It has been called “the disclosure tsunami” but I fear it is more like a stealth bomber that the majority of Lake Norman Realtors and home buyers and sellers won’t see coming until it has already wreaked havoc on their lives. Despite the enormity of the new disclosure rules collectively known as TRID the result of combining the Truth in Lending/Good Faith Estimate and RESPA, in my opinion there is not nearly enough discussion, press coverage and public education going one right now given what is going to take place starting August 1. DELAYED to October 1st!!!
Those of you have been through the home buying or selling process before might appreciate the fact that as of August 1st there will be no more HUD-1 Settlement Statement, Good Faith Estimate and other forms that we have used for decades. They are being replaced by two completely new forms: The Loan Estimate and The Closing Disclosure.
For those of you who are new to the home buying process, the bottom line is that our purchase and closing process will change so much that experts are saying everyone should add at least 15 days to the home purchase contract period to allow for all of the changes.
Probably the single biggest change that will directly impact our closings is the fact that any changes made at closing, let’s say a seller takes a chandelier that was supposed to stay and wants to compensate the buyer instead of returning it, will trigger a 3-day waiting period and thus delay the closing 3 days! But there are also going to be up front delays as well because of additional requirements of the lender. For instance, the lender from what we was told at a class by Ken Trepeta, Director of Real Estate Services for the National Association of Realtors, may have to wait 10 days to order the appraisal. This will require a longer Due Diligence Period.
Okay, so the million dollar question: Is our industry and specifically our Lake Norman area professionals truly prepared for these major changes? The lenders I have spoken with are working hard on their end but expressing significant concerns. One closing attorney I spoke to said their office has been working for months but that it has pretty much been a nightmare. I asked a Realtor from the largest real estate franchise in the Lake Norman/Charlotte area who happened to be sitting next to me at the class and he said there has been NO mention of these changes in any of his office meetings. The class I attended which was the only one I am aware of hosted by the Charlotte Regional Realtor Association had some empty seats with perhaps 250 attendees out of thousands of Realtor members. Yikes!
Interested in the specifics? Go to the Consumer Financial Protection Bureau.
Here is my summary of the key points which are primarily from the two classes/webinars I have attended and articles I have read:
- Back in 1996-1998 discussions started in regards to combining the Good Faith Estimate (GFE) and the Truth in Lending (TIL)
- Dodd-Frank Act Section 1032 passed in 2012 creating TRID
- TRID falls under the Consumer Finance Protection Bureau
- TRID = TILA-RESPA Integrated Disclosures
- Make the forms easier to use for consumers
- Improve consumer understanding of their loan and loan fees, tell consumers how much the loan actually costs
- Aid consumers in comparison shopping for home loans
- Eliminate surprises at the closing table
- Major Changes
- Elimination of all prior forms including the GFE, TIL and HUD-1 Settlement statement
- Two new forms under TRID:
- The Loan Estimate
- The Closing Disclosure (Which must be received 3 business days before closing!)
- Waiting periods: 3 days up front and 3 days at the end
- Some of the more notable details
- Applies to most mortgage loans
- Waivers of the mandatory waiting periods both at the beginning and end of the process are almost impossible. (It won’t matter if you moving van is in front of the house, you will still have to wait 3 days if there are last minute changes.)
- Major changes to a loan trigger an automatic 3-day waiting period
- The lender is responsible for The Closing Disclosure therefore they need to approve any changes at closing but the closing agent creates it
- The new Closing Disclosure will itemize all fees in alphabetical order and will compare the actual to the numbers on the initial Loan Estimate
- Any changes to fees at closing will be paid for by the lender
- Only the buyer signs the form at what they now call the “consummation” or what was previously referred to as the closing.
- Definition of business days: Saturdays count but not Sundays or major holidays.
- The Closing Disclosure must be signed 3 days before the note is signed
- Seller really doesn’t seem to matter
- Advice given to Realtors
- Avoid any last minute stuff!!!
- Keep on top of everyone from lenders to closing attorneys
- Target earlier closing: i.e. if a closing is scheduled for the 30th act as if the closing is the 23rd
- Do earlier walk-throughs: at least 7 days before closing and then to a final walk-through
- Since borrowers have 10 days to accept may have to wait 10 days to order appraisal so Due Diligence Periods will need to be longer…perhaps 15 days more than before
- Until this new process is sorted out add 15 days to the closing period.
The take away: Everyone will be affected by the new TRID Rule!
Learn More About Life in Lake Norman:
To receive all of my updates about Lake Norman Real Estate,