There is a new rule for disclosures in real estate transactions – it is called the TILA-RESPA Integrated Disclosure, or TRID, rule. The rule will go into effect on October 1, 2015 for real estate contracts that are fully agreed to on or after this date. We atJacobson Realty and Home Staging want to fully explain what TRID is and how it will affect you so you have the necessary information to go confidently to the closing table.
Why Did We Need a New Rule?
The federal government under the direction of the CFPB (Consumer Financial Protection Bureau) has determined that the settlement statements, currently known as TIL and HUD1, are difficult to understand, which has also made it difficult to comparison shop for services. The CFPB believes more transparency is needed to help buyers better understand the terms and conditions of their mortgage loans.
What Is the New TRID Rule?
The new rule consolidates four existing disclosures for closed-end credit transactions secured by real property, into two new ones. This means for most loans, there will be two disclosures: your Loan Estimate and your Closing Disclosure. A few exceptions to the new rule exist such as home equity lines of credit (HELOC) and reverse mortgages, will still use the Truth In Lending and HUD-1 disclosures, as always.
The Loan Estimate
The Loan Estimate is a good-faith estimate of the credit costs and the terms of your transaction. It replaces the existing Good Faith Estimate and Truth In Lending disclosures. You should receive your Loan Estimate within three business days from the date your lender received your loan application. If you want to proceed with the loan, you must notify your lender within 10 business days to state your intention. The Loan Estimate provides more detail than previously used documentation. You will receive the loan terms; projected payment changes especially if you want an adjustable rate mortgage, and a glossary of terms to ease you through the understanding process.
The Closing Disclosure
This new Closing Disclosure is the final disclosure reflecting the actual terms of the transaction for the buyer and seller. This replaces the HUD-1 and final Truth In Lending disclosures. You will receive this no later than three business days before the closing date. This gives the buyer the opportunity to fully review the terms of the loan before you go to the settlement table. The form gives you information relative loan terms, closing costs, loan costs, title services, taxes, the seller’s costs and more. There should be no surprises at the closing table with this new disclosure. In the event there is a change to the new CLOSING DISCLOSURE the transaction will automatically extend for 3 business days until paperwork is corrected and the buyer, seller and lender have had time to compete another review and there are no changes. Any further change automatically adds 3-day extension to the closing. Delays may be the result of a walk through inspection issue, a numeric correction, or any last minute uncontrolled event.
HOW TO PREPARE FOR THE CHANGES:
– Buyers and sellers should extend typical closing times by at least 7 days in anticipation of a delay but strive to close earlier if agreed to by all parties. This will help prevent the automatic 3-day extension imposed by the federal rule.
– Buyers should conduct their walk-through inspection at least 7 days prior to closing to provide sellers time to repair, replace or correct final walk-through issues
– Sellers need to be better organized to allow buyers to conduct a thorough and complete final walk-through inspection. The packing and moving process will be much easier for all parties if the seller is as organized as possible. Movers and moving truck assistance should not be confirmed until after the walk-through inspection.
– Buyers, with guidance from their Realtor, should be confident in their selection of lender and title companies. The stronger their relationship the higher the success rate will be to close without errors and on time!
– Average closing times have been 30- 45 days. Under this new rule buyers and sellers should anticipate a 45- 60 day timeframe for closing. Closing more quickly may prove to be difficult if mortgage financing is needed.
We are up-to-date on the latest changes in real estate regulations, and we pass our education along to the consumer, and especially to our clients. Contact us for more information and let us help you navigate through the new closing disclosure process. Or, visit the Consumer Financial Protection Bureau for details on the TRID rule.