Bankers’ Hours column: Bureaucracy is extending the time to close mortgage loans
One thing that definitely doesn’t need to be extended is the time it takes to close and fund a mortgage loan. Unless you’re one of the lucky few who can waltz in to Sotheby’s Aspen office, shuck off your Siberian Sable fur coat and dash off a check for a $2 million condo purchase, you know exactly what I mean.
The mortgage lending process is the negative standard for hitches, glitches and switches. Not too long ago, lenders and borrowers joined in dreaming an impossible dream that, with 21st century communication and digital technology, getting a residential mortgage would be easier, at least on the procedural side.
But that doesn’t appear to be the case. A recent Wall Street Journal article noted that the average residential mortgage took 49 days to close in November 2015, up three days from earlier in the year.
The reason, apparently, is a complete revamping by the Consumer Financial Protection Bureau of how rates and costs are disclosed to residential mortgage borrowers that became effective on Oct. 3, 2015.
Prior to this, the disclosure of loan costs, as mandated by the Real Estate Settlement Procedures Act, and interest rates, as required by the Truth in Lending statute, were communicated in separate communications, with closing documents geared to accommodate this regulatory profile.
All of that changed in October with a completely new batch of documents and timing triggers, called TRID, which stands for Truth in Lending, RESPA Integrated Disclosure. This set lenders scrambling to reprogram software, retrain staff, and test it all so as to be in compliance.
The compliance part didn’t happen right off the bat. After implementation of the new procedure, Moody’s reported that several third party firms had reviewed closed loans from TRID and found that 90 percent had errors that violated the regulation. This led lenders to express fear that this could affect the marketability of the mortgage-backed securities that these loans were destined to be a part of.
This prompted the CFPB recently to assure everybody that they weren’t going to be punitive in upcoming exams but would seek to help lenders correct glitches and honest errors.
All of this came about because the bureau believes that consumers should shop for mortgages whether they want to or not. A survey conducted in 2013 by the CFPB itself showed that 71 percent of prospective borrowers filled out just one mortgage application. The majority of borrowers said that they go to a lender that’s convenient, or to a bank or mortgage broker recommended by a friend or family member.
The CFPB seems to have a vision of residential mortgages being ensconced in a great mall, with prospective borrowers sallying out from the food court, strolling down the halls, and sampling mortgages like trying on shoes. Apparently it doesn’t work that way.
But you gotta love ‘em, the CFPB will try to make it so, no matter what.
Pat Dalrymple is a western Colorado native and has spent almost 50 years in mortgage lending and banking in the Roaring Fork Valley. He’ll be happy to answer your questions or hear your comments. His e-mail is firstname.lastname@example.org.
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