A few days before Christmas, the NAR (National Association of Realtors) reported a 10.5% decline in Existing Home Sales for November. Lawrence Yun, NAR chief economist promptly cited the mortgage industry’s new TRID requirements as the primary culprit for the sharp drop stating that this result; “without a doubt was heavily impacted by new federal government rule regarding closing document situation.”
Mr. Yun also pointed out that; "Sparse inventory and affordability issues continue to impede a large pool of buyers' ability to buy, which is holding back sales, however, signed contracts have remained mostly steady in recent months, and properties sold faster in November. Therefore it's highly possible the stark sales decline wasn't because of sudden, withering demand."
Statistically speaking, it took an average of 41 days to close a mortgage loan in November, 2015, up 5 days from the 36 day average during November of 2014. TRID adds 3 days to the front end of the mortgage getting process and 3 days to the back end, ergo TRID caused closing delays and the decline in Existing Home Sales for November.
Not so fast.
Pending Home Sales is a forward looking indicator that measures signed purchase contracts and these were down 1.4% in August, down again 2.3% in September and up just 0.2% in October. Fewer signed purchase contracts (“withering demand”), mean fewer purchase closings otherwise known as Existing Home Sales, just sayin’.
“Sparse inventory and affordability issues” are enough of a one-two punch to put a dent in Existing Home Sales on their own, blaming TRID as the primary villain for the 10.5% decline in November may be easy but it is misplaced.
The media was quick to disseminate the TRID headline which was quickly followed by a chorus of mortgage industry leaders singing “I told you so.” But the NAR’s Chief Economist, the media and some of us in the mortgage industry are wrong. TRID in and of itself did not delay any closings in November. Not-so-good TRID deployment by not well enough prepared lenders hampered their ability to do what we knew was coming, and they dropped the ball.
Lenders failed to adequately implement TRID into their processing systems and work flows and they came up short. TRID is the excuse but lack of performance was the cause.
There I said it, let loose the haters.
Fact is, a lot of lenders did get it right and TRID implementation was mostly just a well prepared for non-event. Closing delays were not an issue for the national-footprint-big-league mortgage lender that I work for, and for me personally, all of my loans closed on time, as scheduled, with no drama.
I claim no bragging rights here, we were ready for October 3rd, 2015 because long before the clock struck midnight on October 2nd, the entire focus and culture where I work was about TRID. Systems, personnel, work-flows, webinars, meetings, training, all mandatory, all do-it-or-else mandates and all with the purpose of being ready for when TRID would rule.
This whole event was about adding 2 disclosures; the Loan Estimate and 3 days to review it to the beginning of the mortgage application process, and the Closing Disclosure and 3 days to review it to the end of the process, that’s it. The tricky part was making the systems and work flow changes necessary and then speeding up the loan processing mechanics in the middle. Oh yeah, and communicating how to do it to the masses in a way that we understood that this was meaningful and mandatory. All that practice and preparation helped us get it right and we were not alone. TRID was a non-event for many lenders; in fact, one lender down in central Florida; Supreme Lending is getting TRID compliant closings done in less than 20 days!
TRID was the single biggest event in the mortgage industry in decades and it is not going away anytime soon. As an industry, we can’t blame the rules of the game if we come up short, we need to go and figure out how to get it right, make whatever changes need to be made, put the right people in place to navigate those changes and then do whatever we need to do to get it right.
I have in the past been a vocal critic of the CFPB and I think TRID has room for improvement, but TRID is good for mortgage consumers. The LE and CD are easy to understand and compare, they contain great information and the fact is; TRID is here to stay.
We just need to get better at making it invisible.
