RESPA-TILA, TILA-RESPA or TRID. No matter what credit unions call the new Integrated Mortgage Disclosure rule, call it huge. It makes ATR/QM look like child’s play.
Here are four tips credit unions should consider to make sure they’re ready for when the Real Estate Settlement Procedures Act (RESPA) and Truth-in-Lending Act (TILA) Integrated Mortgage Disclosures Final Rule (RESPA-TILA) goes live this year on Aug. 1.
1. Know what’s changing
RESPA-TILA consolidates four existing disclosures for closed-end credit transactions secured by real property. The forms being replaced by RESPA-TILA are:
- Good Faith Estimate (GFE)
- Initial Truth-in-Lending Disclosure
- HUD-1 Settlement Statement
- Final Truth-in-Lending Disclosure
In their place, RESPA-TILA mandates the use of two disclosures: a three-page loan estimate and a five-page closing disclosure.
2. Prepare for new processes, deadlines, and archiving rules
RESPA-TILA also mandates changes to current processes and delivery deadlines:
- New Loan Estimate Delivery
The loan estimate must be delivered or placed in the mail no later than the third business day after receiving the application and no later than the seventh specific business day before consummation.
- Closing Disclosure Delivery Deadline
The closing disclosure must be received by the consumer at least three specific business days prior to consummation. If the annual percentage rate (APR) becomes inaccurate, the loan product description changes, or a prepayment penalty is added, a new closing disclosure must be provided and an additional waiting period of three specific business days after receipt of the new closing disclosure is required before the loan can close.
- Loan Estimate And Closing Disclosure Archiving
Lenders will have to retain copies of the loan estimate for three years after consummation, and retain copies of the closing disclosure and all related documents for five years after consummation.
- New application definition
Under RESPA-TILA, there will be a new definition of what constitutes an application, specifically the removal of the current seventh catch-all item.
- Tolerances (More 0-10% Fees)
Tolerances, called variances under RESPA-TILA, will change and force more fees into the 0% and 10% categories. This imposes greater responsibility on lenders for the amounts they and their partners charge.
- Fee Rounding
All fees in the RESPA-TILA Loan Estimate will be rounded to the nearest dollar. However, when determining whether the fees were disclosed in good faith, RESPA-TILA requires the comparison of unrounded loan estimate fees to unrounded closing disclosure fees.
- Added Dodd-Frank Pressure
RESPA-TILA’s Closing Disclosure will contain additional new disclosures required by the Dodd-Frank Act and a detailed accounting of the settlement transaction.
Lenders will be responsible for preparing the closing disclosure (similar to the HUD-1), which is now typically prepared by a settlement agent. Lenders may continue to use settlement agents to provide the disclosure, provided the settlement agents comply with RESPA-TILA requirements for the closing disclosure.
3. Ask The Right Questions About Your LOS
With the right technology, credit unions can comply with RESPA-TILA without sacrificing compliance, loan quality, or efficiency. Ask yourself:
- Will my loan origination software (LOS) be fully equipped to handle RESPA-TILA changes?
- Will my LOS be updated in time with the new forms, automatic calculations, and disclosure tracking capabilities?
- Is my LOS provider working with key RESPA-TILA stakeholders and thought leaders to understand the new rules and requirements?
4. Start Preparing Now
Even if your organization hasn’t started preparing for RESPA-TILA, there’s still time. Identify affected products, departments, and staff as well as the business process, operational, and technology changes that will be necessary for compliance.
- Identify the impact the changes will have on key service providers or business partners, and what training will be needed.
- Determine the new lender workflow, processes, and procedures needed, as well as how pricing of loan products will be affected.
- Ensure vendors are working toward incorporating the critical changes to keep the credit union compliant.
- Download Ellie Mae’s complete RESPA-TILA Taming Guide now.