We are now a little over two years into the Know Before You Owe /TRID rules and for most of our clientele, it seems that everything is running smoothly at this point. We all got busy prior to the implementation date and made sure to have our processes and systems in place so that we could move forward with our current products in a compliant manner. It cost us all serious man-power dollars to be ready to go. I am sure there were also some of us that had to either change or discontinue some products so that everything stayed on the straight-and-narrow. However, did all of our competitors take this same approach to mold their practices to the new requirements? Unfortunately, I now have some first-hand experiences that would indicate that they did not.
My wife and I are currently in the market to purchase a new home so we decided to take advantage of these compliance requirements and shop around for the best loan. We had already identified the property that we were interested in, so we went to one of the most popular loan sites to see how big of a win we could get if financial institutions were competing for our business. We input our information (which was essentially enough for a pre-qualification) into the site and got around 10 offers of varying terms. We decided to fill out a complete application with 4 of those entities so that we could get an LE from each to compare. What we actually received was a shock rather than the information needed.
Out of the four companies we contacted, here is the breakdown of the interaction:
Company 1 responded immediately requesting an app and provided the LE in an ESIGN compliant manner. The terms of this offer were not what we were comfortable moving forward with.
Company 2 would only let me complete a "preapp worksheet" online which would not allow me to input all of the 6 items TRID constitutes as an application. I brought this up to the MLO I was working with and they stated that they would move forward and "process the app and issue an LE" once I am committed to working with them". I just replied to the email with the additional information needed to make an app under TRID and requested an LE. They eventually provided the LE via ESIGN on the third business day. These guys did not get our business.
Company 3 said they did not provide an LE until they are (this is a direct quote) "locked in and it is simply to protect you as a consumer as the markets change daily". I proceeded to quote the regulation that let them know their practice was illegal and the MLO was able to provide me an LE generated before the close of business that day. I did not move forward with this company either.
Company 4 was by far the biggest surprise. They started out much the same as company 3 but the hold up with them is that they would not provide an LE until they were provided with a sales contract. I used my trusty reg quote of the definition of an application and restrictions for asking for verification information and stated that we wanted an LE to shop with. The next reply from the MLO was "do you have a contract?" After my negative response to that email, I get the following in reply:
"... Yes you have provided me all the fields required for the disclosures, but we vary a bit on the interpretation of the address. I know you provided one to me, but that address is not under contract and that contract carries all terms of the deal. It is clear you understand all the rules of mortgage, so surely you understand that once I enter that address and start that 3 day timer then I have to send you all documents related to the mortgage transaction. I am held liable/accountable for those fees and cannot change them later, which is a big risk on myside being blind to all terms and potentially being out of compliance...."
At this point it is clear that I will never work with this lender, but I wanted to see just how far it would go. I let them know that I do understand the liability, but also know that TRID/KBYO is a CONSUMER protection regulation and I want an LE to shop with. After that email, the MLO gives me this gem:
"You are correct in the fact I have 3 days to disclose once I have an application. But I also have the option to withdraw the application as well. I would really like to help you get a home loan, but we do have policies and procedures here to reduce the amount of unnecessary work for our operations department so they can focus on our clients that want to close their home loan in 30 days. If you would like, I will have your application withdrawn and wish you the best of luck on your home loan."
After I picked myself up off the floor, I emailed back simply stating that I did not wish to withdraw my app. There was further follow-up from the MLO but I never received any additional disclosures.
This experience was completely eye-opening for me. These were some of the biggest names in the mortgage industry that I dealt with. If you watch any television, I am sure you have seen ads for these companies. I assumed that the bigger guys were handling these requirements the same as everyone else was, but my assumption was proven wrong. They handled the process this poorly even after I let them know that my profession is specifically dealing with regulatory compliance and they also provided all of this information in email form, so there is a clear paper trail. Three out of the four companies I engaged would not have provided an LE to a "normal consumer", and I was only able to get one when I directly asked for it and provided regulatory support. Even with those items given, I still had one company outright refuse to provide an LE and threaten to withdraw my application. Aside from the horrible customer service and the potential regulatory issues, this also provides an unfair advantage to these lenders over their smaller counterparts. Since we are now over two years into these requirements, there is no excuse for this type of outright violation. In the days that followed this ordeal, I have submitted a complaint to the CFPB regarding the issues that I was presented with. I also looked up the Compliance Officer for Company #4 and copied them in my submission of the complaint to the CFPB. Once I get some sort of closure on the issue from the CFPB, I will write an updated article. In the mean-time, I am still loan shopping.