Another Cost of TRID - to the Consumer, of course

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Mortgage and Lending with Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, NMLS #138061 MMCD #1141
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Another Cost of TRID - to the Consumer, of course

 

 

     5 years ago, if you asked the public, "Would you like new rules, regulations, authorities, and processes that would mitigate your risk when getting a home loan?", the answer likely would have been a resounding "YES!".

 

TRID costs

     If you asked the same group about a more realistic future, something along the lines of "Would you like your lender to have slightly less flexibility in screwing you with a bait & switch deal, but you'll have to pay hundreds, even thousands of dollars every time you buy a home to ensure this?", I think the answers may have seen more diversity. 

 

 

     Alas, that's what Dodd Frank has brought us.  With the creation of the CFPB, new rules and regulations, and mandatory mortgage processes put in place, things are only slightly safer for consumers, but costs are disproportionately higher (inefficiency you say?  with a government sponsored plan?  No way! (insert sarcastic 'shocked' face here).  Lenders have implemented overly stringent compliance departments, have began outsourcing to third party companies data gathering and cross checking services, and have made the loan process tedious for even the most qualified of borrowers.  And who's paying for it all?  Consumers, of course.  Now there's no line item on a HUD-1 statement that reads "government compliance charge" so consumers can see exactly how much more expensive things are than they should be, but rest assured, charges are being passed directly to home buyers and home owners.

 

 

     Recently, with the implementation of TRID (TILA-RESPA Integrated Disclosure forms, aka, the most confusing acronym of an acronym to ever hit the housing industry) just a couple short months away, there is talk that a 30 day rate lock will be a thing of the past.  With a clean file and borrower cooperation, 30 days is plenty of time to get a loan done.  With TRID in play, though, these same files will likely encounter nothing shorter than a 45 day rate lock.  So what's the big deal?  Well, a longer rate lock comes with a higher price tag.  Currently on most products the difference between a 30 and 45 day rate lock is about .125 points - or $500 on a $400,000 loan.  In the grand scheme of things, is $500 a big deal in a home purchase?  When that $500 is being charged solely based on the fact that the government doesn't trust consumers who are smart & savvy enough to take on a mortgage to be smart & savvy enough to read and understand a disclosure, then YES.  I'd argue yes, that $500 is gouging.  And unnecessary.  And would be fought tooth and nail if consumers knew how much they were getting screwed through these regulations. 

 

 

     I couldn't find data more recent than 2011 (Ok, I admit it, I didn't look very hard, but didn't have to to make a point), but let's say the 7.1 million loans originated in 2011 is about the same number being done today - and let's just say, for the sake of argument, that every loan isn't $400,000, so we'll cut it in half, to make the cost of TRID an extra $250 for each and every loan ($200,000 loan amount, .125 extra for a 45 day rate lock).  What does that mean?  It means that consumers are going to spend roughly $2 billion per year more for mortgage products than they did before.  That's right - just about $2 billion per year, for a new disclosure, which is just a revamp of the previous disclosure that the government also created (the current Good Faith Estimate, which is a mess in and of itself). 

 

 

     If 30 day locks become a thing of the past (30 days has been the standard lock term for the entire decade I've been in the mortgage business), consumers will pay an extra $2 billion per year to the mortgage industry because someone thought yet another disclosure was necessary because the last disclosure they came up with proved a failure.

 

 

     My solution?  Let's go back to pre-Dodd Frank, pre-TRID, and pre-CFPB, and look at lender fees and charges - let's allow lenders to create a new line item on the HUD and all loan documents that incorporate the additional costs associated with over-regulation and compliance, and we'll call it the "government regulatory charge" or "government consumer protection charge".  If consumers knew how much this "protection" is costing them, I wonder how much protection they would really want.

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Ambassador
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Frank Rubi
Frank Rubi Real Estate, LLC - Metairie, LA
FrankRubiRealEstate.com

John, we need to reform this regulation and public awareness is the key. 

Jul 16, 2015 10:16 AM #2
Rainmaker
875,583
Janis Borgueta
Key Properties of the Hudson Valley - Newburgh, NY
LIC RE Salesperson

The consumers are paying and paying and paying. The banks are just laughing when they make up these new "government rules" (yes the banks ARE in charge)  I assure you that the CEOs of the banks are getting richer and richer and NONE of us will be any more protected than we were before. Seriously flawed indeed!

Jul 16, 2015 10:35 AM #3
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Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

my favorite lenders seem super prepared.  They have been "practicing" getting packages out 5 days in advance for months now.  And they are still doing it in under 30 days.  But all this "consumer protection" is just more big governments and not much protection.

Jul 16, 2015 10:58 AM #4
Rainmaker
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David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

This is big government and big brother at its finest. There is NO consideration for protection to the consumer, that is nothing other than a front. This is about TAXES and government control, to know everything they can about everyone.

its disgusting and should scream loudly to everyone WE NEED CHANGE!

Jul 16, 2015 11:11 AM #5
Rainmaker
264,564
Dan Rosenberger
Harvest Realty - Westfield, IN

If this turns out to be a headache, cash buyers will be at even more attractive to sellers than they are now.  (The funds are there - when can we close VS the new layers of uncertainty that many are anticipating once TRID comes into force.)

Jul 16, 2015 11:26 AM #6
Rainmaker
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Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

John, when did the politicians ever care what the constituents wanted?

Jul 16, 2015 11:42 AM #7
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Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

John Meussner - whoever thought of TRID.....

I have buyers who close in 30 days! Now this will be a challenge.

One thing you did not mention is - the lag time the real estate agent will have in their income (or loss of - to pay the next bills!)

Jul 16, 2015 01:17 PM #8
Rainmaker
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Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Got to love those politicians, they write a Health Care Law but exempt themselves...it would be interesting to see if they created an exemption for themselves with TRID?:)Endre

Jul 16, 2015 04:23 PM #9
Rainmaker
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Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for the information. Have a good weekend.

Jul 16, 2015 09:10 PM #10
Rainmaker
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Kathryn J.
Rentec Direct - Grants Pass, OR
Rentec Direct

What happen to the good ole days when you can walk into a Savings & Loan and borrow money? 

"Power tends to corrupt and absolute power corrupts absolutely"  (Lord Acton)

 

Jul 17, 2015 01:03 AM #11
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Thanks for the comments everyone, the more regulation that comes into this business , the worse it'll be.  I'd argue consumers are just as unhappy now than they were pre-meltdown with the mortgage process.  Rather than lenders intentionally screwing people, now they're unintentionally screwing them when rate locks expire because of compliance BS, underwriting turn times are longer, and more and more documentation is requested, some of which makes no sense.  And for all of that, people get to pay more, too!

Jul 17, 2015 03:22 AM #12
Rainmaker
899,582
Joy Daniels
Joy Daniels Real Estate Group, Ltd. - Harrisburg, PA

I was glad that the it was postponed until October, I really wish it would be January 1st. . . thinking winter would be a good time to start this, but I guess some areas are busier in the winter and it would be tough for them.  It will be interesting that's for sure!  Thank you for you post.

Jul 17, 2015 10:24 AM #13
Rainmaker
1,026,929
Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

Where is the love-love-love button?  It's government run amuck. As usual, the law of unintended consequences has come into play...as it always does when the gubmint sticks its nose where it does not belong. 

Jul 17, 2015 11:09 AM #14
Rainmaker
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Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning John. A well deserved feature. I thought all this was being done for the benefit of the consumer, what a joke. No benefit at all, just more Government bureaucracy.

Jul 20, 2015 08:20 PM #15
Rainmaker
1,285,771
Jon Kolsky
Kolsky Realty & Management - Long Beach, CA
Licensed California Real Estate Broker

John Meussner ~ you are sooooo right, less regulations the better for all.... There's way too much right now

Jul 23, 2015 07:59 AM #16
Rainmaker
908,388
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

I heard recently the CFPB is paid on commission. I wonder how much of that $2 billion a year they get to keep? I'm all for the consumer protection part of it, but I don't see how the gouging on mortgage loan costs is protection by the CFPB.

Jul 23, 2015 04:04 PM #17
Rainmaker
3,268,499
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hi John -- I always enjoy reading your take on current events and how they relate not only to the mortgage business but to the consumers --- all of us --- who buy and sell real estate.   Who is really looking out for them(us)?

Jul 27, 2015 03:45 AM #18
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Margaret Rome, Baltimore Maryland
HomeRome Realty 410-530-2400 - Pikesville, MD
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John Meussner 

The new line item  charge will be called... GCPC. Sounds even better than TRID.

Jul 27, 2015 12:08 PM #19
Rainmaker
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Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

One could argue that rate locks on mortgages are lender scams i.e. the banks don't actually go out and buy those funds at the designated rate and hold them for that borrower.

Sep 28, 2015 05:16 AM #20
Anonymous
Kc

OK what should we do if we get a 2 week contract post trid? Yes agents do that crap and of course it's on a house that has repairs and all kinds of crap wrong with it. Like should lenders call the designated brokers???

Sep 29, 2015 03:04 PM #21
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