As of October 3, 2015 the federal government is changing the way mortgage disclosures are handled which could affect your loan closing. It is called TRID which stands for TILA–RESPA Integrated Disclosures. To break it down a little further TILA stands for Truth-In-Lending Act and RESPA stands for Real Estate Settlements Procedures Act. TRID combines the prior TILA and RESPA disclosures into two forms: the Loan Estimate (replacing the initial Truth-In-Lending & Good Faith Estimate) and the Closing Disclosure (replacing the HUD-1 and final Truth-In-Lending).
You may be wondering what does this all mean to you? These new changes are going to affect the time it takes to close your loan. One of the primary changes includes the Closing Disclosure (CD) packet that you the borrower must receive at least 3 business days prior to closing. Although this change is positive for you as it helps eliminate any last-minute surprises at the closing table, it is important that you fully understand how last-minute changes could require the lender to issue a new CD, which could cause the closing to be delayed up to 3-6 business days.
On purchases it is going to become even more critical that the Realtor and lender have clear communication channels. The dates and deadlines on a purchase contract are crucial, there is no room for error if you want to close on-time. There really should never be a contract less than 30 days, and the Realtor really should talk to the lender when writing the contract to make sure delays don’t happen as a result of a poorly written contract.
A big factor with these new changes will pertain to the appraisal and homeowners insurance. These two items need to be ordered early. Your inspection will need to be scheduled early in order to meet your inspection resolution deadline. And then in turn ordering your appraisal, although from our perspective the appraisal is separate from the inspection and is treated as such. Getting your homeowners insurance set up early as well will help avoid any delays, especially to your closing date. For example, if for any reason there are last minute loan changes that cause the APR to adjust +/- .125% from the initially disclosed Loan Estimate then a new CD needs to issued. This could start a new 3 day waiting period and could cause a delay in closing. Another example would be changes to your loan amount at the end, or loan program changes.
Here are four helpful tips for you to avoid closing delays.
Use Electronic Signatures to sign the closing disclosure– The 3 day waiting period cannot start until the borrower acknowledges their receipt of the CD. Electronic signatures are the fastest way to accomplish this. Starting the clock on the waiting period as early as possible will help avoid delays right before closing.
Avoid changing the loan amount at the last minute– Bringing additional money to closing for the down payment will change the loan amount, this change (even if it’s lower) requires a new CD to be issued, which could start a new 3 day waiting period.
Avoid changing the interest rate or loan terms at the last minute– Asking your Loan Officer to make a change to your rate, loan product or other options that will adjust your APR more than .125% will require a new CD to be issued and require an additional 3 day waiting period. This doesn’t mean it can’t be done if needed. It is important to be aware of the required waiting period and how that may affect the closing.
Promptly respond to request for documents & E-Signatures– It’s very important to respond to your lender’s requests promptly. This allows them to address any potential pitfalls early in the process to ensure your loan will close smoothly and on-time.
The main take away is to be aware of the new changes, know what can cause closing delays and have good communication with your lender as well as your Realtor.
Here are some great references to read more about TRID. Give us a call if you have any questions.