January 12th, 2023 12:14 PM by Sam Kader
Effective October 3rd 2015 - a new law will take into effect in real estate industry more significantly than any other regulation in the past 30 years. The Consumer Financial Protection Bureau (CFPB) will implement TILA-RESPA Integrated Disclosure (TRID) also known as "Know Before You Owe" rule. There are currently three primary disclosures that have been causing some confusion; therefore, TILA-RESPA Integrated Disclosure was created. The main thing is that consumers should incorporate a three-day waiting period into a closings timeline any time a mortgage loan application or change within a loan transaction takes place. For example, Pre-Approval letter is only generated after three days after the initial loan application. Therefore, please start your loan application process at earliest possible. A complete loan application is defined when these 6 items are present i) Consumer's name ii) Income iii) Social Security number to obtain credit report iv) Property Address v) Estimate of the value of the property and vi) The loan amount sought. As a mortgage broker, we have three days to send out the Loan Estimate (LE) once we have received a complete loan application and to request for follow-up documents in regards to income, assets, and bank statements. Days are counted as normal business days not including Saturdays, Sundays and legal public holidays.
The first of the replaced disclosures is called the Loan Estimate (LE) which replaces the Good Faith Estimate and the Truth-In-Lending disclosure. This is what the LE looks like and explanations for each item. The second is called the Closing Disclosure (CD) which will replace the HUD-1 and final Truth in Lending disclosure. It looks almost exactly like the Loan Estimate but adds a breakdown of costs paid by buyer versus seller versus third parties. Items reported in CD are held to certain tolerances. This is what the CD looks like and explanations for each item. The CD must be delivered 3 days prior to the scheduled closing date. In addition, any time terms such as the
APR are changed (0.125% up or down), or the loan product is changed, or prepayment penalty
is added, or closing papers are being delivered, a three-day waiting
period will begin. For example, any last-minute concessions, or
addendums could delay closings by an additional three days. (For purpose
of Closing Disclosure (CD) - days are counted as normal business days
including Saturdays but excluding Sundays and federal holidays). In order to speed up the process. I encourage that you opt-in for email delivery. Here's more information on how to elect e-consent from one of our investors - Flagstar bank. Each step 1,2,3 and 4 must be completed in sequential.
Under TRID - if the fees or interest rate changed - the escrow company has to communicate with the lender to make last-minute changes and the lender has to update the final Closing Disclosure (CD) and send the new version to the escrow company. (This is where potential delay can occur).
The real estate transaction is fast-paced and things can and do happen at the last minute. According to National Association of Realtors during the months of April, May and June 2015 - only 63% of purchase contracts closed on time, 29% were delayed and 7% fell apart. Some of the common obstacles are financing conditions (39%), appraisal disagreements (16%), title and deed issues (11%), home inspections (9%), contingencies in the contract (8%), and others such as buyers and sellers getting cold feet and backing out, homeowner associations creating obstacles and buyers losing their jobs.
Within the last few years after the implementation, things are gradually settling in. We can close in 30 days or less but please email us as soon as you receive a copy of the signed around Purchase and Sale Agreement (PSA) so we can address any hiccups and unanticipated events in closing your next transactions.
Here's more information from the CFPB.
1. Please provide us with your client's email address early during the process to save sometime. The 3-day cooling off period starts immediately upon receipt of CD email delivery from the lender.
Preferred CD delivery methods: e-consent or hand delivery. With e-sign or hand delivery - the waiting period to close is reduced to 4 days.
Least preferred way:
2. Please provide us with all fees (other than escrow and title fees) and any seller concessions, addendums, and any credit to homebuyer up-front and 100% accurate. 3. Escrow - please prepare a Master/Closing Statement as completely as possible.