Talk TRID Pain Relief While at MBA Tech in Los Angeles!
Are you attending MBA’s Tech Conference in Los Angeles? While you’re in LA, we invite you to schedule a 30-minute meeting with Managing Consultant, Keith Kemph, who will be in attendance and available to discuss how CC Pace’s TRID Rapid Review Program may be helpful to your organization. TRID is currently the mortgage banking industry’s #1 challenge to navigate. Our program is designed to drive down lender cost to cures, reduce closing time and minimize frustrations associated with TRID compliance. Keith will be available to share how CC Pace can help solve your greatest challenges with TRID. Keith will be available to meet April 3rd – 6th. You can find out more about our ‘TRID Rapid Review’ program here, or reach out to Keith directly to schedule time with him at firstname.lastname@example.org.
While TRID didn’t necessarily result in a ‘housing apocalypse’ as I jested it might in a blog piece posted in the fall of 2015, it does in fact continue to wreak havoc on mortgage bankers nationwide―havoc that won’t end any time soon.
Mortgage bankers have worked vigorously to cobble their people, process and technology together to ensure the forms and data would be correct in order to meet regulatory scrutiny. While there is room for error (as lenders only need to demonstrate a concerted effort to comply), the struggle continues. Lenders are challenged to overcome the operational impacts and impairments that have resulted in dramatically increased cost to produce.
CC Pace conducted a survey of a wide variety of lenders recently, and found that 2 out of 3 are struggling ‘significantly’ with meeting the new TRID regulation. Lenders indicated they have had to ‘throw bodies at it’, temporarily re-structuring processes and other facets of their organization to keep up with the workload. They’ve had to hammer their technology providers for immediate enhancements and implement additional manual steps and work arounds to ensure compliance. Yet despite these proactive steps, some lenders continue to conduct emergency meetings daily to put out the fires at hand in an effort to remain out of hot water with the CFPB while moving loans to close. Cost to produce has sky rocketed due to staff increases in closing and significantly increased tolerance cures, and customer service has been impacted, often with numerous days added to the closing process, negatively impacting lenders’ efficiency, productivity, profitability and reputation. As a result, recent headlines show several top banks and mortgage lenders are either getting out of the lending business or significantly reducing their appetite for production. This should be a clear and distinct message that the dust of TRID has far from settled.
Unfortunately, most mortgage bankers see no end in sight to their struggles. Many focused originally on getting documents correct but less so on their processes, and this is what is now driving their cost and customer service issues. A continued investment of time and energy is required as lenders to conduct on-going evaluations of their existing processes―knowing that any changes can send ripple effects throughout the end-to-end process. As a result, CC Pace recently launched a targeted service called ―TRID Rapid Relief―to help our customers cope.
In my blog post on October 8, 2015, The Value of Looking Back while Looking Ahead, I posted the question, “What’s next for lenders after TRID goes live?” The short answer turns out to be “clean up.” But once the aftermath of TRID gets laid to rest and the struggle subsides, what does come next?
During the last several years lenders nationwide have understandably put off large-scale projects due to TRID. It is now time for lenders to start reconsidering those large-scale projects in order to effectively reduce cost to produce, increase return on investment and position themselves to move forward successfully and profitably in the new age of mortgage banking.
Moving forward, it will be imperative that lenders start to take a long-term, strategic approach to their process, people and technology―a long-term strategic approach that will eliminate the rubber bands, glue, Band-Aids and manual steps they have come to rely upon. As technology, regulations and customer needs have evolved―and with the coming of the millennial home buyer and homeowner―lenders need to start re-thinking their long-term approach, recognizing that the technology and the process strategy they employed to get through the financial crisis may not be the scalable, long-term solution that will allow them to successfully grow as the housing markets continue to recover. CC Pace has been successfully orchestrating the design and implementation of large-scale, business transformation projects for mortgage bankers for over 35 years. We are currently in the final stages of helping implement a Business Transformation project for one of the nation’s largest and most respected regional banks. This has been one such transformative project, where fair lending and the customer experience has been at the forefront of the bank’s requirements. CC Pace facilitated the ground-breaking merger of the mortgage and home equity business units while helping move them onto a shared technology platform. While some industry colleagues have considered this concept “bleeding edge” and others say it’s “cutting edge”, most industry executives will recognize this as representing the new age of lending, one that truly represents fair lending at its best due to the bank’s ability to now offer all the home lending products a customer is qualified for at point of sale, Mortgage AND Home Equity products. Rather than the traditional approach of a loan originator only being able to represent and sell the home lending product their particular origination channel represents, Mortgage OR Home Equity loan products.
Executives are recognizing that in this new era of mortgage banking, walls need to be torn down and operational efficiencies gained throughout to drive the ultimate customer experience, while still mitigating risk across the board. Now more than ever, it is important for mortgage banking leaders to stop looking down and to start looking up―scanning the horizon and moving their organizations towards the future of mortgage banking. It’s time to start transitioning from survival to transformational.
Development of your business strategy requires a long and hard look ahead to the future. Anticipating what the industry may look like, what your customer profile may be and what technology might be available is critical. Yet as important as looking forward is, it is equally critical for an organization to look back and analyze how you got here, what has made your company great and how you’ve managed to retain and build your customer base over the years. The combination of these views will play a significant role in designing a powerful ‘move forward’ strategy for your organization.
In recent years the financial services industry has been heads down focused on navigating the regulatory environment, including the most widely recognized and intrusive regulation of TRID. As a result, any vision for long-term strategic planning has taken a back seat. As TRID begins its final march toward implementation, it’s high time for the industry to begin looking beyond the recent strains of compliance and begin to recall the lessons learned from the past and imagine what the future might be with the development of an effective business strategy. Adidas learned this lesson by regaining control of their future after taking a long, hard look at their past to ensure they break the chains of recent history. Read more about it in Strategy+Business, who wrote “How Adidas Found Its Second Wind”. It’s now time for the financial services industry to get its “Second Wind”.
When speaking with leaders in the mortgage banking industry of late, the chorus always remains the same, “we are heads down on TRID.” Despite the CFPB’s recent announcement regarding leniency on enforcement of this new regulation, industry executives know full well that there is no delay. Only firms who make a “good faith effort” to comply with the new regulation will experience leniency on enforcement. The theme at lenders nationwide therefore remains “stay the course” for hitting the August 1st deadline.
TRID has been widely recognized as one of the single most impactful regulations to befall the mortgage banking industry in recent memory. The real significance of this regulation goes well beyond the requirement to change an already comprehensive and sophisticated consumer disclosure document. By shifting the burden for the consumer closing document three days prior to close from the title company to the lender, it also forces both the lender and title companies to rethink a hundred year old workflow and business relationship, engaging in a more collaborative partnership. To accomplish this effectively, TRID requires lender reconfiguration of business rules, workflows and processes, which has a direct impact on business strategy, technology requirements and system configurations while making certain audit trails go deeper and wider. Amidst it all, lenders are having to work overtime to protect the customer experience by reengineering the loan closing process and better setting expectations with consumer to ensure a positive customer experience and to avoid multiple reschedulings of loan closings. Ultimately putting added pressure on each lender’s cost to produce, not to mention potentially increasing housing costs for consumers.
With less than 60 days remaining to implementation, lenders continue to break the glass and retrieve their proverbial Mortgage Bankers First Aid Kit in order to swiftly bandage together the disparate impact points of TRID, not only to ensure compliance, but for self-preservation. With almost two years to prepare and most vendor organizations fully focused on developing various document solutions and workflow assistance, it’s unfortunate there has been little offered in the way of a universal “one size fits all solution” that lenders can simply plug in and safely implement to help ensure compliance, workflow efficiency and a winning customer experience. Yet after twenty-seven years in the mortgage banking industry, I remain confident mortgage bankers will once again be resourceful, agile and pliable to ensuring successful adoption of the new TRID regulations to ensure consumer satisfaction. After all, it’s in our DNA. We will do what it takes, even if it means throwing bodies at it (similar to days gone by) or adding new layers of manual processes and procedures or quality control checks. I am convinced most will be ready to meet the industry’s new requirements. But at a cost.
So the question remains, “What’s next? Where do mortgage bankers focus after August 1st?”.
As with many disruptive changes, focus before the deadline is on complying with the regulation. Afterwards the focus must shift to actually making it work effectively and efficiently. This could mean that lenders need to take a pause, step back and get back to the basics by conducting an end-to-end full-scale process assessment. A business process assessment serves to help ensure lenders are originating loans at the lowest possible cost to produce by looking to remove redundancies, maximize technology configurations, better integrate appropriate vendor solutions and new business rules, or by simply amending a series of processes and procedures in light of new ones.
Veteran mortgage banking executive, A.W. Pickel, President and CEO at Leader One Financial, is very concerned about the impact of TRID regulation on consumers. “My concern is, what happens to customers with a moving van in the driveway and due to circumstances beyond their control they now have to wait three more days to close. Regulations meant to do good may cause further harm. Will this regulation then cause realtors and loan officers to do off balance sheet items?” In regards to how to how to mitigate the risk, Mr. Pickel goes on to say, “The only way to offset this risk is through the adoption of additional procedures. In the end, however, additional procedures can equate to increased cost to produce a loan.”
Pete Lansing, former President of Colorado Mortgage Lenders Association and President of Universal Lending for over thirty-four years, feels TRID really isn’t any different than any other regulation. “Post August 1st we will be in full force compliance evaluation and review, looking for any holes left over that were not covered before the implementation date. Every organization must keep their eye on regulatory compliance at the same time keeping customer service as its number one objective. The balance between these two objectives has always been the mortgage banker’s concern and goal. I believe these new changes are no more difficult than those previously issued by the regulatory forces.”
Taking it one step further, Gellert Dornay, President & CEO of Axia Home Loans, when speaking of his TRID implementation strategy, put it this way, “Post TRID implementation, lenders should be auditing compliance with the new rule and identifying any areas that require further training or process tweaks. However, if you’re not doing a full-scale operational assessment until after the rule has gone into effect, you’ve missed the boat.”
While the mortgage banking apocalypse is not likely to take place on August 1st, what is more likely is that lenders are going to need to take time post-TRID implementation to conduct a full-scale audit of their end-to-end origination process in order to lower cost to produce and ensure consumer satisfaction. Based on CC Pace’s experience in conducting business process assessments in the mortgage banking industry, we encourage lenders to keep three key components in mind when conducting their post TRID operational assessments. First, be honest in asking yourself if your recently amended TRID process is actually economically “scalable”―is it scalable enough to support what is anticipated to be a growth market if secondary liquidity truly returns due to a rising interest rate environment? Second, when reviewing the operational assessment, challenge yourself with this question, “Is the right long-term answer to take the temporary bandages off and look at full-scale reconstructive surgery of processes, systems and organizational structures in order to successfully implement long-term, scalable growth strategies?” Lastly, decide on a strategy and move forward. Meaningful operational assessments that end up sitting idle on the shelf collecting dust are generally reflective of an overly conservative approach and commitment to long-term failure. Such efforts are best defined as exercises in futility.
After August 1st there is no better time to stop, rebuild the origination’s foundation and prepare for the new mode of lending.