​Watch Out, Here Comes TRID. Are You Ready?

If you don’t know what TRID is, now would be a good time to find out. I’m writing this post to familiarize myself with TRID, and in the process I’m sharing my thoughts with you.

TRID stand for TILA/RESPA Integrated Disclosures. I wrote about these big changes we will experience at the closing table in late May of this year, because they were scheduled to be implemented by August 1, 2015. But there were so many complaints the date got moved back to October 3, 2015. Now that’s it, no more delays will be given.

For a more detailed description of the disclosures, please see my previous post. For now, here are my thoughts on the delayed implementation and what may follow.

If you’re wondering who is in charge of the new disclosures and issuing this earth-shaking ultimatum, it’s the Consumer Financial Protection Bureau (CFPB), a young government agency created by the Dodd-Frank Wall Street and Consumer Protection Act in 2011. The whole idea is for buyers and sellers to receive advance notice of closing and lending costs, so that’s why CFPB is in charge. It’s a consumer protection agency.

Nobody is sure how it’s really going to work. I listened to a seasoned real estate broker interviewed on a National Association of Realtors webinar and she used carefully-chosen, politically-correct words to say, essentially, “It will take some getting-used-to, and at first it may be quite disruptive.”

I definitely agree. Buyers and Sellers are supposed to see the new disclosures, which replace the familiar HUD-1 closing statement, 3 days in advance of the closing date. And some changes, but not all changes, will trigger another 3-day waiting period. This issue is causing a lot of confusion, so I’d like to do my part to clear up the confusion now.

For decades, home buyers in many markets have expected to take a walk-through of the empty home just prior to closing on it, so they could see exactly what they were buying and so they could report anything that didn’t meet their expectations to their agent, for discussion at the closing table.

Well, those days are over. Now the walk-through must happen prior to the TRID form’s completion, meaning more than 3 days prior to closing.

Finding issues with the house during the walk-through can be handled prior to or at the closing table without triggering a new 3-day waiting period. And so can changes various payments that will be made at closing such as the real estate commission, prorated taxes and utilities and monies in escrow. These details, as well as typos require a new TRID to be provided, but they do not trigger another waiting period.

What DOES trigger another 3-day waiting period for Buyer and Seller review and approvals are the following mortgage-related items, copied directly from the CFPB website:

“1. The APR (annual percentage rate) increases by more than 1/8 of a percent for fixed-rate loans or 1/4 of a percent for adjustable loans. A decrease in APR will not require a new 3-day review if it is based on changes to interest rate or other fees.

2. A prepayment penalty is added, making it expensive to refinance or sell.

3. The basic loan product changes, such as a switch from fixed rate to adjustable interest rate or to a loan with interest-only payments.”

However, are you thinking the same thing I’m thinking? Where will Sellers go with all their belongings 3 days before closing? Seriously, what are Sellers supposed to do now? Are they going to feel as though the new legal forms are protecting them? I seriously doubt it. What do you think about it?

Buyers and Sellers involved in residential transactions are consumers of real estate brokerage services and many associated providers, such as title companies, escrow agents, mortgage lenders and banks (just to name the basic players.)

I doubt there is one person working at any company on that short list who is completely confident that TRID is a good thing. TRID is one of those things that sounds good in theory but may prove to be unworkable in practice.

Honestly, I don’t see how Sellers will ever appreciate being put in such an awkward situation, no matter how long TRID is in effect.