What kind of impact have the Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure (TRID) requirements had on banks? According to a new study conducted by the American Bankers Association (ABA), the new rules promulgated by the Consumer Financial Protection Bureau (CFPB) have caused closing delays, a decrease in the variety of products offered by financial institutions, and increased processing times, with an estimate of up to $1,000 in additional costs per transaction, with an average of $300 in additional costs, and 1 to 20 additional days needed to close a loan, with an average of 8 additional days.
What happened
Over a two-week period in February, the ABA reached out to 548 banks with a range of asset sizes across a large geographic area to gauge the impact of the TRID requirements to date. The survey results demonstrated that TRID rule compliance "1) is still a relevant problem; 2) continues to impose a heavy compliance burden; and 3) causes customer dissatisfaction through delayed closings and increased fees and costs," the ABA summarized.
The majority of respondents—457 and 470—said extra staff training and additional hours to achieve compliance were necessary because of the new requirements, with half the banks stating they either have already hired or plan to hire additional staff. One respondent told the ABA the financial institution decided not to issue loans that must be TRID-compliant while another reported a restructuring of loan staff to create dedicated loan originators and processors who only handle TRID. "For a small community bank, this isn't the best use of our staffing," that bank told the ABA.
Sixty-seven percent of the respondents experienced increased legal and regulatory costs, and 77 percent reported increased delays in closings, anywhere from 1 to 20 days, with an average of 8 days. Loan processing times have also increased, banks reported, with the majority estimating another one to two hours are required per loan.
Of the banks polled, 75 percent said they have eliminated certain products—such as construction loans, home equity loans, and ARMs—out of concern that the TRID rule lacks adequate compliance direction.
Since October 3, 2015, only four of the banks surveyed have not made any updates or upgrades to their loan origination systems. Ten to 25 updates have occurred for 144 of the banks while 245 said they have needed 1 to 10 updates since the date of enactment. Those numbers are certainly not final, however, as 72 percent of the financial institutions told the ABA they are still waiting for updates.
Respondents gave mixed answers to the question of whether the total cost to the consumer to obtain a loan has changed. Forty percent of banks said the costs remain unchanged, with 35 percent reporting they could not determine if a difference existed. The remaining 25 percent answered in the affirmative, with a range of increase from 1 percent to 75 percent.
While 247 respondents are not charging higher mortgage loan fees because of the TRID requirements, the remainder said fee hikes were necessary for such items as attorneys' fees, origination fees, lock fees, and closing/settlement fees.
Almost all of the banks—94 percent—answered affirmatively that they would like the CFPB's recognition of "good faith efforts" to be extended.
Why it matters
The study results document that many of the concerns expressed by financial institutions when the TRID rules were first released—increased costs, delays in the applications process, a decrease in product offerings for consumers, and the need for extra staff—proved to be true. The magnitude of these effects varied widely. Many seem to have been felt due to the implementation process itself, and in some cases, the systems providers' timetables for transmission. That is part of why continued use of the "good faith" standard by examiners was urged by many surveyed banks.
To read the 2016 ABA TRID Survey, click here.
