CUs face big mortgage documentation decisions before Aug. 1, 2015.
By John Levy
The close of another year naturally causes most people to think about the year ahead. For our industry, it is a time to ponder such questions as, what will be the defining trends? What will be next year’s biggest stories? What do we face as our primary compliance challenges? This last question might be bringing most credit unions to a screeching halt. Not that managing burgeoning regulatory changes is anything new to today’s executives, but there are some fairly serious deadlines looming. Realize it or not, we are less than a year from the TILA-RESPA Integrated Disclosure Rule issued by the Consumer Financial Protection Bureau, with a go-live date of Aug. 1, 2015. The new rule is meant to make the information on mortgage disclosures easier for consumers to understand by consolidating forms required under the Truth in Lending Act and the Real Estate Settlement Procedures Act, as well as eliminating miscellany data. The TILA-RESPA rule is meant to create a friendlier borrower atmosphere. For instance, two new documents—the loan estimate and the closing disclosure--will consolidate several other forms previously used, simplifying the consumer’s experience. Also, it is supposed to ensure there is no extra, unnecessary data on disclosures, making the display format more convenient for the borrower to view and understand. An example would be removing the option for zeros or N/As to display on documents that disclose costs and the APR. The key is to show only the information relevant to a particular borrower's situation. While this change may sound simple on the surface, the rule will bring considerable changes to mortgage document generation. Credit unions that want to stay in this market will need newly compliant closed-end real estate and home equity transaction documents, and a new method of creating these documents. They will likely need to work with their core, loan origination system and database partners to ensure these platforms accommodate the required additional data elements. In all, I see three options being available for credit unions (and other financial institutions) in their responses to the pending rule:
- Stick with current document processes and, therefore, limit real estate loan offerings to avoid the TILA-RESPA requirements.
- Spend the money needed to change documents and become compliant.
- Go outside the traditional channel to a third party.
Credit unions have acknowledged the changes, but may not have fully considered the ramifications--such as possibly exiting the lending business or the significant next steps for their organizations. The discussion of document generation must happen now to ensure credit unions wishing to continue their mortgage business as usual will be equipped with compliant resources moving forward. Mortgage lending is not only profitable, but gives credit unions the opportunity to build the highest level of member loyalty. While changing how they approach document processes is a large undertaking for any credit union, the investment is definitely worthwhile to become members’ trusted financial institution for one of life’s most important purchases.
John Levy is co-founder and executive vice president of IMM, Linden, N.J., and a board member of the Electronic Signature & Records Association. IMM’s eSignature capture, business process (workflow) automation, and document presentment promote financial institutions’ sustainability while increasing productivity and operational efficiencies. For more information, visit or connect with the company on LinkedIn, Facebook and Twitter @imminfo. Read a Credit Union Management magazine article about this deadline. Increased scrutiny has killed efficiency, but CU mortgage departments are finding ways to clear the tracks.Read more in "Regulatory Rockslide" from Credit Union Management magazine. Also on this blog: "Staying in the Mortgage Game" and "Mortgage Strategy Matters."
