The clock is ticking for TILA-RESPA. With mandatory compliance now just a few short months away, the industry faces the harsh reality that there is little time left to prepare.
At first glance, the changes under TILA-RESPA—coming to be referred to as “TRID,” for TILA-RESPA Integrated Disclosure—appear to be deceptively straightforward. However, the truth is that these regulations are anything but simple. In fact, these changes represent the most significant revisions to these rules in 40 years and will affect mortgage lenders in unprecedented ways.
With 1,888 pages of identifying requirements and over 400 regulation citation changes, the TILA-RESPA rule is being called an industry game-changer. The new rule includes detailed requirements for producing and delivering the two disclosures in ways that will impact your entire mortgage operations, including your business processes, technology, policies and procedures, vendor relationships, employee readiness, and customer service.
Additionally, failure to comply with the rule could result in astronomical fines and penalties, costing your bank thousands of dollars each day and lost business.
Three months left to plan and prepare
With a regulation of this magnitude, the longer you wait, the more at risk your organization becomes.
For those banks that have fallen behind with implementation, all is not lost. You have less than three months to cover a lot of ground, but it can be done.
The following timeline will help you break the challenge into manageable action items so you can make the most of the remaining time before the effective date of Aug. 1, 2015.
MAY: Focus on testing
During the month of May, testing should be your bank’s primary focus.
For those banks that have received their system updates from vendors, don’t forget to test both your documents and workflow changes. The regulation requires delivery of the closing disclosure no later than three business days prior to consummation of a loan. You’ll want to ensure that your process works to deliver a final document in time to meet this requirement.
While you cannot use the new documents prior to Aug.1, there is nothing preventing you from providing the existing disclosures early. So once you’ve identified how you are going to handle process changes, your attention should be on testing and refining.
Even if you haven’t received your system updates yet, now is a good time to begin building out your test plans and test cases. The Loan Estimate and the Closing Disclosure are dynamic in nature. That means the content in the documents will vary based on the features of your loan products.
The test cases and quality controls you develop will need to take into account what aspects of your products will cause variations in the content of the disclosures. Those involved in the lending process will need to understand how different lending scenarios will impact the content fields, including such detailed information as what type of text and payment tables to use or whether the document should have two or four columns.
In May and June, lenders should be evaluating any internal policies and procedures that may have changed. New procedures will need to be finalized and incorporated into upcoming training.
JUNE: Employee readiness is key
By June, training should already be underway.
Although the specifics may vary by organization, training will be necessary for your loan officers, processors, closing agents, notaries, quality control staff, and compliance and vendor management teams.
Ideally, training should be approached in three phases:
• A general orientation for staff to ensure a basic understanding of what’s changing.
• A deeper dive for those who work closely with the documents or who will need the ability to explain the documents to consumers
• Planning for the detailed system and role-specific training that will occur closer to the effective date of Aug. 1.
Although the third phase of training occurs at a later stage, it’s not too early to start developing your training plan, outlining dates for execution, and determining the materials you’ll need to support it.
Keep this in mind: Some of the training materials you need may already be created and available. For example, the new mortgage shopping toolkit, recently published by the Consumer Financial Protection Bureau, provides clear direction for much of the information that lenders will need to train their own internal staff. The revised consumer publication is available for purchase through your mortgage document vendor or the U.S. Government Printing Office. Also, check with your vendors as they may have training or materials ready to assist you with your implementation and roll-out.
Testing should also be ongoing in June. As part of this process, make sure you’ve worked with your vendors to iron out your issue resolution procedures. It is important to establish clear guidelines on how to escalate issues to vendors and expectations for receiving timely responses.
JULY: Resolve any remaining issues
By July, you are in the home stretch. With one month to go before the mandatory deadline, it’s “go time.”
This month, your production environment should be configured and ready for Aug. 1. In addition, any impact and risk to your business that was uncovered during the testing and issue resolution phases should now have mitigations in place to resolve those.
And, as mentioned above, the third phase of your training program should take place this month to keep it fresh in users’ minds. Make sure that employees in customer-facing roles fully understand the revised documents, the new timing requirements, and any other details that could negatively impact the customer experience.
The month-by-month implementation steps outlined here will help you make the most of the remaining time before TILA-RESPA goes into effect on Aug. 1. Regulatory changes like this are huge, complex events. Successfully managing the implementation requires solid planning and a deliberate approach.
About the author
Kris Stewart, CRCM, is principal regulatory consultant and director, Compliance Professional Services, Wolters Kluwer Financial Services. Stewart has 20 years’ experience as an attorney and manager with the company, where she uses her industry knowledge and legal expertise to help develop strategies and solutions that meet the risk-management and business needs of financial institutions. For the past 12 years she has worked directly with financial institutions to implement automated compliance solutions, while developing and delivering complementary services to assist organizations with compliance program management. She can be reached at [email protected]