of the proposed loan. The Loan Estimate was created with two main objectives in mind. First, the document clearly outlines closing costs (from the old GFE) and locks lenders into an accurate projection. Next, the document outlines the complete loan terms by disclosing totals cost and inter- est rates and letting consumers know if their payment can or can- not change down the road. The regulations require the Loan Estimate be sent to bor- rowers on a specific schedule—no later than three business days after mortgage applications are submitted. Similarly, once a borrower signs the disclosure, there is a minimum seven-day advanced notice for all material changes to the Loan Estimate. A recent survey conducted by the CFPB indicated that borrow- ers are responding well to the