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!".
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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