A survey recently conducted by document technology company Capsilon shows that 41% of mortgage lenders are not prepared to meet the Aug. 1 deadline for the Consumer Financial Protection Bureau's (CFPB) new Truth in Lending Act/Real Estate Settlement Procedures Act (TILA-RESPA) Integrated Disclosure Rule (a.k.a. integrated disclosures rules).
The survey of more than 100 executives from leading mortgage lenders, conducted during the Mortgage Bankers Association's (MBA) recent National Technology in Mortgage Banking Conference and Expo, as well as online following the conference, reveals that as of early April, only 12% of respondents were ‘very prepared’ to meet the deadline.
Further, four out of five respondents said they expect that their companies' loan production costs will continue to rise in 2015 versus 2014, as they increase focus on compliance-related activities, with 20% forecasting that their loan production costs will be ‘significantly’ higher this year.
In fact, 67% of respondents reported that they have already hired additional in-house staff or engaged with outsourced staff to handle compliance-related activities, which is driving loan production costs higher.
The findings of the survey are in line with the data from the Mortgage Bankers Association showing that total loan production expenses increased to about $7,000 per loan in the fourth quarter of 2014, up from $6,769 in the third quarter. The MBA's data further shows that total loan production expenses were up 18% compared to 2013, and were up 36% compared to 2012.
‘The survey results clearly indicate that many lenders don't have the right technology in place to handle the requirements of TILA-RESPA, and are scrambling by hiring more labor to help close the gap, which only drives loan production costs higher,’ says Sanjeev Malaney, CEO of Capsilon Corp., in a release ‘This is an unsustainable model, and lenders should be embracing technology to automate compliance and tolerance checks, not hiring more people.’
The survey also reveals that 82% of respondents plan to spend ‘significantly more’ or ‘somewhat more’ on technology in 2015 versus what they spent in 2014. This signals a growing recognition that the industry must implement technology solutions that ensure compliance as a means of reducing labor costs and decreasing total loan production costs.