Posted in Economist Commentaries, by Ken Fears, Director, Regional Economics and Housing Finance on August 18, 2016
The implementation of the new Know Before You Owe or TRID rules were market my initial delays that have given way to relative calm. However, half of lenders surveyed in the 2nd quarter Survey of Mortgage Originators indicated that they increased fees to consumers to cover TRID related costs. Weighted by production volume those costs amounted to $258 on average.
What drove the costs?
71.4 percent of respondents cited investor demand or TRID policy and 57.1 percent cited a lack of regulatory clarity as cost drivers.
Some reports suggest that lenders have had difficulty selling the loans they originate to investors, which has caused them to hold onto loans longer, resulting in higher costs. Despite frequent anecdotes, increased manual underwriting was only cited by 14.3 percent of respondents. Looking to remediation, 42.9 percent indicated that neither clarity, investor changes, nor software changes would reduce costs over time. 28.6 of respondents felt that these changes would reduce costs, while an equal share was unsure.
While the TRID rules may result in higher fees from some lenders, the rules were intended to protect consumers and to streamline the old disclosure process. This benefit is not easy to quantify and costs are not insignificant, but they are not likely to impact sales as fees are often added to the mortgage balance, spreading the charge over the life of the loan.