Are you familiar with the change that occurred in the world of real estate and mortgage lending starting October 3, 2015? If you apply for a mortgage loan after October 3, this change -- the implementation of TRID -- will apply to you. For both buyers and sellers, it's important to understand not just the new documents introduced by TRID, but how new timelines set by TRID could impact your closings.
TRID is an acronym for Truth-in-Lending Act/RESPA Integrated Disclosures. It has a worthy purpose -- to make loan documentation easier to understand for the consumer, less cumbersome and more transparent. There may be a few potential hiccups, however.
TRID replaces the “Good Faith” and “Truth In Lending” documents previously issued by lenders with a new document called a “Loan Estimate.” The Loan Estimate is easier to read and is probably an improvement over the old documents. Under the new guidelines, lenders must provide a potential borrower with the Loan Estimate no later than three days after he/she submits a loan application.
The other document TRID requires, and that is the cause for some concern, is the Closing Disclosure. This document replaces and combines the HUD-1 and other closing statements in a format intended to be easier to understand. Borrowers must receive this Closing Disclosure three business days (Saturdays and Sundays not included) before they can sign loan documents at the closing. This gives the borrow a chance to thoroughly review this document before the closing. Previously, the HUD-1 only needed to be in the hands of he borrower the day before the closing.
Because every number on the Closing Disclosure must be accurate, lenders will need to have loan documents in title three business days sooner than they do now. This also puts pressure on title companies/real estate attorneys to get the title work done earlier. If there is any error discovered in the numbers in the Closing Disclosure, the Closing Disclosure must be re-drawn and the three-day waiting period starts all over. Under TRID guidelines, any delay in closing becomes at least a three-day delay. A buyer who had hoped to move in immediately after the initially planned closing will need to have an alternative plan to accommodate a delay.
It's also worth noting that it is unlikely a client hoping to do same day closings on their home for sale and a new home purchase will be able to do this under these new guidelines. It may be possible, but is not likely. As a real estate agent, I'm preparing my clients for the fact they need to plan about a week contingency in between closings.
Below is the link to an article from one of my favorite real estate investment website, BiggerPockets.com, with useful additional information about TRID.
If you have additional questions about TRID, call or drop me a note.
Mary Lynn Blake