Starting on Oct. 3, the Consumer Financial Protection Bureau is implementing new Tila-Respa Integrated Disclosure requirements, known in the industry as TRID.
“So what’s a TRID?” you may ask. It represents the integration and rescheduling of an assortment of current mortgage documents in an effort to make things easier for consumers to understand while giving them an earlier account of what funds will be needed at closing.
TRID requires that a “loan estimate” (terms, rates, costs, and payments disclosure) be sent directly from the lender’s or broker’s disclosure department to the costumer within three business days of the application being taken.
Currently, once the loan officer discloses a “good faith estimate” (which is being replaced with the “loan estimate”), the lender wouldn’t have to re-disclosure until they received the file into underwriting.
This process is not as time sensitive, generally taking between 7 to 10 days after the application was taken, depending upon when the applicant sent back his/her documentation.
While this new rule will slow things down, I feel that once originators and lenders get into this new rhythm, we will be back to a normal turnaround time at the front end of the process.
The potentially staggering change that TRID is implementing is in the second part of their ruling, which requires borrowers to receive their “closing disclosure” at least three business days prior to the closing so that they can review it. If the document is transmitted via mail or email, that wait blossoms to six days.
Why do I see this as a problem? Because there is currently no time frame as to when a borrower has to see this statement. Sometimes we get a final closing statement from the title company only hours before the closing.
Also, the “closing disclosure” will be completed by the lender and not the title company, as it has in the past. This document contains lender mortgage figures and costs, realtor commissions, seller cost and mortgage payoffs. In all, four parties have to submit numbers to the lenders.
The three- to six-day waiting period can’t start until all those numbers are in. If any of those parties drag their feet in getting numbers to the lender, it will delay the closing. With all parties being required to be on the ball, which is not normally the case, huge problems can arise.
What prompted these new requirements? Consumer complaints that they did not understand the “good faith estimate” and that they were surprised with how much they needed at closing, information they often didn’t receive until the 11th hour. Most homebuyers felt stuck, without time or opportunity to question or fight the charges because they needed a place to move into.
I completely sympathize with their point of view, but those problems could have easily been avoided if originators and companies consistently coached and communicated with their customers. Getting a mortgage and going through a real estate closing is a hand-holding process, which many companies failed to realize at everybody’s peril.
For those originators and companies that neglected that important responsibility, shame on you! You’ve made it a lot harder on the rest of us. For those originators and companies like myself who faithfully go over numbers and closing estimates so that there are no surprises, I’m sorry that you are subjected to the additional paperwork and down time that these new rules are going to burden us with.
In the end, however, I feel that it is important for the consumer to feel totally comfortable than it is for the process to move faster.