No, it’s not but the Closing process is going to dramatically
change and we still don’t know if it will be for the better. We don’t know what
we don’t know, and we probably won’t know until we work with it for a while. But why go through all of these changes? The hope is that by making these changes we
can avoid the conditions that led to what we painfully remember as the Great
Recession.
I was speaking with the Mortgage Sales
Manager for Santander Bank and she listed what she says are the stated goals of
the ‘New Rule’, also being called the TILA-RESPA Integrated Disclosure (TRID) rule,
which is supposed to:
1) Make it easier to use mortgage disclosure forms.
2) Improve Customer understanding – “Know Before You Owe”.
3) Aid in comparison shopping.
4) Prevent surprises at the Closing table.
The bottom line is increased consumer protection.
We’ve all heard of the Dodd–Frank
Wall Street Reform and Consumer Protection Act which requires combining the
Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosures
together.
What has been termed the “Rush Closing” will be long
gone. No longer will you receive a Good
Faith Estimate (GFE) or a Truth in Lending disclosure. Those two forms have
been combined into one Loan Estimate (LE) form.
Here is one of the problems lenders will be faced with: although this is
called an “estimate”, lenders will be accountable for the exact charges outlined
on the LE and they must be within 10% on many others, or lenders will incur
huge fines.
Most of us have seen a HUD-1 Settlement Statement that
discloses where the money goes and who gets what in a purchase and sale
transaction. The HUD is prepared by the
closing attorney and the buyer gets to review it one day before they close on
their new home. The HUD is going to be
replaced by the Closing Disclosure (CD). Although the CD will be similar to the
LE, the most important and challenging change will be that the CD must be
presented to the buyer a full three days before the closing, and if there are
changes during that three day period, you guessed it – the closing could be
delayed an additional three days or more. Attorneys will also be required to provide costs
much earlier in the process than before.
The new Rules will place the burden on all partners at the
Closing table – buyers, sellers, real estate licensees, bankers and attorneys. As you can imagine, any delay in the closing
could be very costly to all parties. Imagine what it could mean if during a
delay the buyer’s loan rate lock expires?
Or a moving company has to wait to deliver furniture to the buyer’s new
home? Or the seller’s payoff will no
longer be any good because it has expired.
In the short run, what does this all mean to you as a
potential buyer? It means, if you are considering making a purchase in 2015 and
you will require a mortgage, make your purchase decision now and apply for a
mortgage before August 1 or be prepared for the process to take a lot longer (~15+
days). Rest assured there will be bumps
in the road while everyone involved in the process goes through OJT while
sorting out the bugs in the new “Know before You Owe” package.
