John Vong is the co-founder and president of San Francisco-based ComplianceEase, a technology solutions provider for financial institutions. As president of ComplianceEase, he is responsible for the company's day-to-day operations and leads the implementation of the Board of Directors' strategies and policies. Vong has more than 22 years of leadership and entrepreneurial experience in the financial services industry with regards to launching new enterprises and successfully managing their rapid subsequent growth.
Vong recently spoke with DS News about the Consumer Financial Protection Bureau’s “Know Before You Owe” mortgage rule, commonly known as the TRID (TILA-RESPA Integrated Disclosure) rule and its effect on the mortgage industry since it forever changed the mortgage industry when it went into effect on October 3, 2015. The TRID rule has been a source of widespread anxiety among all types of businesses operating in the mortgage industry, given the vast complexity of changing systems to make them TRID compliant. It has been nearly four months since TRID went into effect. From a technology solutions provider standpoint, how is the industry dealing with the change?
What is the biggest challenge when it comes to TRID compliance now that the rule has been in effect for more than three months?
TRID is a multi-industry initiative affecting lenders, realtors, title insurers, and settlement agents. And it seems every party in the business of closing real estate transactions is grappling with the new rule in one way or another. From what we’ve heard, lenders are still trying to find out what works best for their workflows, policies, and procedures.
In addition, TRID requires lenders to monitor all fees on all LEs and not just compare the final LE to the final CD. According to the CFPB’s published TRID examination procedures, a lender, “may use a revised estimate of a charge instead of the amount originally disclosed if the revision is due to one of the reasons” specified in TRID. This means that if a lender is only comparing one LE and not monitoring revisions to individual fees and changed circumstances across all LEs throughout the origination process, then there is high potential for significant violations under TRID. So perhaps one of the biggest challenges we’re seeing is that many lenders are still using manual processes to review and compare the LEs and CDs, which has led to some closing delays.
Has your company benefited from TRID so far? Is the best yet to come?
Automated technology makes complying with TRID much easier. So our company has certainly benefited. We’re also developing technology solutions to improve lender and settlement agent communication and data exchange to reduce risk and cure loan defects before closing, which we believe will emerge as a significant source of compliance issues in the near future.
Does the CFPB's announcement that it will take a diagnostic and corrective approach rather than a punitive approach regarding TRID clear up any of the uncertainty for the industry surrounding the rule?
While the CFPB clarifying its position has relieved some worries, lenders still need to be very careful with TRID compliance as secondary market investors are auditing TRID compliance pre-purchase these days. You don’t want your loans stuck in the warehouse line.