For many years, one of the primary benefits touted by advocates of electronic mortgage lending was the concept of moving to a paperless loan process. However, with the Consumer Financial Protection Bureau’s (CFPB) TILA/RESPA Integrated Disclosure (TRID) rules that went into effect in 2015, eliminating paper – and its respective costs – is still a challenge for lenders making the move to digital.
Part of the challenge is a consumer base that is appropriately given the right to choose how to interact with their financial institution in regards to receiving loan documents. The very laws that made electronic commerce possible, the Federal ESIGN Act (15 U.S.C.A. §§ 7001 et seq.) and the Uniform Electronic Transactions Act (UETA), also included protections for consumers who choose to opt out of the electronic signing process.
Add to that the additional complexities introduced by the TRID rules and the high cost levied by the Bureau for non-compliance, and we’re printing out more paper than we have in the past.
Docutech can help ensure your lending operation can meet the needs of your consumers with efficient systems to reduce cost and improve compliance.
Meeting the information needs of all borrowers
TRID went a long way toward providing loan information to consumers in a consistent way that made the costs and terms of a mortgage clearer, but the law also imposed additional deadlines that creditors were required to meet. The upfront disclosures had always been required within three business days of application, but TRID further defined what constituted an actual loan application. The regulation also implemented a new Closing Disclosure timeline to ensure the final costs and terms were communicated to the borrower three business days prior to closing the mortgage.
Digital loan documents make perfect sense for disclosures. They can be distributed efficiently via email, the borrower can sign the forms, and return them without spending time waiting on the mail.
A problem with these timelines is that they depend, to some degree, on the actions taken by the borrower. If the borrower accepts the electronic documents within the prescribed timeline, all is well, and the creditor moves on in a paperless fashion. If they opt out or just fail to respond, the creditor will have to print the documents and send them to the borrower.
As creditors move beyond paper disclosures and generate more documents digitally, should an opt out or failure to respond occur, ensuring that the borrower is provided paper documents will remain vital. This highlights a growing need for the creditor; one that will protect them throughout the lifecycle of the loan as they move to a paperless process.
This means that even creditors dedicated to moving everything to a digital workflow must have a process in place to send, track, and receive physical loan documents for at least some of their customers. Building this redundancy not only ensures compliance and protection during an audit, but it will also ensure a strong customer experience for any borrower.
The high cost of TRID non-compliance
Creditors have always had to be mindful of whether their borrowers opted in to receive electronic documents because the upfront disclosures have been subject to RESPA and TILA timeline requirements. However, TRID is different.
The primary reason for this is that the cost of non-compliance with TRID is very high. Before the Dodd-Frank Act was enacted, failure to deliver the upfront disclosures within prescribed timelines could have resulted in civil liabilities and/or criminal fines typically of thousands of dollars. The cost is much higher under the new Dodd-Frank Act rules, which apply to TRID violations. Creditors who miss prescribed deadlines could receive a civil penalty of up to $1.1 million per day for their error (see 12 U.S.C.A. § 5565[c][c]; figure adjusts yearly).
This has changed the game and made including a back-up paper delivery channel a vital risk mitigation strategy that every creditor should consider. Tracking these timelines would be difficult if the creditor had to rely on internal staff. Fortunately, they don’t.
Protecting the lender in a (mostly) paperless world
The truth is that no creditor wants to establish and maintain paper loan document fulfillment centers to run alongside its digital mortgage origination business. Fortunately, they don’t have to. Docutech offers several fulfillment centers to help lenders remain compliant.
One key to a successful process is a digital push back system that allows the creditor’s doc prep partner to push information back into the system of record. This allows Docutech to receive paper documents from the creditor’s borrower and push the information back into the lender’s database electronically. The creditor never leaves the digital realm. Finally, our system enables us to provide our customers with the compliance tracking information regulators require of our creditor partners.
Eventually, virtually all consumers may opt in to a paperless loan document process; however, given the compliance mandates and high cost of non-compliance related to response times, the role of physical documents remains vital. Lenders need the flexibility and security that a good doc prep provider offers with always-ready print fulfillment centers, loan origination system push back, and great reporting for compliance.