Monday marked an important anniversary in the industry, though it’s doubtful that any real estate offices busted out the champagne to celebrate a controversial 1,800-page, sweeping reform of the mortgage transaction process that took effect on Oct. 3, 2015.
Nevertheless, the National Association of Realtors (NAR) polled about 55,000 Realtors about their post-TRID experiences, in honor of TRID’s first birthday.
The survey (to which about 2,300 Realtors responded) revealed that one year since the implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosure (TRID), or “Know Before You Owe,” rule, consumers have a better understanding of the homebuying process.
However, real estate agents still struggle to comply with the complex landmark regulation.
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“Looking back at the first year of Know Before You Owe, we saw a solid mix of challenges and success,” said NAR President Tom Salomone in a statement. “Consumers now have a clearer picture of their mortgage when they buy a home, and that’s a good thing, but transaction delays and errors on the closing disclosure continue to frustrate our industry.
“Realtors report ongoing struggles getting access to the Closing Disclosure, making it harder for our members to advise their clients. The CFPB’s commitment to improve the rule is encouraging, and I’m hopeful that with time and some responsible fixes to the rule, the process will get smoother in the year ahead.”
TRID drives a wedge between lenders and Realtors
TRID has caused strife between lenders and Realtors, according to the survey’s respondents. Realtors said lending remains the main problem under TRID, and they pointed a finger at large, retail lenders specifically.
Almost half (43 percent) of the Realtors surveyed said they did not develop a TRID plan with their lender partners.
Another 41 percent said they at least enhanced their email, phone call, text and face-to-face communication with lenders.
Almost 35 percent of Realtors said they have been working exclusively with lenders that were ready to demonstrate their TRID expertise, and almost 5 percent of Realtors said they simply changed their “preferred” lenders to work with compliant partners.
“In my opinion, the TRID guidelines have reduced the communication between lenders and Realtors, and it feels like a push to keep us out of the process,” one survey respondent commented.
Trouble with the Closing Disclosure
The main challenge from the regulation’s inception has been Realtors’ ability to access the Closing Disclosure (CD).
TRID requires creditors to provide certain mortgage disclosures to the consumer, but lenders are concerned that sharing this sensitive personal information will violate privacy and information-sharing laws.
At NAR’s urging, the CFPB clarified this issue in late July, saying that it “understands that it is usual, accepted and appropriate for creditors and settlement agents to provide a Closing Disclosure to consumers, sellers and their real estate brokers or other agents.”
The Bureau said it will propose additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.
Despite that clarification, Realtors say many lenders are still reluctant to share the CD with third parties, citing legal requirements and consumer privacy as their rationale.
As a result, more Realtors have turned to title agents to provide the CD — although some title agents may be reluctant to jeopardize their lender relationships by doing so. Realtors with higher transaction volumes had better success at gaining access to the CD.
“It pays to have very strong LOCAL title and lending strategic partners, and be honest with buyer if they have decided to use a large lender or out-of-town title [company],” one respondent said. “Most every time when they decide to go this route, at the end of the transaction, they say they should have listened.”
Had more Realtors been able to gain access to the CD, they could have prevented or corrected errors before settlement, the survey concluded.
The share of Realtors reporting errors rose from 43 percent in the fourth quarter of 2015 to 50 percent in the third quarter of this year.
Realtors said the most common errors are missing seller or buyer concessions; missing agent concessions; incorrect or missing homeowners’ association dues; and mistakes with clients’ names, addresses or other identification information.
They also cited incorrect taxes, commissions, escrows and proration of bills as common problems that could have been avoided had they been able to review the CD before closing.
“How can us real estate agents protect our clients when we have the ability to see the Closing Disclosure taken away?” one respondent commented.
Impact on Realtors
Realtors have had to make other significant adjustments since TRID’s passage, most of which have to do with meeting disclosure deadlines.
Realtors reported adjusting purchase agreements; sharing contracts and amendments sooner with lenders, title insurers and closing agents; and performing inspections earlier, all to meet deadlines.
In making those adjustments, Realtors have nearly doubled the time and effort they spend per transaction, with Realtors working about 43 hours per transaction in Q3 2015, and now 80 hours per transaction in the same quarter of this year.
Direct expenditures on items like marketing, salaries, postage and notary fees have also increased by about $154 per transaction since the same quarter last year.
Although lenders and settlement agents are still finding they must delay or cancel closings due to issues in their processes (such as an error not related to an appraisal, title policy or inspection), delays are actually down year-over-year, with about 10.4 percent reporting delays in Q3 2015, and 8.5 percent reporting delays in the last three months.
However, cancellations are up slightly, with 0.6 percent reporting cancellations in Q3 last year, and 0.7 percent reporting cancellations in the last three months.
All in all, nearly 62 percent of Realtors rated the new settlement process as more difficult. Only about 12 percent of respondents said the process has improved under TRID.
“I worked 23 years building strong relationships, and this new TRID experience has removed me from a lot of the process, making me feel my relationships are suffering as a result,” said one respondent. “The real estate industry, on the whole, is suffering from external influences, and the client is ultimately the one who loses that great service.”
Impact on consumers
Speaking of clients, although TRID was intended to make the home-purchasing process easier and simpler for buyers, the survey noted that consumers have still been impacted by the regulation in various ways.
Realtors reported that clients had increased expenses due to rental or mortgage extensions, lost vacation time or income from taking time off, incurred additional storage fees or lost deposits and moving expenses.
In the last three months, delays cost consumers an average of $410, and cancellations cost them about $226, according to the survey.
Is the CFPB hearing about these experiences firsthand? Only 3 percent of respondents said they had clients who provided comments to the CFPB and on the lending process, although about 49 percent of respondents said they did not know if their clients had done so.
