Community News

The fun part of real estate? Looking at homes and finding the right combination of bedrooms and bathrooms and layout and yard space.  The not-so-fun part of real estate? The piles and piles of paperwork that accompanies a purchase. Keep in mind, though, that each piece of paper that must be read and reviewed, then initialed or signed, has a specific purpose. Even for those who have purchased real estate numerous times in the past, changes that have just taken effect will both clarify the loan process and slow it down as well. 

The acronym TRID (TILA-RESPA Integrated Disclosure Rule) is a new term in the real estate industry. The Consumer Financial Protection Bureau, established in 2011, has been working on its goal to make the mortgage process easier for borrowers to understand.  But as with any major change, there will be an adjustment period.  There are three main categories to look for changes – forms, timelines, and processes.

In the past, homebuyers who applied for a mortgage received both a Good Faith Estimate (GFE) and a Truth in Lending Disclosure.  These two forms have now been combined into a single Loan Estimate form.  This condensed version lays out features, costs, and risks right from the start. One purpose of this change is to make comparison shopping among loans more straightforward. The second form change is that the final Truth in Lending statement and the HUD-1 settlement statement are now a single document called the Closing Disclosure. This is a detailed version of the terms of the loan, fees, and closing costs. This should help the time spent at the closing table be less stressful as the information will be reviewed days before closing.

Timelines will face changes as well. The Loan Estimate form needs to be provided to the consumer by the lender within three business days of a completed loan application. Furthermore, the Closing Disclosure form must be given to the consumer three business days prior to loan consummation (generally the closing date). If certain last-minute changes come up to the specific loan terms, the three business day waiting period will start again. The rationale behind that is tied to the last real estate crash where terms and rates were changing at the last minute and borrowers were not taking the time to properly read and evaluate what these changes actually meant. The adjustments that trigger a new waiting period include a change to the annual percentage rate of more than one-eighth of a percent, the use of a different type of loan product, or the addition of a prepayment penalty.

These new forms and rules apply to all applications for home loans that were newly received after October 3, 2015. Therefore, lenders will be extra cautious during the closing process to stay in compliance with the new rules.  This may mean extended timelines and delays in closing dates as the kinks are getting worked out. The National Association of Realtors is recommending adding an additional 15 days to the closing date to keep the deals on schedule.

The main takeaway for home buyers who are planning to apply for a mortgage is to understand that although the new process may lengthen the amount of time necessary to close the loan and move into their new home, the changes are truly for their benefit. “Know Before You Owe” forms are the result of borrowers in the past signing paperwork when they didn’t fully understand loan terms and also felt there were too many changes in fees and/ or rates right at closing. By simply planning ahead a bit to make the adjustment for a longer escrow period, the new rules should prove to solve the issues they intended to and keep the home-buying process as smooth as possible.