On October 3rd of this year, a new rule went into effect for the Mortgage Industry called “TRID” or the “TILA-RESPA Integrated Disclosure Rule.” TRID was designed toward making mortgages more transparent and easier to understand for borrowers or buyers. This new rule has made a huge impact on not only the specific timelines that borrowers and Loan Officer’s have to meet, but also the disclosures that are required and the actual loan process prior to closing escrow. (If you are a cash buyer however, these new rules do not apply)
There are 2 new disclosures that have been implemented with TRID that are a taking place. The first is the “Loan Estimate” or “LE” which takes place of the Good Faith Estimate and the Truth In Lending Disclosure. It details the key loan terms, costs and risks at the beginning of the loan process so the borrower is completely aware of what they are applying for and how it’s all set up. This new form needs to be provided to the borrower within 3 days after submitting their loan application to the lender. Under this new rule, a lender cannot impose any fee on a borrower (besides for a credit report) until the borrower has received the “Loan Estimate” form and has indicated intent to proceed.
The second is the “Closing Disclosure” or “CD” which replaced the Final Settlement Statement or HUD-1 and is due 3 days BEFORE closing. It looks very similar to the new LE form that borrowers get in the beginning of the loan process, but adds a breakdown of closing costs that are paid by the buyer versus the seller versus a third party along with a detailed account of the entire transaction. By keeping the 2 forms somewhat the same, it makes it easier for the borrower to review the closings costs and compare them to the originally quoted terms on the “Loan Estimate” form.
How Does TRID Affect the Real Estate Process?
The new rules and guidelines of TRID are effecting everyone in the Real Estate and Mortgage industry in Lake Tahoe, including the consumers. I gathered some personal perspectives from some of the professionals within the industry and what they recommend you do to keep the buying process an easy and enjoyable one:
Real Estate Agents: “Agents need to inform their Buyers and Sellers that there are new timelines in place that could affect their actual closing date and make sure they account for these delays on the contract. For example, the average escrow will now take 45–60 days due to the new Lender disclosure laws of TRID instead of the normal 30-45 days. Once the paperwork/loan docs are ready for the Buyers to sign, there is a 3 day approval period for all of the Lenders paperwork (rescission period), and another 72 hours to fund the loan after signing. This can add another 7-10 days to their closing date. Also, when applying a Seller credit toward the Buyer’s closing costs (for repairs), instead of asking to fix the actual repairs, be aware that there will be an “appraisal review period” which can also take an extra 48 – 72 hours.” – Nancy Beaulieu – REALTOR with Paradise Real Estate
Mortgage Brokers: “The biggest issue is that the lender, not the title company is now required to prepare the closing disclosure. Previously the escrow company prepared the disclosure and was then approved by the lender. Now the Closing Disclosure (CD) must be prepared and in the borrower’s hand 3 days before the loan can close. If there are any changes such as items that impact the loan amount, payment or APR, a new CD must be sent out and a new 3 day waiting period begins. It is rare that someone would change the terms this late in the process but it can happen and everyone needs to be prepared for that possibility.” – David Greco – Mortgage Broker
Escrow Officers: Escrow needs to work with the lender and title company, to provide very accurate numbers to enable the lender to issue their disclosure documents by the new deadlines. Early in a transaction, Escrow is required to provide numbers based on specific lender requirements, something that would historically be done very close to closing. This requires a new level of communication between the Lender, Escrow and Title.
Consumers: Buyers and borrowers need to make sure that they have a knowledgeable Real Estate Agent and Mortgage Broker that understand the new rules of TRID. If both of them aren’t up to speed, especially regarding the strict timelines and deadlines, it could cause a lot of confusion on the borrower’s behalf, therefore leading to a long and difficult transaction. If you choose an Agent like Dan Spano to represent you in your Lake Tahoe home buying dream, he will not only make sure that you completely understand all of the new elements of TRID, but will manage your expectations every step of the way so that there are no delays or frustrations on either side.
In conclusion, the new TRID guidelines will take some time getting used to, just like anything else that is new. However, if you have a knowledgeable Real Estate Agent who has a well understanding about the new rules and timelines and plans ahead for the required waiting periods, you will be just fine. Paradise Real Estate Agents have been learning and studying about TRID since the very beginning so that we could offer our clients the BEST and most knowledgeable service we possibly could. If you would like more information about the new rules and guidelines of TRID, please contact Dan Spano at (530) 541-2465
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