Over one-third of loans require costly corrections
Mortgage lenders are hemorrhaging over $1,200 per loan on average due to preventable “fee cure” expenses stemming from disclosure errors, a new analysis by Intercontinental Exchange (ICE) has revealed.
In its new whitepaper, ICE examined the costs associated with lenders having to rectify mistakes made in initially disclosing fees and charges to borrowers under the TILA-RESPA Integrated Disclosure (TRID) “know before you owe” rules.
While TRID disclosure rules aim to promote transparency for borrowers, the high costs of non-compliance, in the form of fee cures, have been a profit-killer for mortgage lenders.
“Fee cures and the costs associated with them – entirely preventable expenses – are contributing to the already ballooning cost to originate a mortgage,” said Tim Bowler, president of ICE Mortgage Technology.
After reviewing nearly 90,000 mortgages, ICE found lenders wasted an average of $1,225 per loan on fee cure-related expenses to correct disclosure errors. Over one in three loans required some type of fee cure during just a six-month period studied.
“With origination inching off a 30-year low, lenders need to be as efficient and detailed as possible. Every basis point counts,” Bowler said
The primary culprit behind many fee cure fiascos is failure to keep up with frequently changing closing costs like transfer taxes. ICE documented over 31,000 transfer tax changes from 2021 through early 2023 alone that lenders struggled to implement accurately.
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These tax changes can come with short timelines, variable schedules and substantial fee increases – an operational minefield for lenders responsible for citing precise numbers to borrowers upfront.
The whitepaper suggested that fee cures were draining lenders’ origination revenue. The ICE data quantified how much this entirely preventable expense is costing the industry at a time when operational efficiencies are paramount.
“Not only is this a significant amount when extrapolated over a lender’s entire pipeline, but the prevalence of such cures is startling,” the whitepaper stated.
ICE said deploying more robust monitoring systems and fee data subscription services could help lenders get ahead of the perpetual changes to transfer taxes and other closing costs driving the fee cure pandemic.
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