Home Seller TRID FAQ’s
Important Home Seller TRID FAQ’s
Prepared EXCLUSIVELY by the Zebaida Group for our buyers to help you better understand how recent federal regulations requiring mandatory review periods for mortgage disclosure review may affect your home sale transaction.
From the CFPB’s “What the new simplified mortgage disclosures mean for consumers”
Mortgages are complex transactions that may include risky features, so we’ve issued a rule that will simplify and improve disclosure forms for mortgage transactions. Consumers currently receive different, but overlapping federal disclosure forms with the terms and costs of mortgage loans. Because these forms are confusing for many people, Congress directed the Bureau to create new forms. The rule replaces the current forms with two new forms: the Loan Estimate, given three business days after application, and the Closing Disclosure, given three business days before closing. Lenders will be required to give consumers these forms for mortgage applications submitted on or after October 3, 2015. Specific benefits of the new forms and rules include:
- Combining several forms and additional statutory disclosure requirements into two forms. This will reduce paperwork and consumer confusion.
- Using clear language and design that will help consumers understand complicated mortgage loan and real estate transactions.
- Highlighting the information that has proven to be most important to consumers. On the new forms, the interest rate, monthly payments, and the total closing costs will be clearly presented on the first page. This will make it easier for consumers to compare mortgage loans and choose the one that is right for them.
- Providing more information about the costs of taxes and insurance and how the interest rate and payments may change in the future. This information will help consumers decide whether they can afford the mortgage loan and the home, now and in the future.
- Warning consumers about features they may want to avoid, like penalties for paying off the loan early or increases to the mortgage loan balance even if payments are made on time.
- Making the cost estimates consumers receive for services required to close a mortgage loan more reliable, for example, appraisal or pest inspection fees. The rule prohibits increases in charges from lenders, their affiliates, and for services for which the lender does not permit the consumer to shop unless a specific exception applies. Examples of the specific exceptions include when information provided by a consumer at application was inaccurate or becomes inaccurate, or when the consumer asks for a change in the services.
- Requiring that consumers receive the Closing Disclosure at least three business days before closing on the mortgage loan. Currently, consumers often receive this information at closing or shortly before closing. This additional time will allow consumers to compare the final terms and costs to the terms and costs they received in the estimate. That will better equip them to raise any questions before they go to the closing table.
NEW REGULATION FAQs
Q: Why are lenders requiring changes to the disclosures?
A: Lenders are not the ones that are requiring the changes, nor are lenders requiring the new timeline requirements to allow a borrower to review the Closing Disclosure before they can consummate their transaction. These changes were required as part of the Dodd-Frank Act of 2010 and are being implemented by the Consumer Financial Protection Bureau (CFPB).
Q: When will these new changes take effect?
A: The new regulations take effect on all applications received on or after October 3rd, 2015. If your buyer had an application in with a lender before that date, you will continue to use the old forms and old rules and the new timeline requirements don’t apply.
Q: Will these changes apply to my transaction?
A: The regulations apply to most closed-end mortgages, but not to HELOCs (home equity lines of credit), reverse mortgages, or chattel-dwellings like mobile homes (not attached to real property). Those transactions will still use the old forms and follow the old rules. So most likely yes, these regulation will apply to the sale of your home.
Q: What are the new forms?
A: There are two new forms – the Loan Estimate, and the Closing Disclosure.
The Loan Estimate, or LE, integrates and replaces the Good Faith Estimate and the Truth in Lending disclosure. The LE is given to a consumer within 3 business days of application, and a transaction cannot close for at least 7 business days after the consumer has received the LE.
The Closing Disclosure, or CD, integrates and replaces the HUD-1 Settlement Statement and the final Truth in Lending Disclosure. The CD must be received by the consumer at least 3 days before consummation (signing the mortgage documents and closing, commonly referred to as closing, signing, or escrow in different parts of the country). If given in person, the CD is considered received that day. If it is mailed or delivered electronically, the consumer is considered to have received it after three business days or upon evidence by the lender that it has been received (generally acknowledgement that it has been received or timestamps of receipt).
The new requirements for your buyer to have 3 business days to review their Closing Disclosure before consummation of the transaction could cause unexpected delays at closing.
Q: How will this affect me as a seller?
A: As stated above, if your buyer is obtaining a mortgage to buy your property, they will now have these regulations to contend with. The biggest possible effect on you as the seller is a delay to closing that is beyond the control of either the buyer, their agent, or their lender.
Q: What counts as a “business day”?
A: There are two different definitions of what counts as a business day according to the CFPB – one for the Loan Estimate and a different one for the Closing Disclosure. For the Loan Estimate, a business day is a day on which the lender’s offices are open to the public for carrying out substantially all of its business functions. For the Loan Estimate, a business day will generally not include Saturday, Sunday, or any legal public holidays. For the For the Closing Disclosure, a business day is any calendar day except Sundays and legal public holidays (so it includes Saturdays).
Q: Do I always have to wait 3 days after the Closing Disclosure is issued to the buyer before we are able to go to closing/signing?
A: Yes, 3 business days is the minimum required time for review according to the CFPB. While there is an exception for “a bona fide personal financial emergency”, the example given for such an emergency (an imminent sale of their home at a foreclosure) is so extreme that lenders will likely not be able to use this exception.
The federal regulations require that your buyers have 3 business days to review the Closing Disclosure before consummation can occur. This is beyond your agent’s control.
Q: What about if a new Closing Disclosure is issued due to error or changes. Do we always have to wait 3 business days after issuing a revised Closing Disclosure before consummation?
A: There are only 3 situations that require a new waiting period when a revised/updated Closing Disclosure is issued before consummation:
- The disclosed APR becomes inaccurate.
- The loan product changes.
- A prepayment penalty is added.
Any other situations that may require a revised Closing Disclosure (even post-consummation events) do not require the 3 business day waiting period. (For example, if damage discovered during a walk through requires a seller credit, it would not require a new waiting period – UNLESS IT AFFECTED THE TERMS OF THE LOAN AND THE APR CHANGED.)
Q: Who will be completing the Closing Disclosure that is now taking the place of the HUD-1?
A: Lenders will now be responsible for preparing the Closing Disclosure. Previously HUD-1 settlement statements were prepared by the closing agent, title company, or attorney closing the transaction. Now it is the lender’s responsibility to prepare the Closing Disclosure and ensure delivery to the consumer.
Q: Will the lender give me a copy of the Closing Disclosure as the seller?
A: The lender only provides the Closing Disclosure to the buyer. The settlement agent is required to provide the seller with the Closing Disclosure no later than the day of consummation. The settlement agent may comply with this requirement by providing the seller with a copy of the Closing Disclosure provided to the consumer (buyer) if it also contains information relating to the seller’s transaction. The settlement agent may also provide the seller with a separate disclosure, including only the information applicable to the seller’s transaction from the Closing Disclosure as applicable). However, if the seller’s disclosure is provided in a separate document, the settlement agent has to provide the creditor with a copy of the disclosure provided to the seller.
Q: Is consummation the same as closing or settlement?
A: No, consummation may commonly occur at the same time as closing or settlement, but it is a legally distinct event. Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan, not, for example, when the consumer becomes contractually obligated to a seller on a real estate transaction.
Q: Will issues at walk-through delay my closing?
A: If an issue is found during a walk-through, a seller may issue credits to the buyer. Although a new Closing Disclosure would be required, it would not require a 3 day review period.
SUMMARY
Will these new changes delay my closing?
While the TILA-RESPA Integrated Disclosure rule (TRID) was enacted to protect consumers, due to the complexity of a real estate transaction and the complexity of the regulations for mortgage loans, there is a possibility that something may happen where your buyer will be forced (by regulation) to postpone a signing/closing due to no fault of theirs, their agents, or their lender.
If you are closing concurrently on another property, be aware that a closing delay could be possible on your sale and plan for contingencies. While the new regulations are no reason to discount a buyer whois obtaining financing, it is important that you are aware of the possibilities of a delay. However you canbe sure that all of the professionals involved in the transaction will work their hardest to ensure a smoothand delay free transaction.
We hope you found the provided information helpful. Remember, contact us if you have any questions that weren’t answered here, or if you would like to know more about the preparations we’ve made to ensure you continue to get great service and to try and avoid any TRID related problems.
This TRID resource guide was brought to you by: Zebaida Group
If you have additional questions, please contact us at 973.251.0182.
Please visit our Zebaida Group Real Estate Dictionary to learn about some of the terms associated with other aspects of a real estate transaction.