Quantcast
Channel: Brokerology » Buyers
Viewing all articles
Browse latest Browse all 4

TRID and the New Way of Closing a Real Estate Transaction

0
0

On October 3, 2015, the Consumer Financial Protection Bureau (CFPB) enacted the TRID (TILA-RESPA Integrated Disclosure) rule for the majority of homes that are closed utilizing a purchase money loan (mortgage).  This new rule will impact the way we, as REALTORS®, guide our clients through their real estate transaction. “Time is of the essence” truly is the catch-phrase for how we will operate from this point forward.

As we move through these new lending waters, the following guidelines can assist you in reducing the stress both you and your client might experience from loan issues during the “contract to close” period:

  1. Prepare your customers to gather ALL of their financial information including employment information, past tax returns, bank account numbers, credit card information, etc. as soon as possible after you begin working with them. They should have all this information available for the lender as soon as the offer to purchase becomes a binding contract.
  1. Educate your buyer customers on the new disclosures. Explain to them the lender will provide two very easy-to-read, but extremely important, disclosures:  the Loan Estimate (LE) and the Closing Disclosure (CD.)  Contrary to what many have said about these new documents they are very easy to comprehend.  The confusion buyers experienced in the past regarding the terms and conditions of their mortgage loan should now be lessened by the TRID changes.
  1. Stress the importance of the critical “timeline” under the new rule. Once your buyer is under contract on a new home he or she will immediately need to contact the lender to initiate the loan process.  The following is a brief overview of the timelines the lender and the buyer must follow in order to acquire their loan and meet the terms of the contract signed with the seller:
  • The buyer has three (3) days from the binding agreement date to make application for the loan and pay for a credit report.
  • The Loan Estimate (LE) begins the loan process. The lender must submit an LE within three (3) days of receiving a bound contract.
  • After the LE is received the buyer has ten (10) days to notify the buyer their Intent to Proceed with the loan. (The lender will provide the buyer with an official “Intent to Proceed” document that will need to be signed indicating the buyer is ready to move forward with the loan.)
  • Within fourteen (14) days of the contract date the buyer must secure evidence of homeowner’s insurance and provide proof the appraisal has been ordered and the appraisal fee has been paid.
  • The lender will issue the Closing Disclosure (CD) no later than three (3) business days before closing. (Note if the CD is mailed, this will add another 3 days.)
  • Any of these three (3) changes will require the lender to issue another Closing Disclosure WITH an additional three (3) day review period:
    • A loan APR change by 1/8% on fixed rate loans or ¼% on an adjustable rate loan.
    • Basic loan product change
    • Pre-payment penalty added to the loan.

Sellers will not see as much impact from TRID as buyers.  The CFPB believes the real “consumer” who needs to be protected is the buyer.  At the closing (or now called “consummation”) of the transaction the seller will be provided a seller closing disclosure by their title company or closing attorney outlining their settlement costs including broker commissions.  Changes to this disclosure will not delay the consummation of the transaction.

The real benefit of the new disclosures for the consumer comes down to simplifying the complex details of a home loan.  A buyer should not be confused as to the loan product they are applying for, the annual percentage rate (APR) of the loan, the closing costs associated with the loan and any other details related to the consummation of the transaction.

Change is difficult, but unfortunately, when the government initiates the change we must be willing to accept what is put before us by bureaucratic hands. This is what it now looks like and it will not change. Assisting your clients in understanding this new paradigm in home lending will not only reduce their fears and concerns, but reaffirm your value as a trusted partner in their real estate transaction.

Additional information on TRID is available at the Consumer Financial Protection Bureau’s website at www.consumerfinance.gov.

 

 

 

 

 



Viewing all articles
Browse latest Browse all 4

Latest Images

Trending Articles





Latest Images