What is TRID and how will it affect REALTORS®?
Have you ever taken a summer vacation in Europe only to discover that businesses are closed because many Europeans take the entire month of August off? This may be something you want to consider this year (just kidding, it’s not going to be that bad).
TRID is an acronym for the TILA-RESPA Integrated Disclosures that will be replacing the current TIL (Truth in Lending disclosures), GFE (Good Faith Estimate), and HUD1 Settlement Statement. This change is a part of the Dodd Frank Act intended to simplify the disclosures to consumers and allow for them to be better prepared for their mortgage transaction. The new disclosures will be called the Loan Estimate and the Closing Disclosure (and presumably will be referred to as LE and CD).
In addition to being easier to understand, this change consolidates the initial TIL and GFE into a single disclosure and combines the Final TIL and HUD 1 into a single disclosure. Because of this change, more of the liability for accuracy is being shifted to the lender. In order to provide consumers with more transparency, the closing disclosure is required to be delivered to the consumer a minimum of three business days prior to closing.
So here is where this change will impact the way that you do business, so you can set proper expectations and help buyers and sellers plan for closing:
- Communication is key. It will be even more important to promptly notify the lender of any changes to the transaction so that they are known when the closing disclosure is initially delivered to the buyer (this could save you three or more days per change).
- Title company/attorney selection. Because the lender is taking on additional responsibilities for the closing disclosure, you will want to make sure that the lender and settlement agent have an acceptable working arrangement prior to making that selection.
- Setting expectations. REALTORS® and buyers need to make sure that all transactional decisions are made well before closing. I would recommend at least two weeks, then no more changes. Since the requirement is that the closing disclosure is delivered three days prior to closing, additional time will be necessary if your buyer is not comfortable with electronic disclosures.
- Early homeowners’/hazard insurance selection. Getting early binders from insurance companies can be tricky when the closing date is still variable. A good relationship with an insurance agent to provide accurate quotes at the time of the initial offer can help to minimize delays in receipt of the binder and closing disclosure preparation.
The new disclosures are a package deal—August 1is the first day that the new applications will use the new Loan Estimates and, later, the new closing disclosure. This means that for the first few months settlement agents will be phasing in the new closing disclosure as closed-end loan transactions that were initiated after August 1 make their way to the closing table. The gradual transitioning from the HUD 1 and Final TIL to the Closing Disclosure may take a little longer while lenders and settlement agents acclimate to the new process. Additionally, this new process won’t impact cash sales, or those financed using HELOCs, so the current processes will still exist as well.
President, Mortgage Bankers Association of Florida