The murmurs are gaining momentum now…lenders, and realtors and escrow officers oh my! It seems like changes are coming at us , the professionals, at record speed and now we are being summoned to hurdle through a fiery hoop of disclosure changes…who is ready???? October is just around the corner.
I don’t claim to be an expert of the new changes but I will take a stab at narrowing it down for us……TRID, or better referred to as TIL RESPA Integrated Disclosure is our next big challenge. The Consumer Financial Protection Bureau has made it clear that the consumer is in need of some changes for the better. What this means for the consumer is better timelines, better understanding of fees paid and better opportunity to comparison shop. OK!! Sounds great so lets break this down…
Currently the lending institution is required to provide 3 vital documents to any home shopper who fills out a loan application: The GOOD FAITH ESTIMATE, The TRUTH IN LENDING and the Right to receive copy of appraisal. TRID will be replacing these documents with one document called the Loan Estimate, LE. The Loan Estimate will contain the terms and actual cost estimate to the consumer within 3 days after the consumer has provided all financial documentation and completed loan application. There is a caveat…the consumer must identify a single property….no more placing multiple offers on multiple properties. SO for us Realtors that means we will no longer be utilizing the AAR loan pre qualification form….now we will need to identify a single property and have that property listed for qualification on the LE ….(yes, moans…..this means showing properties with out that golden prequal….however, between you and I and the fence post…was that prequal ever really golden???)….But never fear….you can still have your clients check with a loan officer on the basics to see what price range they can shop prior to blazing the home show trail. Once a property is identified get that LO working!!! You will need that LE to submit with your offer. The LE will name the property and show the actual costs, including cash to close estimate and the added protection to the consumer is that these fees won’t be notated randomly , they will be listed concisely and in an orderly fashion. Furthermore the taxes , insurance and HOA fees will also be listed at this time…..the idea is to “disclose” all fees so that the consumer is not surprised at closing. By the way…..this should help us Realtors prevent “commissionectomies” as well! Remember the LE is not a covenant with the lender who prepared it. The Buyer has 10 days to express his intent of which lender he will choose based on the fees given, thus allowing the Buyer to comparison shop. Your job as a Listing agent and a Selling agent is to make sure the intent is given within that 10 day timeframe.
OK! So that sounds good so far….what about the closing disclosures that follow once we are in escrow? Current Lender practice is to provide the escrow officer with the loan costs and escrow impound information and then the escrow officer would prepare the pre audit settlement statement also known as the HUD 1 Settlement for all parties to review. A sigh of relief from the escrow side now………sighhhhhhhh…… Lenders will have to provide this document now to all parties which will replace the HUD 1 with the Closing Disclosure, aka CD. The Closing Disclosure will be given to all parties 3 days before close of escrow and it will contain all settlement fees listed alphabetically…easy peasy reading for the consumer. There will also be a ZERO tolerance threshold for unforeseen fees including appraisal fees…meaning no more last minute increase or 10% threshold allowances…and guess what!! THIS, again, protects the Realtor from the pressures of performing a “commissionectomy”!! If any changes to APR occur then a new CD will be prepared with the changes and a 3 day waiting period will ensue before escrow can close. The new responsibility for us Realtors is to make sure our clients have received the LE and the CD within the proper timeframes so we can coordinate with all parties for closing.
So there you have it….BIG Changes coming for October 2015…..more responsibility for the Realtor and the lender, easing a bit up on the Escrow Officer’s responsibilities and the ultimate goal ….Protecting your clients! Yes, it may seem like a fiery hoop to jump through…but then again, when have we ever NOT jumped through fire before with our clients?!