Beginning with loan applications taken October 3, 2015, the CFPB (Consumer Finance Protection Bureau) rolled out the new TRID (TILA-RESPA Integrated Disclosure) forms. These forms replace the GFE (Good Faith Estimate), TIL (Truth In Lending) disclosures, as well as the HUD-1 closing settlement statement that mortgage consumers have been used to seeing for years.
So, why am I writing about this now? Well, anyone who has not gotten a mortgage – including a re-fi – since this was introduced will face some changes at their next closing. Who will not be affected? All-cash buyers and borrowers obtaining a reverse mortgage.
“Borrowers will have the benefit of a three-day period to review their Closing Disclosure before arriving at the closing table,” says Loretta Salzano, a Founding Partner with Franzen & Salzano, PC, a law firm which addresses the needs of the consumer financial services industry. “Unfortunately, this ‘waiting period’ and some of the rule’s implementation challenges generally have tended to add a bit of time to the loan process.”
Whereas in the past, your mortgage pro might be able to facilitate same-day closings once loans were “approved to close” by the underwriter, there is now a 3- to 6-day waiting period from the time the borrower acknowledges receipt of the closing disclosure (that is, signs and returns to the lender). It’s important for consumers to know this. And it’s important for customers to review the Closing Disclosure and sign or speak with their lender regarding changes they may want as soon as possible to avoid any potential delays in closing.
“Because the Closing Disclosure includes more private borrower information, some settlement agents are bifurcating the closing,” says Salzano, whose firm works with banks, thrifts, mortgage lenders, mortgage brokers, consumer finance companies, and others involved in the lending process. “Even absent that separation, there is a renewed sensitivity to the privacy of the borrower and how to conduct a purchase money closing with both the seller and buyer in the room.”
She also notes that the other big difference “is most settlement agents will not be able to revise the Closing Disclosure at the closing table even if only to reflect minor changes. This is because, under TRID, the lender is responsible for the accuracy of the Closing Disclosure, so lenders are unable to relinquish authority to the settlement agent.”
This also tends to reduce the number of “surprises” at closing. For instance, for many fees, there is a $0 tolerance to changes, so, for example, if the appraisal fee was higher than quoted and not re-disclosed to the borrower, the lender is not able to charge the difference in the fee to the borrower. This helps to provide clarity to the borrower prior to closing and reduces the changes that the consumers were not aware or prepared for at closing.
“Overall, the introduction of TILA-RESPA is good, as the disclosures are easier for consumers to understand and the disclosures include more important information in one place,” Salzano says. “The downside is that costs to consumers have increased as a result of the substantial implementation costs. Some borrowers are also experiencing closing delays, but I am optimistic that, once we all get used to the new forms and processes, those delays will be rarer. Hopefully costs will also come down.”
With changes like these, it’s even more important for borrowers to communicate with their lenders throughout the process and provide documents as quickly as possible when requested. A one- or two-day delay in providing documents can lead to a closing delay, resulting in extension fees, both with the ratelock on the loan and any contract extensions for the purchase.
“Thus, we are focusing on how our lender clients can increase communications with settlement agents and investors to ensure that they can close and sell loans without TRID-induced delay,” Salzano says.
Ultimately these changes highlight the importance of consumers working with knowledgeable and educated Realtors and lenders who help in setting buyer and seller expectations. If you are buying or selling your home and have not done so since the introduction of TILA-RESPA, simply ask your real estate agent or lender, “How will the sales contract and closing process be different for me this time?”
Mary Hardy (NMLS #324915) is Vice President of Operations for PrivatePlus Mortgage, which originates mortgages in 50 states and the District of Columbia.