New Document Won’t Delay Most Closings

The new TILA-RESPA Integrated Disclosure rule (known more commonly as TRID) takes effect on October 3, 2015.

Under the new rule, lenders must provide borrowers with a new “Closing Disclosure” which combines two separate documents: the HUD-1 settlement statement and final Truth-in-Lending disclosure. Beginning in October, lenders must provide this document at least three business days before the loan is consummated or when the borrower(s) becomes contractually obligated as defined by Regulation Z, which in most states is the same as the closing date or when the borrower(s) signs the promissory note.

Real estate professionals and lenders have feared that this new document could delay closings if there are last-minute changes. To address concerns, the Consumer Financial Protection Bureau (CFPB) stated that closing delays should not occur except in three unique and unlikely cases, which include:

  • An increase to the loan’s annual percentage rate (APR) by more than one-eighth (.125) percent for fixed-rate loans or more than one-quarter (.25) percent for variable-rate loans. Unlike a home loan’s interest rate, an APR reflects the annualized cost to obtain a home loan, and is a way to compare lender fees and loan options.
  • The addition of a prepayment penalty where the initial loan approval did not account for this factor. Prepayment penalties are rare and depend on the type of loan borrowed.
  • A total change in the loan type, such as a change from a fixed-rate to a variable-rate loan.

The CFPB further assured that the rule makes allowances for ordinary changes without delaying the closing date for both buyers and sellers.

While this new rule may seem scary, we’ve done our homework and will be ready for the August 1 deadline. If you have any concerns about how the new TRID rule impacts your clients, please don’t hesitate to contact me today.

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