Housing News

TRID Five Years Later: CFPB Says Rule Changes Mostly Worked

Believe it or not, it's been five years since the acronym TRID became common knowledge for every mortgage company, title company, closing agent, and real estate agent. TRID stands for the TILA-RESPA Integrated Disclosure Rule, but for many of those housing professionals, the acronym came to jokingly stand for "The Reason I Drink" due to the amount of work that went into implementing the rule.

TRID, which took effect on Oct. 3, 2015, brought about a series of changes to the forms provided to borrowers during the mortgage process and at closing that were meant to make the forms easier for borrowers to understand.

Now, five years later, the Consumer Financial Protection Bureau says the rule accomplished some of its objectives but was not a picture-perfect success.

The CFPB recently published a review of the TRID rule and its implementation, stating that the changes to the Loan Estimate and Closing Disclosure forms did make it easier for borrowers to find relevant information on the forms, but the results were "mixed, but leans positive" on whether the forms made it easier for borrowers to understand the information.

"The evidence available for the assessment indicates that the TRID Rule improved consumers' ability to locate key information, compare terms and costs between initial disclosures and final disclosures, and compare terms and costs across mortgage offers," the CFPB said in its report. "Evidence was mixed, but leans positive, regarding whether the Rule improved consumer understanding of forms."

Those who were working in the housing business in the mid-2010s can attest that the implementation of the rule was stress-inducing and costly, with both mortgage companies and title companies needing to update their systems and operations to be able to provide the forms at the appropriate times.

In its report, the CFPB acknowledges the cost associated with the implementation of TRID, stating that the cost to originate and/or close a loan went up for both mortgage companies and title companies alike.

The CFPB also noted that time-to-close slowed in the immediate aftermath of the rule taking effect, due to lenders navigating the uncharted waters.

The CFPB cautioned that while time-to-close eventually returned to normal, the cost to originate remains elevated, but the CFPB noted that it is unable to tell if TRID is the sole cause of the increase.

"The TRID Rule's effects on ongoing costs are less clear. Industry data indicate that mortgage lending costs have steadily increased over the past decade," the CFPB said in the report.

"However, the Bureau does not have any data that demonstrates how much, if any, of these increased costs are attributable to the TRID Rule," the CFPB continued. "Establishing a relationship between the TRID Rule and these increased costs is particularly challenging given that the Bureau implemented other mortgage rules at roughly the same time as the TRID Rule that also may have affected costs."

Despite the issues for lenders and closing agents, the CFPB said that TRID did meet several of its goals for borrowers. The initiative, which was also called "Know Before You Owe," was designed to simplify the mortgage forms for borrowers, making it both easier for them to understand and easier for them to shop around and compare multiple mortgage offers. The Loan Estimate form, received early on in the mortgage process, details all relevant terms and conditions of the mortgage in question before the borrower agrees to the loan. The Closing Disclosure, on the other hand, provides the borrower with all the relevant information about their loan in advance of their closing.

In its report, the CFPB said that TRID accomplished those goals. According to the report, borrowers who obtained a mortgage after TRID took effect were "more likely to report applying for a mortgage from more than one lender or broker (although most borrowers still reported applying for only one mortgage)."

As part of the report, the CFPB has been collecting comments from industry participants, observers, and other parties. Unsurprisingly, comments from the housing industry have been decidedly "mixed" when it comes to the effectiveness of the TRID rule.

According to the CFPB report, "many industry and trade groups stated that the forms were confusing to consumers, ineffective, hard to understand by consumers, not used by consumers, contained too much information, or had too many pages."

But many other commenters noted that they'd like to see changes to the rule, but would prefer if the "basic provisions" of TRID stayed in place because to change back to the previous way of doing things or to another new way would be "costly" for the industry.

As for what happens next with TRID, the CFPB said that it will consider the results of the report and the public comments when determining whether it will make changes to the TRID rule or not.

"The Bureau will take the public comments as well as the findings of the assessment into account in determining whether there might be changes to the rule that would strengthen the rule's benefits or reduce its costs," the CFPB said.