CFPB Says TRID Rule Improves Borrowers’ Mortgage Understanding
Written By: Joel Palmer, Op-Ed Writer
Even though it created sizable implementation costs for lenders, the TRID Rule has led to improved borrower understanding of mortgage transactions.
That’s according to a more than 300-page report released last week by the Consumer Financial Protection Bureau (CFPB).
The Bureau issued the TRID Rule in November 2013. It took effect in October 2015. It requires that both a Loan Estimate and a Closing Disclosure be provided for most closed-end consumer mortgage loans.
CFPB said its research indicates these forms have improved borrower understanding of their mortgages.
“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,” CFPB said in an accompanying statement.
“The bureau determined that the TRID Rule is a significant rule, and this report assesses its effectiveness.”
A survey of mortgage originators showed there was a median one-time implement cost of $146 per mortgage in 2015. That represented about 2 percent of the average cost of originating a mortgage that year, according to CFPB.
A similar survey of closing companies showed a median implementation cost of $39 per closing, which was under 10 percent of the total median cost.
Participants in both surveys reported their largest implementation costs to be new information technology systems, policies, and training.
The impact of the rule on lenders’ ongoing costs was unclear, according to the report.
“Although lenders’ costs have increased steadily over the last decade, the data do not show a clear increase in such costs at the time the TRID Rule took effect. It therefore is not clear whether the TRID Rule, other factors, or both, caused increases in ongoing costs after the TRID Rule took effect.”
Closing companies reported additional ongoing costs of $100 per closing as a result of the rule.
The report also examined potential effects of the rule on interest rates and origination volumes. It found either no change or relatively short-lived changes in these measures around the rule’s effective date.
The report showed that complaints to the bureau have declined since the rule took effect.
The report also summarizes public comments for modifying, expanding, or eliminating the rule. The bureau said it will take the public comments as well as the findings of the assessment into account in determining potential changes to the rule that would strengthen its benefits or reduce its costs.
The TRID Rule and its associated disclosures and forms were part of a mandate to CFPB included in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule combined previously separate mortgage disclosures given to consumers under the Truth in Lending Act (TILA) and the 1974 Real Estate Settlement Procedures Act (RESPA).
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
