Plan Ahead for the New Closing Rules (TRID) - 6 Major Changes to Disclosure

Plan Ahead for the New Closing Rules (TRID) - 6 Major Changes to Disclosure

We've written about it before, but the upcoming changes to the mortgage process are presenting some enormous changes to real estate that warrant further discussion. 

Under the new TILA-RESPA Integrated Disclosure Rules (TRID) that go into effect on October 3, buyers and sellers will encounter changes that stretch out the closing process. (Note that these rules apply to contracts signed on or after October 3, regardless of when they close.)

Here are the six major shifts you should prepare for: 

1. The TRID Closing Disclosure

One outcome of TRID's new rules is the Closing Disclosure, which is intended to replace the HUD-1 form. Inside of the Closing Disclosure are a description of fees, closing costs, insurance, escrows, credits, etc., and it must be issued to the buyer at least 3 days before closing. If this timeline isn't met, the closing will be delayed by as many as 7-10 days. With this in mind, it's wise to have a housing timeline that takes into account an extra week to make up for any bumps in the road until this process gets ironed out.

2. Closing Forms

The Closing Disclosure forms are meant to be signed by buyers and sellers at closing. 

But, you'll notice that there isn't a place for sellers to sign off at the end of these documents - oops! The folks in Washington made a big error on this mandatory form. Because of this omission, there will be three different Closing Disclosures signed at closing: one for the buyer, one for the seller, and, then, a combined one produced by the lending company

So while the specifics of how your rate and your fees impact your pocketbook may be simpler, the process itself will not be.

3. 60 Day Loan Approvals

Lenders will have to learn and adjust when it comes to TRID's new policies, so buyers and sellers should prepare for longer approval periods when it comes to loans. Historically your average contract-to-close timeline was about 45 days. Now we expect it to be at least 60. Work with your agent in building a longer offer timeline to account for this issue. 

4. Repairs and Walk-Throughs 

Because lenders may now require the finalization of all fees and credits 7-10 days before closing, buyers and sellers will be facing changes when it comes to repairs and walk-throughs. The truth is, changes to the Closing Statement that don't impact the type of loan, prepayment, or the Annual Percentage Rate (APR) require 1 additional day for updating the Closing Statement and notification of the same, but lenders will be playing it safe. 

Some experts advise scheduling a "final" walk-through 14-21 days before closing. We don't see it. The walk-through is intended to allow the buyers to see the home in the condition that is expected at the time of move-in, which requires the sellers to move out. If sellers, or their hired movers, do damage to the home while removing furniture, that's going to be a last minute surprise. And if repairs or credits need to be issued, that changes the closing statement. You can see where this is going... add 7-10 days. 

If there are discussions more than 10 days prior to closing about remedying deficiencies in the home, we encourage credits to be negotiated. Repairs that need to be re-inspected leave little recourse for a buyer hoping to close on time if they're not properly completed.

5. Back-to-Back Closings

Homeowners are accustomed to back-to-back closings, allowing them to close on the sale of their old home and apply the proceeds of the sale to their new home on the same day. But, with the changes to approval and closing timelines under TRID, you should prepare for the reality of small housing gaps by looking into bridge loans, composing use and occupancy agreements with the other party, and/or electing for a temporary housing solution. 

6. Make Sure Your Team is Prepared

Bring on an attorney and lender who understand the new TRID rules and are compliant with these policies. This will ensure that there are fewer bumps in the road and less time spent learning new material. While we have a list of recommended attorneys, you should make sure that your representation follows the American Land Title Association (ALTA) Best Practices, regardless of whom you choose. 

By being aware of these changes and preparing ahead of time, you can make the process of buying your next home easier. When you're ready to find a new home, the Real Group Team would love to step in! Drop us a line, and we'll help you through these new rules!

Suggested Articles:

3 Things You Need to Know About the Upcoming Changes to the Mortgage Process

"I'm Under Contract- Now What?": Sealing the Deal on Your New Home

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