Lenders: Prepare Now for TILA-RESPA Rules


Applying for a mortgage is enough to make any borrower's head spin, but the new integrated TILA-RESPA disclosures are having a similar effect on lenders. As the August 1, 2015 implementation deadline looms, now is the time for lenders to prepare for the new mortgage disclosure forms, which have far-reaching implications for financial institutions.

Designed to simplify the disclosures borrowers receive when applying for and closing mortgages, the new TILA-RESPA rules integrate four previous forms from the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA) into two new forms. Although it sounds simple enough, this change has the potential to wreak havoc on an unprepared lender. Dozens of internal processes will need to be modified to be in compliance – from minor adjustments to completely rewritten procedures and workflows. As added motivation, the Consumer Financial Protection Bureau (CFPB) has made it clear the implementation deadline will not be extended, and has outlined stiff penalties for non-compliance.

At the Mortgage Bankers Association's (MBA) Annual Convention last month, much of the talk focused on the costs and considerations of compliance, including the implications of TILA-RESPA. One mortgage banker and panelist even mentioned that in light of the new rules, he often feels like his organization is a compliance company that from time to time, tries to originate some loans.

With this in mind, what should lending organizations be doing now to prepare for the August 1 implementation of the integrated disclosures?

Be proactive. Staying ahead of regulatory issues is critical. Because of the complexity and compressed timeframe involved in TILA-RESPA, lenders should be proactively examining their processes to gauge the impact of the new disclosure forms. This should be happening now, before the rollout of technology solutions intended to help lending organizations comply with TILA-RESPA. According to the CFPB, the changes related to this rule may take careful planning, time or resources to implement.

Assess operational readiness. Are we ready? If not, what will it take to be ready? Those are the questions every lending organization should be asking. Make sure that your organization knows the tasks that will need to be completed in order to be compliant with TILA-RESPA regulations. For instance, as a result of the modification or creation of data fields on the new disclosures, lenders will need to consider what processes need to be modified to ensure proper tracking, notification and follow-up. Lenders should already be reviewing processes, documents, technology interfaces and other aspects of business operations.

Align staffing resources. Multiple departments will be involved in the implementation of the TILA-RESPA Integrated Disclosure rule, and it's important to have representation from each of those departments in the planning and implementation stages. If your organization hasn’t already, it’s important to review assignments to appropriately staff for ongoing compliance and regulatory issues. The resources needed to address these types of issues are one of the biggest reasons loan production expenses have increased so dramatically in the past few years. According to the MBA, the net cost to originate grew to $6,253 per loan in the first quarter of 2014, compared to $2,945 just four years earlier – a more than two-fold increase. Staff – and budget – accordingly.

Consider the impact of technology. Traditional lending technologies may not support the complexities of regulatory changes like the integrated disclosures. A comprehensive compliance management system can capture and retain content, compare and route data, track and version documents, and reduce lender exposure. Standardized workflows and reporting functions further streamline processes, help facilitate potential audits, and evidence compliance with Dodd-Frank requirements during a supervisory examination.

A key to successful TILA-RESPA oversight is documentation. Automated systems can provide an accurate record of work, help ensure the system of record matches the original documents, track missing documents across multiple processes, archive documents and communications, and remove paper-based systems from the process. Fiserv continues to evaluate new regulations, including TILA-RESPA updates, as part of our ongoing efforts to help our lending clients manage regulatory compliance risks.

The TILA-RESPA rules represent one of the most significant regulatory changes to mortgage lending in recent memory. If lenders haven’t already, they need to start now to consider the broad implications of these regulations to ensure that they will be ready for implementation.

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