1. Are You Ready?
5 Things to Do to Prepare for ‘Know Before You Owe’
Mere monthsremainbefore the implementationof the TILA-RESPA IntegratedDisclosure.Aslenders
workto revampprocessesandpoliciesandtechnologyproviderswrapupupgradestotheirsystems,the
extentof the operational impactsremainunclear.We doknow theywill be extensive,potentiallycostly,
and absolutelynecessary.The ConsumerFinancial ProtectionBureauhasmade itclearthat institutions
will be expectedtocomplywiththe newrulesonthe August1, 2015, effective date.
It was the CFPBthat was requiredunderthe Dodd-FrankActtocombine the TruthinLendingActand
Real Estate SettlementProceduresActdisclosures. The new LoanEstimate formreplacesthe earlyTruth
inLendingdisclosure andthe GoodFaithEstimate.The new ClosingDisclosure Formreplaces the HUD-1
SettlementStatementandthe final TruthinLendingdisclosure.The CFPBsaysthatcombiningseveral
formsintothe two newoneswill reduce bothpaperworkandconfusion.Predictably,the mortgage
industryisbracedfor plentyof both.
“Many in the industryagree thatthese new rulesare goingtohave a muchgreaterimpact onlenders’
operationscomparedtothe CFPB’sability-to-repay/qualifiedmortgage rulesthatwentintoeffectin
January,particularlyfromanoperationsstandpoint,”wrote MortgageOrb.com, areal estate finance
industrynewssite.“What’smore,theyare goingtobe many timesmore costlyandtime-consumingto
implement,astheywill require significanttechnologyupgradesandstaff training.”
What should loanoriginatorsandclosingdepartmentsdotoprepare for“Know Before YouOwe?”
Plenty,basedonourexperience andCFPBguidance.Tosimplifyatopicthat seemstodefy
simplification,we offerthese five stepsaswe prepare forAugust1.
BOX foruse duringthe introduction:
How we got here: The CFPB’s perspective
“For more than 30 years,Federal lawhasrequiredlenderstoprovide twodifferentdisclosureformsto
consumersapplyingforamortgage.The law also hasgenerallyrequiredtwodifferentformsator shortly
before closingonthe loan.TwodifferentFederalagenciesdevelopedthese formsseparately,undertwo
Federal statutes:the TruthinLendingAct(TILA) and the Real Estate SettlementProceduresActof 1974
(RESPA).The informationonthese formsisoverlappingandthe language isinconsistent.Not
surprisingly,consumersoftenfindthe formsconfusing.Itisalsonotsurprisingthatlendersand
settlementagentsfindthe formsburdensometoprovide andexplain. The Dodd-FrankWall Street
ReformandConsumerProtectionAct(Dodd-Frank Act) directsthe Bureautointegrate the mortgage
loandisclosuresunderTILA andRESPA sections4 and5.”

2. 1. Assessthe impact ofthe changes on your operation
The natural startingpointforan evaluationof how the new ruleswill affectyourbusinessistolistthe
servicesyouofferanddetermine whichof the regulatoryamendmentsapplies toeachone.The CFPB
has made available arange of guides,bulletinsandupdates;andtheycontinue tobe publishedasrules
are amended. It’sworthnotingthatthere are exemptionstothe rules,socheckforthose as well.With
the complete informationaboutimpactsandexemptionsinhand,it’stime todiscussbothwith
compliance counsel.
Ultimately,thisassessmentwillextendtoloanpopulations,processesandprocedures,controls,and
staffs.Approacheswillvary.Whatisclear isthat some re-mappingof borrowerinformationandloan
data will be requiredtoproduce the new disclosure forms.Alsotobe dealtwithare new content
requirementssuchasthe newestimatesof total principal paidoff infive yearsandthe total interest
paidoverthe term of the loanexpressedasa percentage of the loanamount.
Rememberthatimpactswill extendbeyondyourwallstovendorsandotherservice providers.Changes
inruleswiththemwill have tobe planned.Technologyintegrationswiththird-partyproviderswill also
needtobe evaluatedand updated.A keyquestionto askiswhetherthose third-partyproviderswillbe
readyby the deadline withcompliant –and tested – applicationreleases.If not,itmaybe time to
considerotheroptions.
2. Consideryour compliance workflow
The newdisclosure rules,whichimpact nearlyeveryplayerinthe home mortgage process,will demand
fast,secure and complaintexchangesof information.The new rulesonthe closingdisclosure,whichwill
have to be in the handsof the borrowerthree daysbefore the closing,are especiallyonerous.Lenders
and closingagentswill have todevelopnew systemstofacilitatethose exchanges.
Under the existingrulesnegotiationsbetweenbuyerandsellercancontinue rightupuntil the closing,
leadingtolast-minutechanges.The newpre-deliveryrequirementswill surelycurtail those kindsof
changes,socustomerexpectationswill have tobe managed.
Rememberthe newrulescovernotjusttimelinessbutalsoaccuracy.New processandoperational
controlsmay be requiredtoensure both.Additionally,preventiveanddefective controlsmayneed
updatingtoensure the organizationhasthe propersafeguardsinplace tomeetthe requirements.
3. Developplansfor implementation
Implementationplanningshouldbe basedonagap analysisthatrevealswhat processesneedtochange
as a resultof the newrules.The plandevelopedbasedonthatanalysisshouldidentifywhowill be
responsible foritsdevelopment,whowill ensure adherence andwhowillmonitorcompliance going
forward.
As withanyplanningprocess,thisone shouldinvolve all the impactedstakeholdersandgainthe
approval of seniormanagement.Progresstrackingandreportingshouldalsobe included,aswell as
testingproceduresand reportingof results.

3. Again,plansneedtobe sharedwiththird-partyproviders,whoshouldbe willingtoprovide versionsof
theirownplanning.If thatcan’t happen,contingenciesshouldbe considered.
4. Train staff
A majorcomponentof any implementationplanisstaff training.Inthisparticularcase,loanoriginators
are seeingathree-page formthattheyonlyrecentlylearnedhow toexplainbe replacedbyanew-five
page form.They’ll needtoknowhowtoexplainthisnew formtocustomerswithouthavingmany
opportunitiestoworkwithitbeforehand.
Decidingwhowill needtrainingandinwhatareasisthe obviousfirststep.Alsotobe decidedare exactly
whatinformationwill be covered,whetherthe trainingwillbe instructor-ledoronline,andhow itwill be
variedbasedonemployees’duties.Remember thattrainingshouldincludeinstructioninareaswhere
companyemployeeshave responsibilityforthe actionsof thirdparties.Partof the processof course
contentdevelopmentandapproval shouldinclude amechanismtodetermine the effectivenessof the
trainingandmakingnecessarymodifications.
Giventhe complexities,itmaymake sense toconsiderpurchasingtrainingcontentfromavendor
experiencedinitsdesign,implementationandevaluation.
5. Reviewyour loan originationsoftware
The last stepinthisprocess,a reviewof yourorganization’sloanoriginationsoftware,shouldanswer
three keyquestions.
Is it ready for TRID on August 1? Be sure your loanoriginationsoftware notonlyproducesthe new
disclosuresbutalsoprovidesthe necessarydataanddocumentationtoevidence compliance. Itisnot
enoughtojust produce the disclosures;youmustbe able totrack re-disclosure andre-settingof
tolerancesandknowwhenalendercreditwill be neededinthe eventof atolerance violation.
Does it facilitate communicationin operational relationships? Be sure yourloan originationsoftware
allowsyoutocommunicate withthird-partysettlementservice providers,particularlysettlement
agents. The flowof the closingprocesschangesdramaticallyunderthe new rules –today,the
settlementagentpreparesthe HUD-1and getsthe lender’sapproval. Withthe new rule,the lenderis
responsible forthe ClosingDisclosure.And withthe waitingperiods,itismore importantthaneverto
ensure dataintegrityandaccurate fee disclosure tothe consumer.
Is it a workflowthat matches your company? Your loanoriginationsoftwareshouldworkwithyour
processes,notinconflictwiththem. Havingsystemsandprocessesworktogetherseamlesslywillhelp
to ensure forwardmovementof yourmortgage loanfiles,increasingefficiencyandconsumer
satisfaction.Ensuringyouhave accurate feesfromthe initialLoanEstimate throughtothe Closing
Disclosure isessential.Knowingwhenwaitingperiodsexpireandwhendisclosureshave tobe outto

4. make a specificclosingdate iscrucial.Havingyour systemsupportyouinall this givesyoupeace of
mind,especially giventhe liabilityunderthe Truthin LendingAct.
Mentor yourteam,ensure compliance,and stayincontrol – on August1 and beyond.