Mortgage lenders and settlement-service providers are making sure their clientele and referral partners understand the nuances of the new disclosure forms that take effect Aug. 1.
At the recent Regional Conference of Mortgage Bankers Associations, the chairman of the national trade group,
But there are those who are actively looking to educate their business partners in addition to their own employees about the changes.
HomeBridge Financial Services, a retail and wholesale lender in Iselin, N.J., feels that it has an obligation to educate real estate brokers about this change.
"We're taking the initiative with our referral partners to help with the information and education about this process," said Phil Schild, its general counsel and chief compliance officer.
There are a lot of misconceptions about the change, with many in the mortgage industry still feeling that things are as simple as replacing the Good Faith Estimate with the lending-estimate form and the HUD-1 with the closing disclosure when Aug. 1 rolls around, said Grace Currid, HomeBridge's chief credit officer.
'Fundamental Change'
HomeBridge is "looking at our own workflow, because this is not about two new forms. If it was that simple, you would take the old forms out, you put the new forms in and everybody goes back to their normal way of doing business.
"It is anything but just two new forms. It's really a fundamental change in the way the industry is going to disclose to consumers," she said.
There are new timelines, procedures and policies that need to be developed throughout the whole origination process, from the time the consumer starts looking for a loan all the way past closing, Schild said.
Still, he noted, even though the Consumer Financial Protection Bureau
Lenders had to deal with the new qualified mortgage rules early in 2014 and more recently have had to deal with increased refinance volume because of unexpectedly low interest rates.
Until Aug. 1, things at HomeBridge will be done the same way as before. "Since lenders cannot begin using the new definition prior to Aug. 1st, any application received on or before July 31 must follow existing regulations," Currid said.
The aim of HomeBridge's training program is to get the various players in origination to look at how the change will affect their part of the transaction.
This is not meant to be the definitive education program regarding the new disclosure scheme. "We know there are unresolved issues [regarding the forms' implementation], but the goal of this is for [those taking the training] to have enough of a working knowledge" to determine in which ways this change affects the way they operate, Schild said.
Unsettled in Settlements
Other than mortgage lenders, no group will see a bigger shift in the way they operated under the new format than the title and settlement services providers.
Many in this business, especially the smaller companies, have expressed a lot of fear during industry meetings and webinars, especially when it comes to what the changes mean, said Shanon Lake-Catello, the chief technology officer of Commonwealth Settlements USA in Pittsburgh.
"Title and settlement agencies, we're used to doing things a certain way and it's been the same process for decades. And you throw in a change; a lot of people don't like change. It's the fear of the unknown that is scaring a lot of folks.
"But the more that you dig into it and work with your lenders, everybody will find that it's not going to be that big of a change. It's just learning a new process, and being willing to be flexible and work with your lender as a partner," she said.
Commonwealth will be offering training programs for its nationwide staff and for closing agents and notaries. For those who work outside the company headquarters, there will be webinars and the training will focus on procedural changes, the new expectations from lenders and reviewing the content of the new forms.
The accounting firm of Pershing Yoakley & Associates has performed an audit on Commonwealth and
"Certification is an absolute need for title and settlement agencies," Lake-Catello said. "With everything that lenders are facing right now, and all of the different regulations and what they have to be responsible for in vetting their third-party providers, the certification is an ease and peace of mind for the lender knowing that the companies they are using, that are handling the work for their borrowers, are protected."
As for issuing the disclosure itself, Commonwealth has been in discussions with some of its lenders, talking with them about how their processes are going to change and what they will be looking for from the company.
Verification Steps
Another large title agency is planning to offer lenders a service which will verify that the consumer has received the closing disclosure three days before the loan closing is to take place.
In cases where the lender is unsure that consumers have received and looked at the closing disclosure, Rockville, Md.-based CLA Title and Escrow will hire notaries to visit the buyers and confirm that they have the documents and their loans are now ready to move to closing, said company founder John Coester.
The inspiration for this service comes from what happens regarding the appraisal, where the borrower needs to receive a copy of that document before the loan closing, he pointed out; Coester has plenty of experience in that business because before founding CLA, he was the chief client advocate for appraisal management company Coester Appraisal Group.
"We have to deliver the appraisal to the buyer: what is the difference?" he asked rhetorically. That delivery, like with the closing disclosure, can be made electronically.
But if the borrower does not have an email address or the email bounces back, you have to hand-deliver the appraisal or send it out by mail. When time is of the essence, sending it by mail is impractical.
On the title side, CLA is going to take the delivery aspect a step further and have notaries go out and pay them for that service, Coester said.
If there is a complaint regarding the disclosure process it gives lenders a way to say, "Yes I can prove it, actually. I don't think it will be taken on good faith" that it was delivered, he added.
Using notaries in this circumstance provides an audit trail to show regulators that the lender made the effort to comply with the new rule.
