CFPB: TRID Rule Results ‘Mixed, But Leans Positive’
The Consumer Financial Protection Bureau released its assessment of the TRID Integrated Disclosure Rule, acknowledging the rule resulted in “sizeable implementation costs” for mortgage lenders and servicers but finding the rule ultimately benefited consumers.
The assessment (https://files.consumerfinance.gov/f/documents/cfpb_trid-rule-assessment_report.pdf) said TRID, established in 2017 and also known as “Know Before You Owe,” made progress towards several of its goals.
“The evidence available for the assessment indicates that the TRID Rule improved consumers’ ability to locate key information, compare terms and costs between initial disclosures and final disclosures and compare terms and costs across mortgage offers,” the report said. “Evidence was mixed, but leans positive, regarding whether the Rule improved consumer understanding of forms.
However, the assessment also found the Rule resulted in sizeable implementation costs for companies. “Firms also reported increases to their ongoing costs; however, it is unclear if these increases are due to ongoing trends or if these increases can be attributed to the Rule,” the report said. “The report examined potential effects on a range of market outcomes, such as interest rates and origination volumes, and found either no change or relatively short-lived changes in these measures around the Rule’s effective date.”
In addition, the Bureau published a Data Point (https://files.consumerfinance.gov/f/documents/cfpb_data-point_how-mortgages-change-before-origination.pdf) examining how the terms and costs of a mortgage loan might change during the origination process as reflected in the Loan Estimate and Closing Disclosure forms provided to borrowers pursuant to the TRID Rule. The research examined data for about 50,000 mortgages, though they may not be representative of all mortgages. Other key findings:
–Nearly 90 percent of mortgages received at least one revision (either a revised Loan Estimate or a corrected Closing Disclosure). Nearly 62 percent received at least one revised Loan Estimate, and 49 percent received at least one corrected Closing Disclosure.
–The prevalence of changes in loan terms between the first Loan Estimate and the last Closing Disclosure varied greatly across mortgage terms tracked in Bureau data. For example, the annual percentage rate changed for more than 40 percent of mortgages, the loan amount and the loan-to-value ratio changed for almost a quarter of mortgages, and the interest rate changed for about eight percent. In contrast, changes to maturity, loan type (conventional, Veterans Affairs, Federal Housing Administration, United States Department of Agriculture) rate type (fixed or adjustable-rate) and loan purpose (purchase, refinance, etc.) were relatively rare.
–Similarly, the magnitude of changes varied widely among the mortgage terms tracked in the Bureau data. Changes to loan amount and APR were relatively small, whereas many changes to interest rate and LTV ratio were relatively large. The disparity between the magnitude of changes in APR and interest rate are at least partly mechanical—APR would likely change slightly in response to small changes in loan amount or closing costs.
–According to survey data, disparities between the prevalence and magnitudes of changes to APR and changes to interest rate may also be due to precautions lenders took to avoid tolerance violations. More than three-quarters of respondents said their institution “sometimes,” “often,” or “almost always” estimated fees at the top of their range to avoid possible tolerance violations. Use of this strategy would imply that mortgage costs on the Closing Disclosure would often be lower than initial estimates, and these changes would subsequently show up in the Bureau’s data as a small decrease in APR.
–The median number of days between application and consumers receiving their first Loan Estimate was one calendar day. Thus, for most mortgages, lenders provided Loan Estimates sooner than they were required to under the TRID rule.
