The new TILA-RESPA Integrated Disclosure (TRID) rules for mortgage closings took effect for new loan applications on October 3. Closing delays will compound expected seasonal declines.
PALM COAST, Fla. – October 12, 2015 – The new TILA-RESPA Integrated Disclosure (TRID) rules for mortgage closings took effect for new loan applications on October 3. The changes apply to transactions that include a mortgage and will affect both the mortgage origination at the front end and closing disclosure at the back end. The new procedure includes new forms and rigid time-lines.
Industry experts are advising real estate practitioners to advise their clients that the loan closing cycle will likely be extended from the previously advised 30 days to 45 days. My gut tells me that while 45 days may eventually become the norm, delays will be greater until the industry familiarizes itself with the new processes. [Remember how long it took Obamacare to get off the ground.]
We have entered the “slow” season for local real estate closings. October through February have represented the five slowest months, as measured by single-family home closings, over the past 12 years.
This year’s seasonal slump is predictable. However, I expect that during the next 2 – 3 months the seasonal slump will be magnified by the effects of the TILA-RESPA changes. Local housing market fundamentals will remain very positive.
The additional 15 days to closing will be baked into the system going forward. This means that we should not expect a bump in the future to compensate for the upcoming dip in closings. We will simply return to a normal level of closings. The perminant lag of 15 days will mean that the real estate industry will take a 4% hit in revenue for the year. It means that the number of homes sales reported closed in 2015 will "understate" the market by 4%.
Oh, and another thing. This will be a national phenominon, not just a local one. It will be interesting to see how the media interprets the dip in sales.
The following is made available by the Mortgage Bankers Association.
EXPECT NEW FORMS
• You will receive the Loan Estimate (LE) no later than three business days after an initial application.
• You will receive the Closing Disclosure (CD) at least three business days before closing.
• Together, these disclosures detail the consumer’s monthly payment, the costs of getting a mortgage, the costs to close and other pertinent information about the loan.
KNOW THE NEW TIMELINES
The rule requires that you be given or mailed:
• A Loan Estimate (LE) within three business days after you apply by providing six items of basic information — name, income, social security number, address of the property for the loan, estimated value and the mortgage loan amount sought;
• A Closing Disclosure (CD) at least three business days prior to closing so you have time to review it;
• An additional three business days to review a revised CD if you or your lender make certain changes to the annual percentage rate (APR) or loan product after you receive the CD; and
• At least seven business days to review the paperwork between the time you receive an LE and the time you close.
HELP SPEED THE PROCESS
• Tell your lender to move forward as soon as you finish shopping and are comfortable with your choice of loan. You are allowed ten business days to decide but you do not have to wait that long:
• Give your lender any documents necessary to complete the loan as soon as possible;
• Read the LE, and any revisions to the LE, carefully so any questions can be resolved early in the process;
• Avoid last minute changes to the loan to avoid delay and prevent an additional three business day wait;
• Work with your real estate agent and the seller’s agent to conduct home inspections, order reports (e.g., pest inspection), and clear any contingencies as early in the process as possible;
• Schedule your final walk through well before the CD is issued, if possible;
• Tell your lender as soon as possible about any changes to the transaction that you think might impact the loan or the closing; and
• Understand that this new disclosure process could add additional time to completing your loan as the new process is being introduced.