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The Cost of TRID From STRATMOR and its Impact on Appraisers

Wednesday, March 30, 2016 - Article by: bcahoone - Global Home Finance Inc - Message


Something for seniors to do to keep those "aging" grey cells active! (Answers tomorrow.)

1. Johnny's mother had three children. The first child was named April. The second child was named May.

...What was the third child's name?

2. There is a clerk at the butcher shop, he is five feet ten inches tall and he wears size 13 sneakers.

...What does he weigh?

3. Before Mt. Everest was discovered,

...what was the highest mountain in the world?

4. How much dirt is there in a hole

...that measures two feet by three feet by four feet?

5. What word in the English language always spelled incorrectly?

6. Billy was born on December 28th, yet his birthday is always in the summer.

....How is this possible?

7. In California, you cannot take a picture of a man with a wooden leg.

...Why not?

8. What was the President's name 1975?

9. If you were running a race,

...and you passed the person in 2nd place, what place would you be in now?

10. Which is correct to say,

..."The yolk of the egg are white" or "The yolk of the egg is white"?

11. If a farmer has 5 haystacks in one field and 4 haystacks in the other field, many haystacks would he have if he combined them all in another field?

(Answers tomorrow.)

Lenders across the nation are switching to potlucks at the end of the month instead of catered lunches. Why? A new survey of mortgage lenders by the MBA finds loan production expenses have climbed 9.4% to $7,747 per loan vs. $7,080 before the TRID requirement went into effect. I just made up the tidbit about the lunches, and everyone knows that these costs are passed on to borrowers, but still... It certainly helps explain why there is less refinancing in a similar rate environment. But STRATMOR has a different take on the increase in cost - see below.

Regarding TRDI Jim Hennessy writes, "Do you suppose when coming up with TILA/RESPA Integrated Disclosure that the acronym squad ever considered "Truly Understanding Residential Disclosures"? (I think the industry might have agreed with that one.)"

STRATMOR released select findings from its TRID - Impact and Experience Spotlight Survey. It has impacted not only the mortgage lender but also the borrowers it was created to assist. Dr. Matt Lind writes, "Based on the results of STRATMOR's Spotlight Survey, TRID implementation seems to be largely complete, with the vast majority (87 percent) of survey respondents reporting implementation either fully or mostly accomplished; only 1 percent said their efforts were 'way behind.' Independent lenders were generally ahead of banks, with TRID implementation fully accomplished at 72 percent of small and 80 percent of mid-sized independents, as compared to just 33 and 44 percent respectively for small and mid-sized banks. In fact, banks seemed to have a harder time with implementation all around, with 31 percent characterizing their experience under TRID as either 'difficult' or 'terrible' versus only 16 percent of independents reporting similar results.

"Implementing TRID has obviously not been easy for lenders. It's been costly as well. On average, since October 2015, TRID has increased lender back office fulfillment and post-closing costs by an average of $209 per loan, and lenders are estimating that only about 17 percent of those costs can be recovered through additional charges," said Dr. Matt. "However, TRID seems to be associated with a significant pickup in borrower satisfaction, despite somewhat slower application-to-closing times. At the end of the day, improving the borrower's experience is a main objective of TRID, and in an increasingly competitive origination market, it is also a primary goal of lenders as well."

"The increase in satisfaction is borne out by STRATMOR's MortgageSAT Borrower Satisfaction Program survey data, which pulls in thousands of data points every month. The MortgageSAT data shows that the time to process a mortgage from application to closing, after initially increasing, is moving back towards pre-TRID levels. There has also been a steady and substantial increase - from 85 to 91 percent - in the proportion of borrowers being contacted by their lender prior to closing. Increasing such contact was a key goal of TRID and has previously been shown by MortgageSAT to be an important factor affecting overall borrower satisfaction. As a result, overall borrower satisfaction with the origination process now stands at 91 percent, a record high since MortgageSAT was launched in 2013. (Full results of the TRID - Impact and Experience Survey are available for purchase from STRATMOR online at"

Regarding the recent MBA figures on the cost per loan heading higher, it seems that, "Over $425 per loan in the MBA's roughly $650 per loan increase can be attributable to a 12.5% decline in volume from the 3rd to 4th quarter. Assuming that $3,000 of the roughly $7,000 origination expense per loan cited by the MBA for the 3rd quarter are fixed costs, a 12.5% decline in volume results in a 14.2% increase the cost per loan or an increase of about $426. Add our estimate of $209 in TRID costs and you get $635 per loan, just about what the MBA estimated for the total increase from the 3rd to the 4th quarter."

Speaking of TRID I received this note. "Appraisers always will have many questions as they continue traveling down the road to compliance. Am I doing what is right? Am I going about my business that meets with regulation guidelines? Some of those rules have changed since October, when the TILA-RESPA Integrated Disclosure (TRID) rule took effect. "Mistakes made by the appraiser regarding the report will result in hyper-diligence, meaning the remedy time to fix those mistakes will be hours and not the usual 24- to 48-hour time frames," Jan Buchele, SVP of The William Fall Group & Valuation Partners said.

"In my opinion, there will be more pressure on the appraiser to be accurate. Consumers losing earnest money deposits due to falling outside contractual closing dates may come back and claim the appraiser caused these problems in the first place costing them real money. Lenders will not deal with appraisers who make mistakes that can delay closings." Of course, everything starts with a quality report, where accuracy should be reflected to achieve compliance. Buchele said a quality report convinces the reader that the appraiser believes in its conclusion. "I believe that reconciled data is what gets lost in reports," she said. "It is the responsibility of the appraiser to provide results and explain the data used to arrive at that determination of value. There's no such thing as too much or too little information within a report. Each report has to contain the sufficient data for that individual assignment and has to be detailed and explained to the reader as to why this is the appropriate and necessary data."

There are some definite thoughts on the appraisal side of the biz. From the Sierra Nevada Foothills in California Sharon Nixon penned, "Here's a good article addressing the shortage of appraisers. Where the use of trainees is concerned, the few lenders who will accept trainee signatures most require the Supervisory Appraiser to sign also. The Supervisory Appraiser takes full responsibility for the appraisal just as he/she would if the signing appraiser. Most appraisers carry E & O Insurance. There really is no shortage of appraisers. The lenders and AMCs want to go cheap then they complain about lousy appraisals and long turn times. They do not want to pay a reasonable and customary fee and many appraisers are refusing to do lender or AMC work. Seasoned appraisers are changing their client focus on non-lender work, retiring or changing their profession."

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