Fannie Mae: With TRID, Larger Lenders Hold Advantage–For Now

Fannie Mae, Washington, D.C., reported its survey of senior mortgage executives said new mortgage disclosure requirements have given larger lenders a more competitive advantage in the mortgage marketplace.

The firm’s Economic & Strategic Research Group surveyed executives in February on the impact of the Consumer Financial Protections Bureau’s TILA/RESPA Integrated Disclosure Rule (TRID, also known as Know Before You Owe). The rule went into effect last October and requires lenders to provide two loan documents: a Loan Estimate and a Closing Disclosure, designed to simplify the loan application process and putting the onus on lenders to verify timing, accuracy and completeness of mortgage disclosures. TRID required most mortgage lenders to revamp their loan disclosure and closing processes.

The survey reported two key findings:
–The two biggest challenges lenders reported in implementing TRID were “managing/coordinating with third-party technology vendors” and “communication with key origination and closing players (e.g., buyer, seller and loan officer).”
–One-third of lenders said TRID has created more competitive advantages for their firm, whereas 12 percent say fewer competitive advantages. In particular, larger lenders are more likely than smaller lenders (44 percent and 16 percent, respectively) to report that TRID has allowed their firm to have more competitive advantages.

The survey noted many small to mid-sized lenders indicated that larger institutions are able to invest more to upgrade systems and have in-house compliance resources to increase efficiency and competitive advantages.

Sheila Teimourian, Fannie Mae vice president and deputy general counsel, said the results confirm in large measure the sense that lenders and their service providers have had difficulties in transitioning to TRID, particularly among smaller lenders.

“As is evident from trade association and congressional proposals in recent months, lenders remain concerned over how to comply with TRID and the consequences for non-compliance,” Teimourian said. “Although there have been some suggestions in media reports in recent weeks that lenders’ concerns over TRID implementation have receded somewhat, there is a growing sense of unease among the lender community over the interpretations and policies of due diligence firms and secondary market investors regarding TRID compliance.”

Teimourian said it remains to be seen whether the competitive advantage that larger lenders reported as a result of TRID implementation will be sustained, “or whether small and mid-sized lenders will close this gap using their own resources or through innovative third-party vendors.”

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