Delivery of Closing Disclosure Under TRID, and Why It's Important
This is one issue you'll come across as lenders continue to prepare for the TILA-RESPA Integrated Disclosures Rule ... hopefully this will make this issue a little easier when you come across it.
So, August 1st is fast approaching ... we're working a lot with clients on training, policy & procedure development, etc. related to the TRID Rule (TILA-RESPA Integrated Disclosures). One issue that jumps out, that we'd like to share with you all, is how to deliver the Closing Disclosure- including why that's important and how it affects Timing.
Timing - 3 Days Prior to Closing
The Closing Disclosure (replaces final TIL and Hud-1) must be received by the borrower 3 days before closing. Note that says "received by" and not "delivered to" -- the Closing Disclosure must be in the borrower's hands 3 days before closing.
Timing is a huge part of the TRID Rule and how we'll adapt as an industry. To give you an example:
You deliver the Closing Disclosure on Day 1 by mail. You have to wait 3 days for mailing (waiting for the borrower to get it in her hands)-this is on Day 4. Then you have new TRID 3-day waiting period, which puts the earliest possible closing at Day 7. The right of rescission 3-day period is added on top of this, making those transactions that much longer. And of course, throw in a holiday or weekend and add a day or two. Oh wait, there's more! Some changes require a re-disclosure of the Closing Disclosure and an additional 3-day waiting period again! And on a second 3-day mailing period and all of a sudden one small mistake and a holiday leads to massive delays in closing. Unhappy borrower ... unhappy real estate agent... unhappy loan officer. Not a happy ending.
You can see why finding any and every way to speed up closing is going to be essential.
"Received"
Before the 3-day TRID clock starts, the borrower must have "received" the Closing Disclosure. How do we know when the borrower received it? Let's look at the different ways a disclosure can be provided.
(1)Traditional "Snail" Mail
When you mail someone a letter, we don't see the mailman hand it to the recipient, and we can't prove that they even opened it. That's why tampering with mail is a felony. We simply trust that mail is delivered. The TRID Rules presumes the disclosure is received 3 days after delivery.
Exception - You don't necessarily have to wait the 3-day mailing period, however. The TRID Rule says that, if you can prove the borrower received the disclosure sooner, then you can use the earlier date. For example, if you mail the disclosure with signature required- that is sufficient proof of receipt.
Best Practices
For lenders that will deliver the Closing Disclosure by mail, we believe we'll see most shift to overnight delivery with signature required to try and help with the Timing problems under TRID.
Work address - Note that USPS doesn't always deliver after work and not all borrowers will take vacation to wait for mortgage disclosures in the mail. Lenders may shift to mailing the Closing Disclosure to a borrower's work address to make it more likely they'll be there to sign for it.
Multiple borrowers - Proving receipt of the Closing Disclosure will also be more difficult (sorry) in cases where multiple borrowers must receive it. Normally, any borrower with primary liability can receive the Closing Disclosure (i.e. only 1 borrower has to receive it). But both borrowers will need to receive it if they have the right to rescind (generally talking, refinances involving the borrowers' principal residence we're talking where it's the borrowers' principal dwelling).
(2)Electronic Delivery
The rules here are essentially the same as for traditional mail. Even if you e-mail it on Monday you still need to wait 3 days for mailing (guess this assumes some people aren't checking their e-mail every 5 minutes?)
But the same exception applies (if you can prove earlier receipt) and that should be easier to take advantage of here. Lenders can require proof of receipt if sending by e-mail. And many systems have a built-in feature that shows when the disclosure was opened.
Best Practice
For the lenders that don't already disclose electronically, here's yet another reason to do so. It's faster, more efficient, and easier to comply with record retention requirements, speaking of which ...
Record Retention. Whichever method you use for delivery of the Closing Disclosure, you'll need a method for documenting receipt by the borrower-- both that it actually occurred and when. With traditional mail, you could request a copy to be signed and returned. It's easier with electronic delivery when you can often printout the screen that shows when the borrower opened it.
(3)In-Person Delivery
This is the most straightforward ... if you hand the Closing Disclosure to a borrower in person, then that is the day of receipt, that is the day the 3-day waiting period begins.
In other news:
Who do you have under $50k in salary that you're not paying overtime to? Right now, you can avoid the hassle of tracking (and expense of paying) overtime with a minimum salary of $23,660 and up (amid some other requirements) .... what if this was increased to $50- or 60,000? That might happen. Processors and closers working late to get loans through ... loan officers, well, let's not even go down that road! May be time to start thinking of how we might adjust compensation if this occurs.
The trend downwards for community banks, as opposed to credit unions and large banks, since 1992 is kind of scary, as shown in this chart from CUNA.
Here's an interesting recent article on the role of FHA in mortgage lending.
This Wall Street Journal article argues that delinquencies reaching the lowest point since 2007 proves that loans originated since 2011 simply have a higher credit quality than before (I'm sure it must help that home prices have been rising).
Whether you're pitching or catching, firing an employee is often a low point. The person being fired can be angry, shocked--offended personally or concerned financially. The person doing the firing can feel terrible too. But the mortgage business is so mercurial (Colin, that means cyclical) ... that a processor you lay off in the winter may be desperately needed in the fall. If you make an effort to be kind during a layoff that very well may pay dividends when the market shifts and you need to "staff up" quickly with qualified people. One example of doing well by doing good ... ("Dad, did I do good on my test." "Only Superman does good, son, you did well").
Now I know you can't learn to ride a bike by reading a book, and that this comes from experience, but I do believe Jack Welch makes a good point in his book "Winning" (c) 2005 when he argues that there should be no surprises when an employee is fired. He thinks the ideal situation will go like this:
BOSS: Well, I think you know what this meeting is about.
EMPLOYEE: Yes, I guess I do. So, what are your thoughts on timing and what's the deal?
Probably easier said than done, but in order to avoid surprises you have to have honest evaluations. It's not good for anyone (company or employee) if you smile and give good reviews to an employee for 5 years because you can't bear to deliver bad news to them (that they're not doing as good a job as you need them to)--only to fire them, seemingly out of nowhere. "But I've had stellar reviews for the past 5 years!" Better they know sooner than later--they have a chance to improve at this job or find another where they can succeed. And better for you to find out what they're capable of ... people aren't frozen in time, with support and encouragement they can improve in almost all areas.
"Keep away from people who try to belittle your ambitions. Small people always do that. But the really great make you feel that you, too, can become great."
- Mark Twain
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