In November 2013, the Consumer Financial Protection Bureau (CFPB) integrated the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosures and regulations. Any transaction involving a mortgage will use new CFPB disclosure forms. The new TRID (TILA-RESPA Integrated Disclosure) rules and forms took effect on October 3, 2015.

It's critical to know that the new TRID rules won't just affect lenders and closing attorneys, but pretty much every profession in the real estate industry. According to NAR home sales data, even if only 10% of transactions experience an issue in closing due to these new rules, that is as many as 40,000 transaction per month!

To understand how things are changing, we must look to the past in the transaction and closing process. In the recent past, the loan terms and closing statement could change as late as the day of the closing or even while parties are sitting at the closing table - which never makes anyone very happy! Starting October 3rd changes will not be allowed three days prior to closing.

The new rules require that the Loan Estimate (which gives the estimated costs associated with the loan) be provided to the borrower within three days after their initial application. Further, the Closing Disclosure (which gives the actual costs associated with the loan) must be provided to the borrower at least three business days prior to closing. If there are any changes which alter the mortgage, a new disclosure must be provided and the respective three-day waiting periods commence again.

This new procedure raises a giant red flag. What happens when the seller of one property intends to use the proceeds from the sale of their home on the purchase of their new home that was scheduled to close just hours apart from the other? These back-to-back closings are dependent upon one another and already sensitive for all parties. This new three day waiting period has the potential to affect not just two parties, but four or more.

Due to all the possible ramifications of these new regulations, here are some guidelines that you and your clients should be aware of:

• Delays may be more likely, particularly in the early days of implementation.
   
• A seller should negotiate possession for some number of days AFTER closing.

• While this has always been the case for a seller still living in the property they are selling, now it becomes even more imperative in the event of a delay in closing date.
   
• A buyer should commit to a lender as soon as possible after contract binding so as to limit delays. A buyer should choose a lender that is fully compliant and knowledgeable about these new regulations.
   
• It should be expected that every loan is going to take a bit longer to process, at least in the early stages of implementation. A cushion of at least 45 days between official binding contract and closing date is advisable.
   
• Real estate agents should have their contracts thoroughly and properly filled out. Even changes in the Realtor's commission are part of the disclosure process and changes to that could result in a delay to the closing. Send all final documents to the lender and closing attorney as soon as possible.

These changes will certainly impact the way we all do business. As a result, the CFPB has created a web-based TRID tool for real estate agents and their clients.

http://www.consumerfinance.gov/know-before-you-owe/real-estate-professionals

In the above link, there is a sign up section for real estate agents to receive e-mail updates on TRID resources. Real estate agents should also consider providing this link to clients. The new TRID rules are going to affect the timing and the work flow of the contract to close process; in order to prevent delays, everyone involved in the transaction should be proactive and look for ways to streamline and follow procedure of these new rules. A good head start will be to get all necessary documents to the closing attorney (contract, commission agreement, termite letter, invoices, homeowner's warranty invoices, pay at close letters, etc.) and the lender as soon as possible.

   

   

 
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Sincerely,
  Patrick McManamy
  Bren McLeod
  Kati Heller