Effective this Saturday, 10/3/2015, all new residential loans will begin following the new “TRID” rules. TRID is an acronym for the TILA – RESPA Integrated Disclosure. TRID is a set of new disclosure rules created to simplify lending disclosures for the consumer and it does a great job at that.
Facts About the New TRID
- The new disclosures are much simpler and easier to comprehend than the old “Truth In Lending” disclosure and “Good Faith Estimate” which provided two sets of numbers that were almost impossible to reconcile.
- The HUD-1 also goes away. In their place are two new disclosures, the “LE” or Loan Estimate and the “CD” or Closing Disclosure.
- The new rules only apply to loans originated on or after Saturday 10/3/15. Any ongoing loans will continue to follow the old rules.
The rules bring about one significant change for the real estate industry: whenever a home purchase involves traditional residential financing, the new CD (Closing Disclosure) will be used, rather than the old HUD-1.
Two Key Changes Associated with the New Closing Disclosure:
- The lender, not escrow, is now responsible for preparing the Closing Disclosure.
- The Closing Disclosure must be received by the buyer 3 business days prior to signing closing documents. If a borrower acknowledges receipt the same day the CD is created, the wait is only 3 days, however, if a document must be mailed to the borrower, the wait period can be up to 6 business days before signing can occur.
As a result of the changes, there will be additional time between final loan approval and recording of the loan. Therefore, communication with the lender becomes increasingly important; any delays in providing documentation or changes to closing figures can cause delays in the preparation of the CD and thus in closing.
Two Ways To Effectively Navigate the New TRID Process:
- Prepare for longer closings. Many Realtor boards are recommending that new contracts should account for at least an additional 10-15 days. For now, more time is safer until lenders and escrow companies get all the kinks worked out once loans begin to close using this new process. Managing the communication and transfer of information is increasingly important. Each lender and each escrow company has their own system and processes, so accurately predicting how all the combinations will work with each other is a challenge. After about three to four months, the process should become a lot clearer and closing time-frames easier to gauge.
- The lender will require all fees, credits, invoices and reimbursable receipts anywhere from 7 to 10 days prior to recording. Finalize all expenditures early and keep your documentation in order. Make sure to communicate any changes in the contract or other costs with both the lender and escrow. This may mean scheduling inspections earlier than before to keep closing timelines in order.
As an industry, we’ve dealt with many hurdles in the past and this is just another little one. It will help ensure consumers know more about the loans they are taking on should improve the stability of the residential lending and housing market as a result. We’ll figure out how to navigate and change our processes accordingly, so let’s all go help the home buyers!
For any questions regarding the VA loan process, give us a call at 808-792-4251.