TRID? – On August 1, 2015 the Consumer Financial Protection Bureau (CFPB) is requiring the roll-out and enforced usage of new mortgage loan disclosures and replacing others. TRID stands for the “Truth-in-Lending and Real Estate Settlement Procedures Act Integrated Disclosures” and these new disclosures will replace the Good Faith Estimate, Truth-in-Lending Disclosure and the HUD Settlement Statement. WOW! This is big news and these new disclosures (Loan Estimate and Closing Disclosure) will mean BIG CHANGES for many of the parties in a Real Estate purchase and refinance transaction.
In our industry, new disclosures usually means MORE PAGES and MORE DELAYS! This is also true in this case. These new disclosures will require a delay before the appraisal order can be placed. The borrower must know exactly what their loan will look like BEFORE the appraisal is ordered and this will result in delays “out of the chute” for many new loans simply because many borrowers are still considering their loan options during those first few days of the mortgage loan process and sometimes have not had time to fully consider the consequences of a 15 year loan verses a 30 year loan, or an FHA mortgage with less down payment compared to a conforming mortgage which usually requires more down but a less expensive monthly mortgage insurance premium. All of this must be considered, numbers need to be gathered and compared and a busy couple with active kids needs to find a few peaceful few minutes to consider all of this information in the midst of inspections, contingencies, offers, counter-offers and packing! YIKES!
If that is not enough, the biggest delay related to these new disclosures comes at the end when everyone is weary, worn-out and tired of receiving daily emails from their loan originators, Realtor, inspectors, movers, utility companies, etc. All of the final numbers represented on the new Closing Disclosure (which replaces the old HUD 1 Settlement Statement) must be “spot-on”, no changes and exact – 3 DAYS PRIOR TO THE CLOSING DATE! This means no additional changes, last minute fees, or forgotten invoices can be added during those last 3 days prior to the closing date. If so, then the closing will be pushed back another 3 days to allow the new Closing Disclosure to be printed and received by the borrower to review. Here is link from Frank and Brian at the National Real Estate Post where their video gives more details: Click Here.
Many in the industry are hinting at the likely consequences of these delays come August 1 but I have not heard any admit what I am about to say. Realtors who what to avoid the high-pressure finger-pointing, name calling, threatening phone calls and punishing per-diem being charged to their buyers caught in the middle of these changes will wisely prepare their buyers and sellers for 45-60 day closings rather than 30-40 days closings which will result in eventual extensions and everyone hating everyone at the end of the transaction. Allow me to address the elephant in the room – these loans will not close until the lenders fulfill the new federally mandated time-lines which are put in place to protect the buyers from being rushed into a 30-year decision – regardless of when a Real Estate Purchase Agreement says the transaction will close.
Please be smart when setting realistic expectations with buyers, sellers, Realtors and your loan originators and set dates which will allow the new system to work to protect the buyer from being caught in a pressure-cooker of unrealistic and overly demanding deadlines which do not serve anyone well. It is my opinion that a 30 day closing for a purchase transaction is now another historical display in the Museum of Mortgage Lending right beside pre-payment penalties, negative amortization, interest-only loans and 30-day adjustable mortgages.
Rushing a home buyer into a 30 year commitment and several hundred thousand dollars of debt with a stack of “sign here quickly” documents and terms not understood or clearly explained is never a good idea, in my opinion. The CFPB is doing their best to slow this whole process down to allow the borrower digest the details of what is happening. Buyers. sellers, Realtors, closing attorneys and mortgage originators must now embrace these changes, work as a team and make these Real Estate transactions a positive experience for all parties involved. Our industries need the public trust and these changes are part of us all working together to rebuild what was lost in the “rush to simply close deals” from 2000-2008 with very consideration given to making sure the buyer knows what they are signing at the closing table.
REALTORS – To view a video presentation by Kenneth Trepeta Esq, Director of Real Estate Services for NAR, explain the new rules and regulations and review the new forms – CLICK HERE.