To some in the mortgage industry, the upcoming regulatory changes in August might be about as threatening as the crocodile in Peter Pan that ate the clock. It doesn’t seem real, despite all the hype about how “the clock is ticking” and that time is running out to be compliant. Besides, there is talk about it being delayed in Congress anyway.
However, the RESPA – TILA “crocodile” is very real and very deadly. Even if the CFPB does grant a grace period, industry insiders have said that it will not protect real estate and mortgage companies from enforcement actions starting August 1, 2015. Below are the steps necessary to help you remain compliant.
Acknowledge RESPA – TILA’s Existence
Just because you stop thinking about the upcoming changes doesn’t mean they stop being real and dangerous to your bottom line. Take a look at the enforcement actions below that the Consumer Financial Protection Bureau (CFPB) enforced recently. The regulators mean business:
MAY 29 2015 – CFPB and Florida Attorney General obtain $27.7 million judgment against foreclosure relief scam companies
APR 29 2015 – CFPB and State of Maryland take action against “pay-to-play” mortgage kickback scheme; loan officers and former title company executives who traded cash and marketing services for illegal referrals will be banned, pay redress and penalties
APR 21 2015 – CFPB and Federal Trade Commission take action against Green Tree Servicing for mistreating borrowers trying to save their homes- Green Tree to pay $48 million in borrower restitution and $15 million fine for servicing failures.
The hour is late – if you haven’t started looking down the road to deal with these changes, then you are behind the eight ball. Your future self will thank you for being proactive.
Know How Many You’re Dealing With
RESPA – TILA isn’t just a form change. The main regulatory process, form and liability changes will need to change a horde of processes in your organization.
- HUD-1 Settlement Statement and Final TIL is changing to the Closing Disclosure Form
- GFE and Initial TIL is changing to the Loan Estimate Form
Regulatory Process Changes:
- The Closing Disclosure must be provided to the borrower three days before closing. This requires that everyone involved in a closing, which is essentially anybody who has been involved in the process, must have the ability to collaborate quickly and make changes to the Closing Disclosure with varying degrees of transparency. This one process change affects the entire mortgage process and, therefore, initiates the very real need for other process changes.
- The lender has another reason to collaborate on forms in that they are now held liable for errors in the settlement agent’s preparation of the settlement disclosures, creating private liability and vendor management risk.
- The forms’ tolerance level has changed. According to the CFPB’s Small Entity Compliance Guide regarding the Loan Estimate, “Generally, if the charge paid by or imposed on the consumer exceeds the amount originally disclosed on the Loan Estimate it is not in good faith, regardless of whether the creditor later discovers a technical error, miscalculation, or underestimation of a charge.”
- The consequences for not complying with new regulations have changed. These new rules have new consequences—and they are steep.
Internal Process Changes:
What is your organization doing to comply with the above regulatory changes?
- When you communicate matters. It is vital that every person involved in the mortgage process can collaborate on the important mortgage documents as early as possible so the consumer can review the documents and help ensure their accuracy.
- How you communicate matters. Are you using technology that secures the consumers’ Non-Public Personal Information, or are you sending their information through unencrypted email? Are you ensuring that the way you are collaborating on the loan documents is safe and secure?
- What you communicate matters. Is your mortgage company doing everything in its power to ensure that the buyer, title agent, real estate agent, lender and all other professionals involved in the process are able to communicate in an accurate and succinct manner to each other?
- What checks and balances do you have in place to ensure that appropriate communication and the necessary levels of accuracy have been implemented and are running smoothly?
These are just few of the internal processes that your mortgage or real estate business may need to implement.
Don’t Bluff About Having a Compliance Plan
These regulations aren’t going to stay on the beach and sun themselves, so bluffing isn’t going to work. Being prepared is the name of the game and that means having a compliance plan in place that will deal with any regulatory issues that come up.
Tick-Tock. Are you ready for the RESPA – TILA croc?
Want to make your mortgage process easier and more accurate? Contact ATS Secured today.