Beginning tomorrow, Oct. 3, a new rule regulating loan and closing processes, called “TRID,” will impact how you sell and purchase your next home and could delay your closings for weeks.
Below is a brief summary of the rule, how it affects you and what you can do to ensure you have a smooth closing, on time.
What is TRID?
The goal of the new rule is to replace confusing closing settlement statements with consumer-friendly forms; eliminate hidden fees, costs or risks; and, reduce last-minute closing surprises. TRID, or TILA-RESPA Integrated Disclosures, is a new 1,888-page rule that is governed by the Truth-in-Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA).
The Loan Estimate (LE) will replace the Good Faith Estimate (GFE) and initial Truth In Lending (TIL). The LE must be delivered to the consumer within three days of application. With the new guidelines, the buyer only needs to provide:
- Social Security Number (for credit report)
- Property address
- Estimate of the value of property
- Mortgage loan amount sought
There must be at least seven days between the LE and closing, and it is good for up to 10 business days but may be reissued in the event of:
- Discovery of new information
- Extraordinary events
- Revision request by consumer
- Locking the rate
The Closing Disclosure Form (CD or CDF) replaces the HUD-1 Closing Settlement Statement and Final TIL. The CD must be delivered to the consumer three days before closing. The first page of the CD is the same as the first page of the Loan Estimate. The second and third pages detail various closing costs, fees, service charges and credits. The fourth and fifth pages include several disclosures such as loan assumption, homeowner insurance, late payments, finance charges, annual percentage rate and a new disclosure of Total Interest Percentage (TIP).
New “Waiting Period”
The main cause of concern in TRID is the notification and waiting period requirements. The borrower must wait three days to close after receiving the Closing Disclosure. Ask your lender which one of these delivery methods they use:
- Hand Delivery — Buyer and seller may close three business days after hand delivery of the Closing Disclosure is confirmed. If hand delivery is made on Tuesday, the soonest possible closing day is Friday.
- Email — Approval of this method must be given by consumer and confirmation of receipt must be sent by consumer. If not, the rule assumes three business days to open the email.
- Overnight Delivery — Must be confirmed with a a consumer receipt.
- U.S. Mail — Receipt is assumed three days after being postmarked.
If after the CDF has been received by the buyer and there is a change in annual percentage rate (APR), loan product/type or prepayment penalty, the lender must “re-disclose” to the borrower with a new Closing Disclosure document and the waiting period is reset. This should be rare, but if it does happen, your closing will be delayed.
What Can You Do?
As you consider buying or selling, use title agents, lenders and realtors who are familiar with the new rules and who have streamlined processes to avoid any delays in your closing. Communicate regularly with all parties involved and complete items in the contract to close timeline (loan application, inspection, etc.) on time or early. Then, you will only notice improved, easy to read forms and will be ready for well in advance of closing.
Originally posted on Arkansas Money & Politics by Ray Ellen.