‘Tis the season for industry vendor and technology conferences. I’ve recently attended a number of these events. As a matter of fact, I have just returned from attending the MBA Technology Conference in Orlando, Florida. Whether this industry event, the Ellie Mae Encompass Experience in February or the like, there is definitely one pervasive theme – TRID.
And for good reason: if a conference’s session topic isn’t outright themed “compliance with TRID” you would be hard-pressed to find a session that doesn’t mention TRID at least a dozen times.
Although we are all learning new nuances related to fee types and the like on a regular basis, all things considered, it appears as if our industry is fairly well-prepared to comply with this far-reaching, game-changing legislation.
But… is this really the case?
At the Ellie Mae conference last month, I spoke with a chief compliance officer from a super-regional mortgage banking operation. Who, while comfortable that Encompass would be TRID compliant by the Aug. 1 implementation date, he was equally concerned with the lack of preparedness exhibited by his company’s servicing platform. I have had numerous, similar conversations with compliance professionals in our industry. Mortgage servicing platforms are big, old, and in general, hard to change.
With all of the great efforts being drilled into the origination, processing, underwriting and closing side of the business, a glaring fact is starting to set in: The major mortgage servicing platforms, on which the vast majority of residential mortgage loans reside, have not even begun to consume the TRID-initiated data set or foundational documents – namely the Uniform Closing Dataset (UCD), the Loan Estimate (LE) and the Closing Disclosure (CD).
If you think of the loan origination products as representing the ‘short-term memory’ of our industry, long-term memory can be represented by 1) mortgage servicing systems and 2) the databases of record of mortgage investors, securitizers and other prominent secondary market risk holders.
If we have learned anything from the 2007 collapse of the mortgage market and ensuing economic recession, it is that the industry’s short-term memory doesn’t always get logged in its long-term memory. Meaning, it is more important than ever that both the origination side and the servicing side of a loan are working together and equally prepared for this major change.
Mortgages are bought and sold, and servicing rights are transferred. Origination entities are acquired, spun off, re-acquired and shuttered. During the dark days of the recession, the lack of ability to piece loans back together, back to their points of origination, significantly inflated repurchase demand.
With TRID, I see the same pattern emerging. Encompass and many of its competitors are ready. However, you could argue through the common hallway conversation talking points at many of these conferences, servicing platforms are not.
This is exacerbated by the fact that half of our long-term memory is emerging intact because the GSEs have poured efforts into standardizing the UCD. Fannie Mae and Freddie Mac will soon be requiring the delivery of the UCD on every loan they securitize.
When the time for evidence of compliance presents itself, the GSEs will be ready.
Want to know more about TRID compliance? Listen to our recorded webinar:GSEs, Mortgage Industry, TILA-RESPA, Top Content, TRID