BLOG VIEW: With the upcoming deadline for the Consumer Financial Protection Bureau's new TILA-RESPA Integrated Disclosure (TRID) rules just weeks away, the industry holds its collective breath as it gears up for an entirely new way of doing business. But this transformation does not have to be as scary as everyone is making it out to be. With a few proper measures, lenders can turn their stress into constructive and positive change for their institution and, consequently, for their customers.
Spending a little more effort on time and money to safeguard compliance would be better spent than failure to conform. Consequences for failing to comply could be extremely harsh, especially for larger organizations. Monetary penalties alone could range from $5,000 per day to $1,000,000 per day, during which the violation continues.
First and foremost, lenders must have a complete understanding of the rule in order to adequately prepare and comply. As lenders feverishly try to get an accurate assessment of the regulation, they also must encourage their entire institution to undergo as much training as possible.
Not only must lenders understand the rule at a granular level and continually train and educate their associates, but they must also coordinate educational efforts with their vendor partners for an even deeper understanding to ensure everyone is on the same page.
Also, the industry faces different federal- and state-chartered regulators, so it is crucial to follow the path of the appropriate regulator's guidance. For instance, a mortgage broker (audited by the state) may undergo different types of audits from a bank (audited by federal regulators). Having an understanding of whom you may typically be audited by will better help you prepare and put controls in place for following TRID.
It is also important that lenders leverage and lean on the expertise of any vendor partners impacted by TRID, whether it is their loan origination system (LOS) provider, fraud system vendor, external and internal compliance and legal partners, or the Mortgage Bankers Association. There are many resources available to lenders to gain deep-seated knowledge of the legislation. Take advantage of these resources early and often.
Also, all lenders should have an active, exhaustive mitigation plan moving forward. Think about any worst-case scenarios that can possibly come up, such as issues involving improper documentation or mishandling of the new disclosures, and have controls already in place to mitigate the associated risks. Regulators will not only expect all lenders to have a thoroughly produced risk mitigation plan, but they will also expect lenders to exercise such a plan on demand during one of their routine visits and expect them to fully justify any issues that may come up.
Understanding and implementing the rule successfully is key, but it is equally important to take a look at the bigger picture. Compliance without strategy can inevitably lead to missed opportunities for lenders. Rather than focus on what is required to ensure compliance, lenders should also consider placing attention on how TRID integration can be used to drive process improvement. Many lenders and their technology providers view compliance integration as a chance to replace outdated infrastructures and processes with a more streamlined and simplified approach for borrowers. For instance, savvy lenders will use TRID as the catalyst in adopting more modern technologies, such as mobility and paperless lending.
The industry doesn't have to look at Oct. 3 as a day of panic and stress. Let's get to work now so that TRID's upcoming implementation date is a smooth start to a better future.
Brad Durrer is operations manager at Wipro Gallagher Solutions, a Wipro Ltd. company and provider of end-to-end technology products and services for mortgage, consumer and commercial lenders in the U.S. and abroad.